Happy New Year! The start of a new year is a great time to make financial moves that benefit your life in 2021 and beyond. Let’s get started. Starting the New Year with these 15 tasks in process or completed can make a financial difference to you and others:
#1- Increase your retirement savings contributions
Increasing or maximizing your pre-tax and after-tax retirement savings contributions helps in two ways. First, it helps ensure you will have more money available to you in retirement. Second, contributions in pre-tax retirement savings accounts help lower your taxable income in the year the contributions are made.
#2- Consider converting to a Roth IRA
Consider converting to a Roth IRA- Since contributions and earnings in a Roth IRA grow tax-free, converting your tax-deferred retirement savings into a Roth may make sense for you. You must pay taxes on the total contributions and earnings for the tax year the conversion took place but maybe beneficial in the long term if taxes increase in the future.
#3- Prepare for 2020 tax reporting
You don’t need to wait until the last minute to meet with your tax professional. Being prepared for how much you may need to pay in taxes can benefit you now. Additionally, if you’ve made more money in 2020 than in previous years and anticipate making more in 2021, increase your pre-tax savings contributions now to offset taxes due for 2021 or pre-paying taxes can make sense.
#4- Evaluate Health Savings Account (HSA) contributions
The fourth financial move has to dow ith your health savings account. HSAs allow pre-tax contributions, much like your pre-tax retirement savings. However, when used later for health-related expenses, including future long-term care expenses, the contributions and accumulation are tax-free upon withdraw. Ensure you are maximizing your contributions to enjoy the benefits of using the account later and lowering your taxable income for 2021.
#5- Contribute to your children’s or grandchildren’s college savings.
Many states offer a state income tax credit or deduction up to a certain amount for parents or grandparents to contribute to a tax-sheltered college savings plan. Another option is to purchase a whole life insurance policy. This policy can grow tax-free. It can be used to fund college through a policy loan. Consult your financial professional for questions you may have on both options.
#6- Rebalance, review, and revise
The sixth financial move will only take a minute. Market volatility can cause portfolio allocations to change over time. The beginning of the year is a great time to review all of your investment accounts for potential changes and add new investments such as an annuity.
#7- Spread your wealth to benefit others
Donor-Advised Funds allow you to deduct your contributions to a non-profit. Due to the Tax Cuts and Jobs Act, contributions must be made into a donor-advised fund in 2021. So they can be itemized and deducted from your 2021 tax return.
#8- Utilize your life insurance policy to benefit a non-profit by listing the non-profit as your beneficiary.
Consult your financial professional and attorney to determine what option is best for your situation.
#9- Check and update beneficiary information
The ninth financial move is simple, check and update beneficiary information for your employer retirement plan and all life insurance policies. Has there been a marriage, divorce, or name change for any beneficiary? Keeping your beneficiary information current is essential to help avoid problems for your heirs later.
#10- Save and don’t spend more than you make
The last financial move will require some discipline. Overspending, credit card debt, and debt, in general, will hinder saving if all of your extra income goes toward paying down debt. The important thing is to not live beyond your means. Consistently save each month and save unexpected money you receive. Maybe you’ve received a bonus at work or inherited money. Instead of spending it all on things, you don’t need or a lavish vacation, save some of it!
Let me help you with these 10 financial moves. We can help to keep you and those you care about on track for a better financial future.
Disclosures: An Annuity is a long-term financial product designed largely for asset accumulation and retirement needs. Annuities generally contain fees and charges which include, but are not limited to, surrender charges, administrative fees, and for optional contract riders and benefits. All guarantees of an Annuity are backed by the claims-paying ability of the issuing insurer.
This information is provided as general information and is not intended to be specific financial or tax guidance. The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed.
In addition, Carrio Financial Group specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!
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