10/29/2014 06:31 pm ET Updated Dec 29, 2014

Is Your Year-End Financial Plan Missing Something?

This post, written by MP Dunleavey, originally appeared on Betterment.

No question: Q4 is the carpe diem quarter. You've got nine months of the year behind you, the blank slate of 2015 around the corner -- and a small window of time to tackle financial chores before the holidays hit. Bonus: Now that it's almost open enrollment season, you can consider maxing out (or adjusting) your employee benefits.

Yep, there's a lot to do, and you may not nail every item on your To Do list (who does?). But this primer will make sure you don't miss anything crucial, so that you're in great shape when the New Year comes dancing in.


Obviously, it's better if you've been maxing out your 401(k) contributions throughout the year because you stand to gain quite a bit more. But it's not too late to contribute what you can for 2014. Even bumping up your savings rate by 1 percent can add up in years to come. Also note, the 401(k) limit for contributions for 2015 was bumped up by $500 to $18,000.

Hint: If you're earning $100,000, a 1 percent savings increase comes to an extra $1,000 per year -- about $80 a month or $40 per bi-weekly paycheck - -and that's pre-tax, remember. If you were saving only post-tax dollars, you'd need about $66 in income to net that $40 in savings, assuming a 39.6 percent income tax rate.

If you have an IRA, you can make your 2014 contributions until April of next year, but again an early IRA contribution is more profitable in the long term.

Expecting a crisis soon? Of course not. That's why you need to set up a safety net fund now, so you're ready for the inevitable curveballs.

IRAs and Rollover

If you left a job and your old 401(k) behind (or if you have an orphan IRA somewhere), take the time now to consolidate accounts. Roll over your 401(k) to an IRA; and/or combine IRAs. You'll have more control over your asset allocation, total contributions, paperwork, fees -- and (by reducing your hassle factor) your stress levels.

Review Beneficiaries

While you're digging into your benefits, be sure to take your former spouse off your life insurance. No joke: having the wrong beneficiary is a common mistake people make on insurance policies and even retirement or bank accounts.

Pre-Tax Savings for Healthcare

A quick reminder about tax-advantaged healthcare accounts, like flexible spending accounts (FSAs) and health savings accounts (HSAs): Under the Affordable Care Act, your FSA contributions are capped at $2,500 currently. But the funds, which you save pre-tax, are still considered use-it-or-lose-it by the end of the calendar year.

HSA funds have different caps for individuals and families ($3,250 and $6,450 respectively), but you can roll over HSA funds from one year to the next.

If you have an FSA, find out whether your company offers a grace period into the new year (typically through mid-March) to spend down your account.

Before you waste your tax-free savings on eyeglasses you don't need, check out what you can buy with FSA money -- with and without a prescription. If you decide to get Lasik surgery or the dental work you've been putting off, schedule those procedures now. You're not the only one trying to make the most of your FSA -- and doctors get busy this time of year.

Given that most people put about $1,400 into their health care savings -- and forfeit 3 percent on average, according to the Mercer National Survey of Employee-Sponsored Healthcare Plans, you might want to adjust how much you save for next year.


Using these final three months to maximize tax deductions across the board--and plan your investing tax strategy -- is a Q4 must.

Consult with your accountant on how to structure tax losses to offset gains for this year.
If you own a rental property, it might make sense to complete any deductible repairs or upgrades to reduce taxable income.

If you're self-employed, there are a number of legitimate business expenses that can be deducted or amortized to lower your taxable income (equipment, advertising, travel, research, etc.)

Charitable Contributions

If you typically find yourself scrambling to make good on your vow to do good when December rolls around, plan your charitable contributions now. This gives you time to select recipients, and decide whether you want to give cash or assets.


Speaking of happiness...take full advantage of the pre-holiday lull to contemplate next year. What do you want fiscal year 2015 to look like for you? We strongly advise:

  • Optimized and automated savings
  • Spending on experiences, not things
  • Peace of mind

The opinions expressed by MP Dunleavey are strictly her own and do not necessarily represent those of Betterment.

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