The end of the year is drawing near; you can tell by the sounds of Christmas carols and busy shoppers scrambling about. The holidays bring many distractions, but don’t let them stop you from reviewing your finances and making a plan for a successful new year. Here are some areas of your financial life that you’ll want to pay attention to before the new year arrives.
Max Out Retirement Plans
First, be sure you are meeting your employer’s 401(k) contributions if you have this option. You are missing out on free money if your employer, for example, matches up to 6% of your salary and you are only contributing 4% of your salary to your 401(k).
401(k) contributions are typically due by the end of the year and you can claim a tax deduction up to $18,000 for the year 2016. People age 50 or older can make additional contributions up to a total of $24,000.
Don’t forget about your IRA plans. You have until the tax filing deadline in April to contribute, but it’s good to review it at the end of the year as well. Don’t forget – the money you contribute to your retirement accounts is tax deductible so you’re effectively giving less money to Uncle Sam.
Check Your FSA and HSA Accounts
Many employers offer a flexible spending account (FSA) that allows you to divert a portion of your paycheck towards expenses not covered by health insurance. For 2016, you could contribute up to $2,550; however, unless your employer offers a grace period or rollover option, this money is “use it or lose it.” If you have money sitting in your FSA, might be time to squeeze in a dentist appointment.
Health savings accounts (HSAs) are similar to FSAs. All funds you put in your HSA are 100% tax deductible from gross income and can be used tax-free to pay for out-of-pocket medical expenses. There are limits to the amount of money you can put in tax-free and the amount of money you can use tax-free as well. Unlike with FSAs, funds in a HSA roll over year to year and can be used with Medicare after retirement. If you want to take money out of the account for non-medical reasons you must pay the appropriate income taxes and a 20% penalty.
Review your medical expenses from the past year. Do you need to contribute differently to your HSA or FSA next year?
Review Your Insurance Policies
Every individual likely has more than one insurance policy, whether it’s health, auto, homeowners, dental, pet, disability, or life insurance. Review your policies each year. Are you missing out on discounts? Do you have enough coverage? Is there a company offering cheaper rates?
No year in the life is the same as the previous. Consider any big changes that occurred in 2016, such as:
- a new home
- marriage or divorce
- a new baby
- job change
- a new car
Or maybe you simply adopted a new furry friend.
All of these changes bring the need to review insurance policies. If you need to make changes in your life insurance policy, or maybe you don’t even own life insurance yet, we can help. Quotacy makes life insurance easy. Contact us for help with a current inforce policy or start the process by running a free, no contact information required, term life insurance quote.
About the writer
Natasha Cornelius, CLU
Senior Editor and Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.