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Year-End Financial Planning Checklist


Written by: Corey Janoff 

Are you a young doctor looking to learn more about personal financial planning? Register to attend one of our free upcoming educational financial planning webinars! 

As the third quarter comes to an end, and we enter the last three months of the year, I thought it would be a good idea to put together a year-end financial planning checklist for you. Why am I writing a year-end checklist now instead of in December? Let's be real, we don't get much done between Thanksgiving and New Year's, so you only have about a month and a half remaining to tackle everything. Below are ten things to take a look at as part of your regular financial planning housekeeping to maximize your opportunities and protect yourself where necessary.  

Meet with Your Tax Professional (CPA)  

Why should I meet with my tax professional now? Shouldn't I be meeting with my tax person in the first quarter during tax season?  

You will want to touch base with your tax professional in the fall for a year-end tax projection, so there aren't any surprises come April. Have you paid enough taxes in relation to your income? Paid too much? Do you need to adjust your withholdings on your W4 or adjust your final quarterly tax estimated payment (if paying quarterly estimates)?   

If you are a business owner, is there anything you should be doing before the end of the year to benefit you from a tax standpoint? If you are thinking of purchasing some equipment for your business that isn't urgent, would you be better off purchasing it this year or next year for tax purposes?  

Our Finity Tax division works with a lot of our clients in this regard and does tax planning with people throughout the year in addition to tax filing in April. Having a plan helps.  

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Increase Retirement Savings  

Your income will likely rise over time. As you pay off debts, some fixed expenses will go away. Kids get older, and childcare costs decrease or go away. Before adding another expense to the mix, pay yourself first, and increase the amount you save each month automatically for retirement. Do this every year, and baby step your way to financial independence.    

Every year if you increase your retirement savings amount by $200/month, after 20 years, you are saving an additional $4,000/month for retirement! That's some serious progress!    

No excuses. Increase your retirement savings. Just do it.   

Increase Debt Payments  

The same logic as increasing retirement savings also increases the amount you are paying towards debts; if you are debt-free, double down on the retirement savings increases to become financially independent sooner.    

Take a look at your overall goals and direct money to the areas that need the most attention, of course. Small increases here and there can add up. Even increasing the amount you pay towards your mortgage by $100-200/month can shave several years off the loan's life.    

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Review College Savings Amount  

College keeps getting more expensive! If your parents went to college, ask them how much their tuition costs. My dad paid $400 per semester to attend Rutgers back in the early '70s.   

If you want to pay for your children to go to college, plan accordingly. How much do you want to pay for? 100% of all higher education costs? Undergraduate only? In-state public schools, or any school in the country? Costs can vary drastically based on the goal. Ensure the amount you are saving is sufficient for the amount of college you want to pay for and update it accordingly.    

Review Your Estate Plan  

In the Estate Planning Essentials episode of our podcast, we learned that most people don't have an estate plan! If you don't have an estate plan, it would be wise to get one.   

Assuming you do have an estate plan, it would be wise to review it to make sure it is still in line with your goals and wishes. It's advisable to review your estate plan with your estate planning attorney every five years or sooner if significant changes occur. Laws change, people change, our goals and wishes change. We want to make sure the game plan is still what we want it to be.  

Even if we aren't changing anything, refreshing your memory on what you outlined is helpful. Who is the guardian for your children if you aren't around? Who is the executor of your estate? Trustee for your trusts (if created)? Are these people still able and willing? Useful to spot check these things from time to time.   

Review Beneficiaries on Your Investment Accounts and Insurance Policies  

Along the estate planning lines, we want to make sure money goes to the right places if something happens to you. Some accounts, such as retirement accounts and life insurance policies, have named beneficiaries, so the money goes directly to the designated individual/entity and bypasses your estate plan altogether (in most cases). It's good to review your beneficiaries annually to ensure they are still what you want.  

I have reviewed accounts and policies that still have ex-spouses listed. I have seen ones where parents are listed, despite the owner being married with children. I have seen ones where one child is listed, but not the others (sometimes intentionally!).    

It is entirely up to you where the money goes when you die, but it's smart to make sure the companies holding that money know where to send it since they can't ask you for clarification after you kick the bucket.     

life insurance for doctors

Review Your Disability Insurance Benefit Amount  

Most people see their income increase over time. Also, benefits offered through employers can change over time, or change if you switch jobs. It's good to check your disability insurance benefit annually to make sure it is in line with your needs.    

Does it cover your full income? If not, does it cover enough of your income to allow you to comfortably pay your bills and still save adequately for your future goals? If not, it's probably wise to increase the coverage.  

Getting disabled stinks. Getting disabled and not having enough money really stinks.    

Review Your Life Insurance  

Similar to disability insurance, is your life insurance benefit amount sufficient? We tend to upgrade our lifestyle over time. Maybe you bought a new house with a bigger mortgage or had another kid since you originally purchased your life insurance policy.   

In addition to reviewing the life insurance amount, see if the policy will last long enough to cover you for the needed time. Most people have term life insurance, which essentially expires after a certain number of years. If you purchased a 20-year term policy nine years ago, you only have 11 years remaining. Is that enough? Will your kids be grown? Are you on track to be financially independent in that timeframe? If not, it could be worth getting a new, longer-lasting policy.  

Many companies have updated their rates in the last handful of years as mortality tables have been updated. This means that some people can purchase a new policy for less money than their original policy, despite being older in age. If you are still in good health, this could be a win-win – longer-lasting coverage for less money. Sign me up!  

Rebalance and Tax-Loss Harvest Investment Accounts  

I have touched on the concept of rebalancing investment accounts before in other posts. It is the concept of adjusting your portfolio holdings back to your original desired percentages that you deemed appropriate as part of your overall financial strategy. If you don't have a professional managing your investment accounts for you, this is something to check on at least yearly.    

If you are not monitoring your portfolio, left unchecked, it can get really out of whack. Some holdings will perform better than others, leaving your portfolio concentrated in those sectors. When the good times come to an end for those positions, it could hurt you. Rebalance forces you to sell high and buy low, ensuring you don't become overly exposed to any area.    

Another prudent strategy involves tax-loss harvesting your taxable investment accounts. In short, sell the losers to lower your tax bill. This also enables you to rebalance the portfolio in a more tax-efficient manner.   

In 2020, there have been some excellent tax-loss harvesting opportunities for those paying attention. Given it is an election year and the future economic ramifications from COVID are still uncertain, we could very well see some additional tax minimizing opportunities present themselves.   

Required Minimum Distributions (RMD's)  

While required minimum distributions (RMD's) from retirement accounts are not required in 2020, thanks to the CARES Act, this is something that must be addressed for certain people in normal years. If you already withdrew an RMD for 2020, you can put it back in the account before the end of the year if you want to.   

In years not named 2020, if you are over the age of 72, or inherited an IRA from someone who passed away prior to 2020 and would be over the age of 70 ½ by now, you must withdraw a certain percentage each year from all qualified retirement plans and IRA's (except Roth IRA's). If you inherit an IRA from someone who passed away in 2020 and beyond, in most cases, you have to liquidate the account within ten years. Confusing, I know.  Meet with an advisor who knows the rules and can help you develop your RMD strategy.  

Just know, if you're in your 70's or inherited a retirement account from someone who passed, there is a good chance you will be required to withdraw money from it. Tax penalties are steep for those who don't follow the rules.   

In Summary  

Financial planning isn't a one-time thing. It's an ongoing process. If you practice regular maintenance of your finances, you can capitalize on opportunities and protect against major catastrophes. Let's close out 2020 on a high note and get our finances in good order!  

  

Disclosures:  

This should not be construed as induvial tax or investment advice. Consult with a tax professional for specific tax implications pertaining to your circumstances.    


financial planning for doctors