As the year draws to a close, financial experts emphasize the importance of taking a proactive approach to your finances. Beyond the typical yard cleanup, there are several crucial steps you can take to ensure your financial house is in order before the new year arrives.

Unlock the Power of Year-End Financial Optimization

Charitable Contributions and Tax-Loss Harvesting

The final months of the year present an opportune time to review your charitable contributions and investment portfolio. Financial experts recommend accounting for any charitable donations before December 31st, as these can provide valuable tax deductions come tax season. Additionally, they suggest exploring a strategy known as "tax-loss harvesting," which involves selling underperforming investments to offset capital gains and potentially lower your tax bill.

Kathleen Sablone, a financial and estate planner, explains the benefits of this approach: "Taking things that are at a loss and selling them allows you to net it against your capital gains for the year, ultimately reducing your tax liability." By proactively managing your investments and charitable giving, you can position yourself for a more favorable tax outcome in the coming year.

Reviewing Insurance Coverage

Another important aspect of year-end financial planning is evaluating your insurance coverage, particularly your homeowner's policy. Sablone cautions that many individuals may have lower levels of excess liability or umbrella insurance than they should, especially as we approach 2024. "Your excess liability or umbrella insurance may need to be increased over time," she advises, emphasizing the importance of ensuring your coverage aligns with your current needs and risk profile.

By taking the time to review your insurance policies, you can identify any gaps or areas that require adjustment, ultimately providing you with the necessary protection and peace of mind as you move forward.

Navigating FERPA for College-Bound Families

For families with children heading off to college, there's an important legal document to consider: the Family Educational Rights and Privacy Act (FERPA). This legislation grants parents the right to access their child's educational information and grades, even after the child reaches adulthood.

Alisa Kim O'Neil, a financial and estate planner, explains the significance of FERPA: "If you're paying the tuition, you want to be able to see what you're getting for that investment. Unless your child signs off on that, you have no access to that information." She emphasizes that even though the child is your own, they are considered an adult in the eyes of the law, making FERPA a crucial consideration for families with college-bound students.

Retirement Account Distributions and Penalties

Retirees also have a critical year-end task to address: required minimum distributions (RMDs) from their retirement accounts. Sablone cautions that failing to take the required distribution can result in a significant penalty. "If you missed that distribution, there is a 25% excise tax penalty that you need to pay," she warns. To avoid this, Sablone advises retirees to start the process early, as custodians may have processing times that need to be factored in.

By staying on top of RMDs, retirees can ensure they comply with the necessary regulations and avoid costly penalties, allowing them to maximize their retirement savings and enjoy their golden years with greater financial security.

Monitoring Your Credit Report

Finally, the fall season is an opportune time to review your credit report. Consumers are entitled to a free credit report from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion) once a year. By accessing these reports, you can stay informed about your credit standing and identify any potential issues or discrepancies that may require attention.

Regularly monitoring your credit report can help you maintain a healthy financial profile, detect any signs of identity theft or fraud, and take proactive steps to address any concerns before they escalate. With the convenience of online and telephone access, obtaining your free annual credit report has never been easier.