Pour some eggnog and dust off your budget
It’s that special time of the year, as we gather together with loved ones around hearth and table… shoring up our budgets and looking for possible tax deductions on our 2017 tax returns. Truly a magical season.
But seriously, though it may be low on your Naughty/Nice List of Priorities, it’s a good time to take stock of the year financially, review any changes, and draft a budget or set financial goals for the coming year.
The end of the year can be a whirlwind of activity, so it’s good to set aside some time to review any major changes to your circumstances: marriage, divorce, a new baby, the purchase of a new home… If you’ve recently gotten married, for instance, you may wish to revise your personal allowances on your W-4 for 2018. If you’ve relocated for work or have renovated your home, you may qualify for specific tax deductions related to the cost of moving, or tax credits on “energy efficient” home improvements.
Look for possible savings.
A Health Savings Account is a triple tax-efficient way to save for medical expenses. Any contributions you make are 100% tax-deductible from your gross income; the dollars you put into the account grow tax-deferred; when you take dollars out to use for qualified health expenses, those withdrawals are tax-free, too. Plus, HSAs roll over every year—they’re not “use ‘em or lose ‘em” accounts. Single HSA holders can put away up to $3,400; family insurance plans allow for contributions up to $6,750. HSA owners 55 and older can make an extra “catch-up” contribution of $1,000 (or $4,400 for an individual and $7,750 for a family).
Here’s another HSA benefit: If you own an Inherited IRA from which you must take annual, taxable distributions, you can take those distributions and plop them into your HSA, creating a tax-wash! Deck the halls with fewer taxes!
If you don’t have a budget, the impending New Year is an ideal time to create one and to set goals and expectations for 2018. Will you take a vacation? Do you need a new furnace? Would you like to start saving for your child’s future education expenses? Do you need to pay down debt? Whatever your goals are, you’re more likely to achieve them by putting pen to paper and detailing how you plan to allocate dollars each month/pay period. If you have a budget, take a few moments to review how strictly (or loosely) you adhered to it in 2017, and determine what changes, if any, you need to make.
Above all, these exercises are an opportunity for you to reflect on the year as a whole and anticipate the year ahead with renewed ambition and clarity. What did you accomplish? What setbacks did you overcome? What are you looking forward to in the New Year? Reflection and perspective are two of the greatest gifts we can give to ourselves, and by extension, to our loved ones.
And as always, we’re here to help: 513.834.9383, firstname.lastname@example.org
Retirement Plan Advisors