After another year so full of change — and market volatility — a solid year-end financial planning checklist is a necessity. It’s a resource that lets investors visualize how hard their money worked for them this past year, and where opportunities lie for having a productive and impactful new year.
At Ellevest, we know that women want to build wealth differently. We want both financial and social returns. That’s why this year-end checklist is different. It was made for women — by me (hi!), a financial advisor — to help make sure all parts of your financial life are working together to achieve all of your goals.
Use this financial planning checklist to make smart money moves with your Ellevest financial advisor, tax professional, and estate planner for the year ahead.
Look at your investment portfolio
Rebalance your portfolios.
Think about whether you want to realize capital losses.
Diversify any concentrated positions.
Revisit your current income needs.
Know what your money is doing.
When the stock and bond markets are volatile, your target portfolio mix can drift off course as some of your investments change value. Rebalancing is the act of buying and selling across your portfolio to bring your investments back in line with your target.
If you had portfolio losses this year, you may be able to offset current (or future) gains with the losses, with the goal of reducing the amount you’ll owe in taxes, now or in the future. This tactic is also known as tax loss harvesting.
We’d say you have a concentrated stock position if you have more than 10% of your total investment portfolio in a single stock or company. It's important to put together a plan to ensure that any future stock price volatility doesn’t hinder you achieving your goals.
You can also use some of your stock position to create a donor-advised fund. That'd let you diversify your position by donating stock, allowing for a same-year tax benefit. Then, you could make grants to charitable organizations from the fund over time.
If you rely on your investment portfolio to partially or fully support your lifestyle, you’ll want to work with your advisor to estimate the cash flow your portfolio is expected to generate next year. If any other sources of income were disrupted last year, you might also want to talk about modifying your overall financial plan.
Every dollar you invest makes an impact. If you don’t know the impact your money is making right now, ask your advisor to run a diagnostic of your portfolio to better understand how your investments are aligning with your values.
Check in on your retirement planning
Maximize your 401(k) contributions.
Think about maximizing your IRA contributions.
Review your beneficiary designations.
Think about a Roth conversion.
Consider a “child Roth IRA.”
The max contribution into your 401(k) for 2023 is $22,500 (or $30,000, if you’re 50 or older). Even if you don’t hit the max, your contributions are still important because they lower your taxable income for 2023. You have until December 31 to make 401(k) contributions. Also good to know: In 2024, the limit’s increasing by $500. If you want to keep maxing out, set a reminder to increase your contributions starting January 1.
The contribution limit for most IRAs in 2023 is $6,500 ($7,500 if you’re 50 or older). With IRAs, you have until Tax Day (April 15) to make the contribution, so you can assess your year-end financial situation before contributing if you like.
Beneficiary forms often supersede will and trust directives in court, and not updating them is a common (and potentially expensive) mistake. Review and update them each year.
With a Roth IRA conversion, you’ll transfer retirement funds from a 401(k) or traditional IRA account into a Roth account. Since a traditional account is tax-deferred while a Roth is tax-exempt, you’ll need to pay those deferred income taxes on the funds you convert. This strategy isn’t relevant every year. It tends to be most relevant in a year when you think your tax bracket will be lower (or when the markets are down) — which means it might be better to pay taxes now than in retirement. The upside? When you withdraw your money in retirement, it’ll be tax-free.
Opening an IRA for a child can give your kids (or grandkids, or any kids you care about) a head start for retirement. You’ll set up a regular Roth IRA as a custodial account. Kids can contribute to it if they earned income from a job or business of their own.
Consider charitable contributions and gifts
Revisit your charitable giving strategy.
Gift your gains.
Consider family gifting before year-end.
Think about upping your giving this year.
If you’re giving intentionally, rather than reactively, you can have a bigger impact on the things you care about most. We like the 80/20 rule, where you give 80% of your giving budget to those causes and organizations you’re deeply connected to, and reserve 20% of it for giving in reaction to requests and opportunities that come up.
If you’re donating an appreciated asset, like stock that has increased in value since you got it, donating it in kind may allow you to avoid the capital gains tax that you’d have had to pay if you sold it. That means you can donate the full value of the asset instead of a reduced, after-tax amount. Talk to your legal and tax pros to see if this applies to you.
You won’t receive any sort of deduction for gifting to a family member, friend, or neighbor in need. That said, if the gift is under $17,000 ($34,000 for married couples), it won’t be subject to gift tax and doesn’t count toward your lifetime gift and estate tax limit. And that’s a per-recipient cap!
Usually, the deduction limit for charitable cash donation is 60% of your adjusted gross income. There’s a tool from the IRS to help you check to see if your donation is deductible, but you may still want to talk to your financial advisor and your legal and tax professionals about whether giving more is right for you.
Other things to check off the list
Tell your team about any major life events.
Review your estate planning documents.
Review your income tax withholding.
Think about paying your January mortgage early.
Weddings or divorces, births and deaths, career changes, relocations … All of these could impact your spending and budgets — or the investment advice and recommendations that are made for you — so make sure you let your team know.
Take a look at your will, health care power of attorney, advanced medical directive, and general power of attorney to make sure all names are up to date and they reflect your wishes.
Talk to your tax professional to see if the amount you’re withholding still makes sense as you head into the new year.
Talk to your financial planner and tax pro to see if it makes sense to make your January mortgage payment in December so you can deduct the interest on your 2023 tax return.
Looking to review your portfolio? Ellevest’s Private Wealth Management team of all-women financial advisors is here to help you reach your financial goals with a comprehensive checklist.
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