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Your Year-End Financial Checklist

Nov 08, 2021 5 min read Sheila Olson

Key takeaways

  • There may still be time to lower your taxes with retirement contributions and gifting.
  • See if you can offset taxes on investment gains by selling losers.
  • Financial priorities change; adjust your budget to meet your goals.


During the chaos of the past year and a half, many people overlooked key financial tasks as they struggled to stay afloat or put retirement savings on pause if they lost a job. With 2021 drawing to a close, now’s a good time to get your finances in order, maximize your tax savings, and make sure you’re on track to achieve your goals.

Whether you’re early in your career and building wealth, fine-tuning your future plans or prepping for life in retirement, there are things you may want to consider doing by Dec. 31 to tidy up your finances. A financial professional can advise you on how these steps might impact your overall financial picture.

Of course, a lot depends on how you’ve fared this year. But if you’re financially stable, here are seven items to consider checking off your year-end financial checklist.



  1. 1. Max out your retirement contributions

    In 2021, you can sock away $19,500 in your 401(k) or other employer-sponsored retirement plan, plus an extra $6,500 in “catch-up” contributions if you’ll be at least age 50 this year.

    If you don’t have a workplace plan, you may still be able to tuck away up to $6,000 ($7,000 if you’re 50+) in a traditional IRA—and so can your spouse if they’re not employed.

    If you freelance or are self-employed, your limits are even higher: up to $58,000 or 25% of your qualifying income, whichever is less, if you have a Simplified Employee Pension (SEP) Opens in new window plan IRA. If you don’t, there's still time to set one up to take advantage of the tax benefits.

    Now’s also a good time to review your retirement investments to make sure they’re performing as expected and still aligned with your strategy. If market performance has caused your asset allocation (the portions of your portfolio devoted to certain types of investments) to stray from your targets, you may need to rebalance to get back on track.


  2. 2. Consider converting to a Roth IRA

    With retirement income, it makes sense to have a good mix of traditional and Roth IRAs. (Money you take from traditional accounts is taxable in retirement, while Roth withdrawals are tax free as long as you meet certain criteria.)

    One way to boost your tax-free funds is to “convert” some money in traditional accounts (either within your workplace plan or an IRA) to a Roth IRA. Just keep in mind that doing so will trigger income taxes—money you convert to a Roth is treated as a normal distribution, so you’ll need funds to cover the tax on that amount. So, you’ll need to crunch the numbers to see if a Roth conversion makes sense this year. That might be the case if, say, you're in a lower tax bracket, perhaps due to a gap in employment or other life event.


  3. 3. Offset capital gains with capital losses

    Tax-loss harvesting” is a complex name for a simple idea: selling stocks and funds that have lost value to offset taxes on profits from sales of those that have gained value. If you hold investments outside your tax-favored retirement accounts, and you’ve made money by selling some this year, see if you can lower your tax burden by selling some poor performers.

    Even if you haven’t “realized” capital gains by selling winners, you may be able to use realized capital losses to lower your (taxable) ordinary income by up to $3,000.

    Bottom line: If you have capital gains this year, talk with your financial advisor or accountant to help you narrow down the best investments to unload to take advantage of tax-loss harvesting.


  4. 4. Plan ahead for education expenses

    With a state-based 529 college savings plan, anyone can give up to $15,000 per year, tax free, to help fund a child’s college or some K-12 expenses. (If you’re lucky enough to have had a windfall this year, you can snag up to five years of gift-tax exclusions and set aside up to $75,000 in a 529 plan in a single year.) Investments in 529s grow tax deferred, and withdrawals are federal tax-free when used toward qualified education costs. These can include textbooks, tuition and fees, some room and board, and student loans (up to a lifetime maximum of $10,000). What’s more, many states offer residents tax breaks on 529 contributions or withdrawals too.

    With private college costs averaging more than $60,000 per year and rising, it’s never too soon to start saving.


  5. 5. Make sure you’re adequately insured

    Have you grown your family this year? Bought a house? Started a business? The insurance coverage you had at the start of the year may not be enough for your needs in the new year.

    Check to see if your life insurance policy adequately protects your spouse and children, and that you have enough liability coverage on your home and car; depending on your assets, you may need an umbrella liability policy. You may also need extra coverage if you use your home or car for business.

    And if you’ve declined any extra coverage, such as disability insurance, through your employer, make sure those decisions will still make sense for you in 2022. If you've struck out on your own, you may need a disability policy to protect your family in case you're unable to work.


  6. 6. Fine-tune your budget

    Year-end is the perfect time to review your spending and savings to see if you need to make any changes. Review your service bills, such as wireless and cable, and see if you can get a lower rate, and look for savings by bundling your insurance policies with a single carrier.

    Check the balances in your long- and short-term savings accounts; if you’re not hitting your goals, look for ways to adjust your budget so you can get there next year. It’s not too early to start thinking about vacation plans (particularly if you put them on hold until things settled down). That might mean establishing a savings plan to pay for it without borrowing. Having a positive goal in mind is a good motivator for sticking to your plan.


  7. 7. Think about your legacy goals

    Estate planning isn’t only for the very old and very wealthy; there are things you can do at every stage of life to make sure your family's hopes and dreams are realized.

    Start with the basics:

    • If you don’t have a will, draw one up. If you already have one, make sure it's up to date.
    • Consider naming a health care proxy to make medical decisions on your behalf if you aren’t able to make them for yourself.
    • Think about a financial power of attorney—the authority to make financial decisions for you if you’re unable to do so.


    Also, talk to your aging parents about their wishes for end-of-life care, and encourage them to get the appropriate legal and financial documents in order.

    If you plan to give cash to children or grandchildren this year, keep in mind the annual gift-tax exclusion amount is $15,000; you can give that much to as many individuals as you like. You can also give beyond that limit to cover medical, dental and tuition expenses—as long as the payments go directly to the providers.


What you can do next

Make time before year-end to review this checklist, give your finances a thorough once-over, and take affirmative steps to set yourself up for a prosperous new year. Of course, everyone’s circumstances are different, so consider speaking with a financial professional before you make a move, especially if you’ve gone through major life changes.


Sheila Olson is a Charlotte-based freelance writer specializing in investing, personal finance, entrepreneurship and retirement planning. She is a regular contributor at Investopedia and writes frequently for the banking and consumer credit industry.


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