15 Year-End Money Moves You Need to Make

For best results when managing your money and investing for your future, you should be taking certain actions regularly -- many at least once a year. As year-end approaches, this is a great time to take stock of where you are financially and make any adjustments that can save or make you money.

Note that some of the upcoming smart money moves have deadlines -- don't miss the ones that affect you. A perfect example of an important annual deadline is that for taking your required minimum distribution (RMD) from certain retirement accounts by the end of the year. Failing to do so can cost you a massive 50% penalty. It doesn't make this list, though, because RMDs are waived for 2020, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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Start by assessing your big picture. Take some time to look up and jot down the basics -- how much is each of your financial accounts worth? How much do you owe -- on your home, your credit cards, and anything else? What are your long-term and short-term financial goals -- a down payment for a home? Saving for college? A comfortable retirement? How are you doing as you try to reach those goals? Are you saving and investing sufficiently? If not, you might need to revisit or set up your budget. Are your investments growing at a good clip? If they're not outperforming the overall market, you might want to simply invest in the overall market -- via an index fund or two.

ALSO READ: 3 Stocks That Can Double Again in 2021

Do you have an emergency fund, and is it funded with several months' worth of all your nonnegotiable living expenses, such as food, housing, taxes, insurance, transportation, and so on? It's easy to assume we will never need such a fund, but many of us are living a little too close to the edge and may end up in deep trouble without an emergency fund. A Federal Reserve Board survey from July found that 10% of respondents couldn't pay an unexpected $400 expense, and about a quarter would have to borrow that money, or sell something.

If you're carrying a meaningful amount of high-interest-rate debt, such as that from credit cards, you're going to have trouble getting ahead financially. That's because carrying such debt is kind of like investing in reverse: Instead of you earning, say, 10% annually, on average, you're paying out 15% or 20% or even 25% -- to your credit card company. It's the company that's building wealth, not you. It can be a real challenge to pay off credit card debt, but it can be done. Strategies include paying off the highest-rate debt first, not using credit cards any more, and/or using a good balance transfer credit card that gives you a long grace period of paying 0% interest.

The end of the year is a perfect time to check whether you've made your contribution(s) to your IRA account(s) for the year. For 2020 (and also for 2021), the IRA contribution limit is $6,000, plus an additional $1,000 for those 50 or older. Interestingly, the deadline to make a 2020 contribution isn't Dec. 31 of 2020 -- instead, it's the same day as the tax deadline for the year -- April 15, 2021, for the 2020 tax year. So you could wait until April, but in general, sooner is better, as it will give your money more time to grow, and will help you not miss the deadline in April.

Note that IRAs come in two flavors -- traditional and Roth. The former gives you an up-front tax break, and the latter offers tax-free withdrawals in retirement.

ALSO READ: 4 Misunderstood Facts Every IRA Investor Must Know

Like IRAs, 401(k)s also come in traditional and Roth varieties, offering, respectively, up-front tax breaks and a delayed break in the form of tax-free withdrawals. Unlike IRAs, your deadline for contributing to a 401(k) account is coming up soon -- in most cases, it's Dec. 31. While IRAs have annual contribution limits of up to $7,000, 401(k)s are much more generous: The annual contribution limit for 401(k)s in 2020 (and 2021) is $19,500, plus $6,500 for those 50 and older.

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Many Americans face a deadline in December for choosing their health insurance plan. If your policy is through the company you work for, look into when your deadline is for choosing a policy or switching to a different one. Deadlines differ by employer. For Medicare, the annual enrollment period for most people just ended -- it ran from Oct. 15 through Dec. 7.

For those getting coverage through the Affordable Care Act's Federal Health Insurance Exchange (the "Marketplace"), the enrollment period for 2021 coverage is underway, and ends on Dec. 15. It's never smart to go without health insurance, even if you're young and healthy -- and these days, in the midst of a dangerous pandemic, it's more important than ever to carry insurance.

If you have a high-deductible health insurance plan, look into setting up and contributing to a health savings account (HSA) or make sure you're contributing to one you already have. An HSA is a great tax-saving tool, allowing you to contribute pre-tax dollars to your account (thereby avoiding being taxed on that income) -- and then to spend those dollars on qualifying healthcare expenses, such as eye exams, lab work, doctor visits, prescription drugs, and so on. The deadline for contributing to your HSA is the tax deadline, so 2020 contributions must be made by April 15 of 2021.

The contribution limit for 2020 is $3,550 for individuals and $7,100 for families -- and those 55 and older can contribute an additional $1,000. Here's a great detail: The money in your account can stay in it for years, growing in value, and whatever remains in the account once you turn 65 can be spent on anything, though withdrawals for anything other than qualifying healthcare expenses will count as ordinary income.

ALSO READ: How an HSA Can Help You Invest Now More Than Ever

Flexible spending accounts (FSAs) are another way to save tax dollars on your healthcare spending. (There are also dependent-care FSAs.) An FSA account is less powerful than a health savings account, but you don't need a high-deductible health insurance policy in order to open it. You contribute pre-tax dollars that you can spend on qualifying healthcare expenses, such as dental visits and doctor visits. For 2020 and 2021, you can contribute up to $2,750 to your health FSAs. (Dependent-care FSAs have a $5,000 annual contribution limit for most folks.)

There's a big catch regarding FSAs, though: The money in your account is there on a use-it-or-lose-it basis. So you should aim to spend it by Dec. 31 of each year, though some employers offer a grace period of several weeks or months.

As the end of the year approaches, take this opportunity to assess your portfolio. Does it reflect the asset-allocation mix you want? For example, you might have been at your desired mix of, say, 80% stocks and 20% bonds several years ago, but perhaps your stocks have grown so much that you're now at 95% stocks and 5% bonds. If so, you might sell some stocks, buy some bonds, and rebalance your portfolio back to your desired mix.

While you're at it, how much of your portfolio is in cash? It's not a bad idea to have some cash in it, ready to pounce on any opportunities that suddenly appear.

The end of the year is also a great time to sell some stinkers out of your portfolio -- in order to offset capital gains with capital losses. For example, let's say that you have $30,000 in capital gains, on which you'll be taxed, probably at 15%. You're looking at a $4,500 tax bill. But if you have $30,000 in losses from various stocks in your portfolio, you can offset those gains -- to zero. Poof -- you've just saved $4,500! Better still, if you sell enough losers to get to $40,000 in losses, you can wipe out your gains and offset $3,000 in income, too, avoiding paying taxes on that. The remaining $7,000 in losses isn't lost, either -- you can carry it over to the following year.

This is often referred to as "tax-loss harvesting," and you'll want to read up on some rules before using the strategy. For instance, you shouldn't buy back any stock you sell until at least 31 days have passed.

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It's not quite time to start preparing your tax return, but there are tax deductions and tax credits you might want to learn about or refresh your memory about, so that you can plan to take advantage of them. If you think you can put together enough deductions to outweigh the standard deductions, you might want to make a bunch of charitable donations in December and perhaps pay some expected deductible expenses (such as mortgage interest, state and local tax payments, and medical expenses) early, in December instead of January. Look into any tax credits you can use, too, as they are even more powerful than deductions, offering a dollar-for-dollar reduction in your taxes due. You'll find credits available for energy-efficient home improvements, foreign taxes paid, education, the adoption of children, and the care of children and dependents, among other things.

ALSO READ: You Could Save Up to $15,720 in Taxes. Here's How

As the end of the year approaches, it's smart to give all your various accounts a quick look -- not just your investment accounts. For investment accounts, insurance policies, bank accounts, and the like, check to make sure all their settings are still good. Perhaps you can increase the percentage of your income you contribute to your 401(k). Perhaps you got divorced recently and should change the beneficiary or beneficiaries on certain accounts. Perhaps you've moved and you need to update your address on all accounts.

Speaking of insurance policies, it can be well worth it to spend an hour or so calling around to several insurers -- your own and others -- to see which one can offer you the lowest premiums for the level of coverage you need or want. Don't assume that your current insurer will charge you the least, even if it did four years ago, when you shopped around and chose it. Give some thought to your deductibles, too. It's generally good to have a relatively high deductible, as it will reduce your premium, possibly by a lot. Just be sure that you can afford to pay that deductible, if you ever have to.

Part of your annual financial checkup should include revising your goals if needed, and/or setting new ones. Having goals isn't enough, though, unless they're paired with actions that you plan to take. For example, you might set a goal of amassing a million dollars before you retire, but then you need to set out a plan to reach that, determining how much you'll need to save and invest each year. If you determine that you ideally need to be socking away more than you can afford to, you might plan to take on a side gig for at least a few years, to generate more income.

ALSO READ: 3 Financial Goals I'm Setting for Myself in 2021

Lastly, don't despair, thinking that you have to figure out how to plan and execute strategies that will have you reaching your financial goals. This is important stuff, and if you feel ill-equipped for it, or just not confident enough, consider consulting a financial advisor or financial planner. Ideally, find a fee-only one who won't be getting commissions for steering you into certain products or investments. You can find one near you by visiting the NAPFA.org website.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

There are few things easier than procrastinating, and few things that can have such disastrous results. Fail to plan and save and invest effectively, and you can end up struggling severely in retirement. Fortunately, this isn't rocket science, and as long as you tend to your finances regularly and save and invest diligently, you can do well.

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