The following list is not intended to be exhaustive or cover all eventualities, but it does outline some items to be aware of that you can discuss in more detail with your tax, insurance, property or financial advisor.
1. Check FDIC coverage on your accounts
Money can accumulate over the years, especially if we are still working and saving. Make sure the money in your bank accounts doesn’t exceed the FDIC coverage limit, which is $ 250,000 per individual and $ 500,000 per joint account.
FDIC insurance is the amount of money that is protected in the event of a bank failure. If you have a large chunk of money (even temporarily), for example from selling and buying a house, you may want to split it between several banks.
2. Make sure your beneficiaries still make sense
Review beneficiaries on retirement accounts and add provisions on death transfer (TOD) on individual and joint accounts as per your wishes. You should review the beneficiaries especially after any major life changes, such as a death or divorce.
3. Review your 401 (k) allocation.
If you recently changed jobs and signed up for a new 401 (k), or if you have previous 401 (k) that you haven’t tracked, check your asset allocation to make sure your 401 (k) s are consistent with yours. total Floor. You may also want to check the beneficiaries of old plans to make sure they are consistent with your current wishes.
4. Make provision for minors
It may be necessary to establish protections / trusts for minor children (or children with special needs), particularly for divorced or widowed parents. Minors who inherit assets outright can cause problems (such as the legal guardian who is in control of the funds). If your only heirs are minors, you may want to discuss your options with your lawyer.
5. Maximize your cash earnings
As interest rates are rising, check what your bank is currently paying in cash as it may make sense to move banks. It may sound like a hassle, but 0.5% on $ 100,000 is $ 500 per year, if you can get 1% elsewhere you can make an extra $ 500 per year by switching to an online bank. You can check www.Bankrate.com for a list of current rates at various banks.
You may also want to consider options for any adjustable rate loans. As rates go up, loan rates will rise too – if you have cash on the sidelines, paying off these loans now might make sense.
6. Stay up to date on IRA distributions and inherited IRAs
Neglecting the required annual IRA distributions can impose a hefty 50% tax penalty. If you are transferring custodians or advisors, be sure to note if you have taken distributions for that fiscal year. It will usually be listed on your statement, but the new custodian or advisor may not be aware of it. Any inherited IRAs received after 2019 must be fully distributed within 10 years unless you fall under one of the exceptions to that rule, such as inheriting as a surviving spouse.
7. Keep track of HSA refunds / receipts
With health savings accounts, there are no restrictions on when a health expense is incurred and when it must be repaid. So you can pay cash for an expense now and get reimbursed years later if you want to let the HSA continue to grow, with tax benefits.
Knowing which items are eligible expenses can save you on fees in the long run. Since you don’t have to pay yourself back today, keeping receipts is important. Some people use spreadsheets, but Lively (livelyme.com) lets you take pictures of your receipts, which are saved in the app for future refunds. The app also counts the receipts and you can pay yourself back by expense (or total) whenever you want.
Be sure to look at the list of eligible items as some expenses you may not think are actually refundable, such as long-term care premiums, women’s products, masks, sanitizing wipes, and even sunscreen.
8. Verify charges / subscriptions / credit card fraudulent activity
Setting up alerts on your phone for all credit card charges will immediately notify you if someone unscrupulous has logged into your account or used your card. You can set it up via Apple Pay or other phone apps if you don’t have time to review statements and charges.
9. Comb your portfolio for tax losses in declining years
When the market is down, you can trade mutual funds or ETFs in a similar investment and make a tax loss. For example, a Vanguard S&P 500 mutual fund with a loss of $ 10,000 can be sold and you can immediately repurchase a Schwab Broad Market listed fund, which is similar but has a different structure as an ETF. You can accumulate the tax loss to offset future earnings, but still remain invested in the market when it recovers. Just pay attention to the washing sale rule, where you sell a stock at a loss and buy the same or “substantially identical” stock within 30 days. If so, you may end up paying the capital gains tax on the sale.
10. Purchase term life insurance
If you have family members who will face financial difficulties when you are gone, it makes sense to consider purchasing life insurance. If you are the main breadwinner in your family, what would happen if you died unexpectedly? Could your family pay the mortgage? Does the spouse’s salary alone cover the total family expenses? If not, you may need to speak to your insurance advisor to get coverage. And even if you are a stay-at-home parent, even though you may not be earning a salary that needs to be replaced with insurance, if you were to die, your spouse would likely need to hire help. So you may also need life insurance.
Senior Financial Advisor, Evensky & Katz / Foldes Financial Wealth Management
Roxanne Alexander is a Senior Financial Advisor with Evensky & Katz / Foldes Financial who manages client analytics on investment, insurance, annuity, college planning, and investment policy development. Previously, she was Senior Vice President at Evensky & Katz, working with both individual and institutional clients. She has a bachelor’s degree in accounting and business management from the University of the West Indies, an MBA from the University of Miami in finance and investment.