The end of the year is a time when many of us are focused on holiday celebrations and year-end wrap-ups. However, it's crucial to set aside some time to address our financial matters. By taking care of these tasks now, we can enter the new year with a sense of financial security and be better positioned for success. From maximizing our savings to taking advantage of tax breaks, here are the key end-of-year financial moves you should make.

Secure Your Financial Future with These Year-End Tasks

Use Your Remaining FSA Funds

Flexible spending accounts (FSAs) are often use-it-or-lose-it, meaning any funds not used by the end of the year are forfeited. It's essential to make the most of these funds before December 31. You can use them for various items such as contact lenses, prescription drugs, and bandages. By using up your FSA funds, you can avoid losing money that could have been put to good use.Another aspect to consider is that some FSAs have specific rules and limitations. For example, some may only cover certain types of expenses or have a maximum amount that can be spent. It's important to familiarize yourself with the details of your FSA to ensure you're using the funds appropriately.

Max Out Your Retirement Contributions

Investment adviser Chris Berkel emphasizes the importance of maximizing retirement contributions. The more money you can put into a retirement account, the faster you can reach your savings goals. There are limits to how much you can contribute annually to a 401(k) or IRA, but taking advantage of these limits can make a significant difference in your financial future.For those planning to contribute to a retirement account in the near future, it's crucial to do so before the end of the year to maximize the benefits. By contributing the maximum amount allowed, you can take advantage of tax advantages and grow your retirement savings over time.

Consider Donating to a Charity

Donating to charity not only brings a sense of fulfillment but can also have financial benefits. You can write off charitable cash contributions on your taxes, up to 50% of your adjusted gross income. This can reduce your taxable income and potentially move you into a lower tax bracket, resulting in lower tax payments.When considering charitable donations, it's important to choose a cause that is meaningful to you. There are many different charities and organizations available, each with their own areas of focus. By donating to a charity that aligns with your values, you can make a positive impact while also reaping the financial rewards.

Review Your Insurance Policies

Insurance is a crucial part of a well-rounded financial strategy, but your coverage may need to be adjusted over time. Big life events such as marriage or the birth of a child can significantly affect your insurance needs. It's important to review your auto insurance, homeowners or renters insurance, health insurance, and other policies to ensure they still meet your current needs.Comparing different insurance providers can also help you ensure you're getting the best deal possible. With so many options available, it's worth taking the time to shop around and find the insurance coverage that suits you best.

Review and Rebalance Your Investment Portfolio

Rebalancing your investment portfolio at least once a year is essential to ensure it stays on track to help you achieve your financial goals. Emily Luk, CFA, CPA, CEO, and co-founder of Plenty, recommends focusing on cash holdings first. You should have three to six months of expenses in an emergency fund and ensure your money is properly allocated for short-term and long-term goals.Once your cash holdings are in order, consider your asset allocation. Experts suggest basing your asset allocation on your age. For example, if you're 25, you might consider holding 25% of your investments in lower-risk assets like bonds and 75% in higher-risk assets like stocks. As you age, your risk appetite may decrease, and you may want to shift more money into lower-risk assets.Diversifying among asset classes is also important. You can invest in low-cost index funds to diversify your stock holdings and exchange-traded funds (ETFs) to diversify your bond holdings. By spreading your investments across different asset classes, you can reduce risk and potentially increase returns.

Update Your Beneficiaries

There are several reasons why you may want to update the beneficiaries for your insurance policies and estate. Life events such as children becoming adults or getting married can change your financial situation and the people you want to support. It's important to regularly review your beneficiaries and ensure they accurately reflect your wishes.Updating your beneficiaries is a simple process that can have a significant impact on your loved ones in the event of your passing. Make sure to review your policies and make any necessary changes to ensure your assets are distributed according to your wishes.

Review Your Interest Rates

The interest rate environment is constantly changing, and it's important to stay informed to make the most of your money. High-yield savings accounts can offer significant returns, with APYs up to 10 times the national average rate or more. If your money is currently earning a paltry APY, consider switching to an HYSA to grow your savings faster.Certificates of deposit (CDs) are another option to consider. With a CD, you can lock in today's APYs before additional rate cuts. Your CD rate is fixed when you open the account, so your returns will remain the same even if interest rates decrease. If you have a CD maturing soon, be sure to compare competitors' rates to ensure you're getting the best deal.For those with mortgages or debts, recent rate reductions can provide an opportunity to save money. Mortgage rates are falling, and if you purchased your home when rates were high, you may want to consider refinancing. Similarly, if you have high-interest debts like credit cards or personal loans, you may be able to consolidate your debt and pay it off faster by taking advantage of lower interest rates.

Consider a Roth Conversion

With traditional retirement accounts like 401(k)s and IRAs, you make pre-tax contributions, and taxes are deferred until you withdraw funds. However, by converting your traditional retirement account to a Roth IRA, you can maximize your tax advantages. With a Roth IRA, you make contributions with after-tax money, and withdrawals in retirement are tax-free.This can provide significant savings over traditional retirement alternatives, especially if you expect your tax rate to be higher in retirement. However, it's important to consider your individual financial situation and consult with a financial professional before making a Roth conversion.

Take Any Required Minimum Distributions

If you're 73 years or older, it's important to take the minimum required distributions from your retirement accounts before the end of the year. Failure to do so can result in a 25% excise tax on the remaining amount. You can use a calculator to determine your required minimum distribution if you're unsure.By taking these distributions, you can ensure you're meeting your tax obligations and properly managing your retirement funds.

Set Financial Goals for the New Year

Carrying the positive momentum from the end of the year into the new year is essential. By setting financial goals, you can stay focused and motivated to improve your financial situation. Examples of financial goals for the new year include paying off debt, mastering your budget, fully funding your emergency savings, and finding your savings sweet spot.Each goal requires a specific plan and action steps. For example, to pay off debt, you may need to create a debt repayment plan and stick to it. To master your budget, you may need to track your expenses and make adjustments as needed. By setting clear goals and taking action, you can make significant progress in your financial life.