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Your 5-Point End-of-Year Financial Checklist

By Maurie Backman - Updated Dec 5, 2017 at 8:10PM

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Ready for 2018? Not until you make these key money moves.

It's that time of the year again -- when we not only start counting down toward Jan. 1, but also begin crossing critical items off our financial to-do lists. So if you'd like to end 2017 on a financially strong note, here are a few moves to start working on today.

1. Max out your 401(k), or get as close as possible

The benefit of working for a company with a 401(k) is the opportunity to save far more for retirement than you can with an IRA alone. Unfortunately, most workers don't take full advantage of this option. According to Schwab, only 15% of participants max out their 401(k)s. If you aren't one of them, then now's the time to get moving.

Red pen on checklist


The more you contribute to your 401(k) this year, the greater a tax break you'll get. Currently, workers under 50 can put up to $18,000 a year into a 401(k). Older workers 50 and over get an even more generous allowance -- a $6,000 catch-up provision increases this limit to $24,000.

What will maxing out your 401(k) do for your taxes? Let's assume you're in your 40s, and that your effective tax rate is 30%. If you put $18,000 into your 401(k), you'll shave $5,400 off your IRS bill.

Keep in mind that it often takes a pay cycle or two to change your 401(k) allocation, so if you're looking to ramp up in December, now's the time to act. Once 2017 comes to a close, you can no longer contribute to your 401(k) for the year (though you can, of course, get started on your 2018 contributions).

2. Review your investments

Whether you're saving in an IRA or 401(k), the end of the year is a good time to examine your holdings and see if it pays to do some portfolio rebalancing. This especially holds true if you're getting closer to retirement, and expect to start selling off investments in the coming years.

Ideally, your portfolio should be fairly stock-heavy if you're younger, and contain a healthy mix of stocks and bonds when you're older. Furthermore, your investments should be spread out across a variety of industries; you don't want the bulk of your cash in a single sector, lest it take a dive.

Also, be wary of the way high-performing investments may unbalance your portfolio. Just because a particular stock or sector has a few good years doesn't mean that pattern well continue indefinitely. If you see that you're heavily invested in a single industry due to its recent growth, it might pay to take some gains, sell off part of that position, and put more money into a different sector. Remember, if you're talking about investments held in an IRA or 401(k), you won't pay taxes on those gains right away, and if you have a Roth-style account, you won't pay taxes on them at all.

Finally, do an annual review of the investment fees you're paying, and see if it makes sense to shift into lower-cost options, like index funds or exchange-traded funds. The less money you lose to fees, the more you'll have available for yourself down the line.

3. Sell bum investments at a loss

In a diversified portfolio, not every investment can be a winner. If you have underperforming investments in a traditional brokerage account, then selling them at a loss could benefit you in two ways. First, it'll free up cash to invest elsewhere -- ideally, in a better-performing alternative. Secondly, it can serve as a tax break.

Whenever you sell investments at a loss, you can offset a similar amount in gains. So if, for instance, you take a $5,000 loss for the year, but also have a $5,000 gain in a non-tax-advantaged account, the two will cancel each other out, which means you won't pay taxes on your gains. Don't have any profits to show for 2017? You can still apply up to $3,000 in losses to offset your income for the year, thus lowering your taxes that way, and carry over any unused losses to future years.

4. Pay down some debt

It'd be nice to go into 2018 debt-free, or as close to that point as possible. So if you're carrying a credit card balance, now's the time to work on making it disappear. If you have a bonus coming your way in the next few weeks, use it to eliminate whatever nagging debt you've yet to shake. Even if you can't retire your entire balance, the less debt you carry into the new year, the less you'll wind up paying in interest.

5. Squeeze in some year-end charitable giving

It's natural to get into the giving spirit as the holidays near, and while doing so will make you feel good, it can't be ignored that money contributed to a qualified charity can be deducted from your taxable income.

And it's not just cash that's tax-deductible: You can write off the goods you donate as well, provided you drop them off at a registered charity, retain a detailed receipt, and deduct only the fair market value of what you give away (meaning, the current value of those items, as opposed to their original value when you first obtained them).

But don't wait to be charitable. As the holidays near, you're apt to get busy and forget to write out that check. You'll also have less time to go through your closets or basement and scrounge up items you no longer need. So focus on those donations now, before you run out of time.

The financial moves you make in the coming weeks could set you up for a more successful 2018. Put in the effort now, and you'll have more to celebrate when you ring in the new year.

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