Six Money Moves To Make Before Year End

The end of the year is always a good time for tying up loose ends.  Whether it’s preparing for a new and healthier you in the new year or taking care of some of this year’s resolution, now is usually the best time to close the books on the current year and get ready to open a new chapter in January.  With your money, it’s no different.

Last minute

When it comes to the financial world, some of the issues worth addressing have a hard deadline of December 31st.  Miss this deadline and you’ll have to wait until next year to take advantage.  We have talked about year-end tax strategies before, now let’s take a look at what other moves you should consider making before Year 2011 arrives to save you money.

Make Contributions to Charity

Donations made to approved charities are eligible for a tax deduction as long as you itemize deductions on your return.  Make sure that all contributions are made by December 31st and you save receipts just in case later you will need them.  In many cases, appreciated stock  can be donated to charities too.

Empty out Your Flexible Spending Plan Accounts

If you contribute to your company’s medical or dependent care flexible spending plan, you’ll need to zero out the account by year end or you’ll fall victim to the “use it or lose it” provision.  Some employers offer more flexibility and allow you to use the account until the first quarter of the new year to empty out your account but in either case you’ll need to spend what’s in your account or you’ll forfeit it.

Lock in Losses in Your Portfolio

Odds are you have one or two investments in your portfolio that haven’t quite turned out as planned.  Whenever you’re sitting on a financial lemon, make lemonade by turning that loser into a tax break.  If you sell your money losing securities this year, you’ll be able to use that loss to offset capital gains or income on your tax return.

Complete a Roth Conversion to Spread out the Tax Hit

Thanks to the Bush tax cuts, Roth IRAs became available to investors without regard to their income.  Even better, if you convert from a traditional to a Roth IRA you can spread the tax liability over the next two years instead of having to settle the full bill in the year of the conversion.

Rebalance Your Portfolio

This doesn’t really have a hard deadline but the beginning of a new year is always a good time to check the relative balance of your investment portfolio and make any necessary changes.  Your current asset allocation may have shifted from your original target and now would be a great opportunity to reset your portfolio back to where you’d like it.

Contribute to 529 Plans

Many 529 college savings plans have investment limits that only the wealthiest of the wealthy really need to worry about hitting but many plans also offer state tax deductions for contributions so long as you get them in by the end of the year.  You can check with your state’s plan specifically for details but even if a tax deduction isn’t available to you shoring up your child’s education fund with a few extra dollars is never a bad idea.

Photo credit: adesigna

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Author Info

This post was written by David Dierking. David lives outside Milwaukee, Wisconsin and has been working in the financial services industry for over 13 years with a background in investments, accounting, and marketing. He earned his Chartered Financial Analyst designation from the CFA Institute in 2004 and was recently published in the Milwaukee Business Journal. You can also check him out at The Ultimate Fit Challenge

One Response to “Six Money Moves To Make Before Year End”

  1. Jacob @ My Personal Finance Journey |  Dec 30, 2010 at 4:42 pm

    These are great points to consider. I especially would like to emphasize the importance of making sure to spend all of the money in your FSA accounts, since you won’t be able to buy OTC meds next year with those accounts