A year-end checklist for your finances

Pay attention to your finances now, and you’ll have less to pay at tax time.
Pay attention to your finances now, and you’ll have less to pay at tax time. MCT

As you prepare to wrap up 2014, it’s a good time to do a little financial housekeeping. Here are some strategies from money experts as the year ends:

▪ Take required minimum distributions.

If you are older than 70½, you could potentially face big tax penalties if you don’t take your required minimum distributions, or RMDs, from retirement savings by Dec. 31. (There are some exceptions, such as the year you turn 70½, when you have until April 1.)

According to Fidelity Investments, an analysis of Florida IRA customers on Oct. 31 showed that half of account holders hadn’t taken any RMDs.

Maura Cassidy, director of retirement for Fidelity, said it’s common to procrastinate. “I think some people wait to maximize returns, especially in a strong market,” she said. “I think there’s also a natural delay, like with taxes, when people wait until the last minute. But retirement plan holders need to make sure they leave themselves enough time to get that money out of their account by Dec. 31.”

If you take out money in intervals throughout the year, you can potentially benefit from reversed dollar-cost averaging, Cassidy said. “What you average out might be better than what you get from selling all at one time,” she said. Many investment providers, including Fidelity, offer automatic withdrawal services that can be set up according to a customer’s wishes to satisfy the minimum distribution requirement.

▪ Maximize your 401(k) contribution.

Beef up retirement savings by adding money to your 401(k). “Tucking money away into your retirement plan is my top tip because it has the biggest bang for the buck,” said Ellen Siegel, a certified financial planner with Ellen R. Siegel and Associates in Miami.

“If you haven’t been maximizing your retirement plan, go straight to your human resources department,” and have them do it as a payroll deduction, Siegel said. “You cannot write a check.”

If you can’t spare the funds now, consider increasing your 401(k) contributions for 2015.

▪ Confirm your Flexible Spending Account deadline.

Depending on your plan, the money in your Flexible Spending Account could be forfeited at the end of the year if you don’t spend it. “If you haven’t used it, now would be good time to get new eyeglasses or get your teeth cleaned,” Siegel said.

Susan Luskin, president of Diversified Administration of Hollywood, said some plans are use-it-or-lose-it by year-end. But other plans offer a grace period extension to March 15, and some plans offer a rollover option that will let you carry up to $500 to the end of 2015. If you don’t understand your plan’s deadlines, contact the human resources department at your company, Luskin said.

▪ Consider converting to a Roth IRA.

If this is a low-income year for you, converting funds from a traditional IRA to a Roth could make sense. You will pay taxes on the funds you convert, but will enjoy tax-free withdrawals from a Roth in retirement. “This is really a tax question,” Siegel said. “But most people are not going to want to take advantage of it,” particularly in a year where investments are doing well. Consult your tax adviser to see if this is right for you.

▪ Make tax-deductible charitable contributions.

If you itemize, contributing to a charity not only makes you feel good — it can give you a tax deduction. Consult your tax adviser to see how a cash or stock contribution to a worthy cause could help your bottom line. Siegel said another way to help a good cause and score a deduction is to clean out your clutter and make a non-cash contribution like household goods or clothing. “Be sure you get a letter from the charity documenting the donation,” she said.

▪ Make energy-efficient improvements to your home.

Improve the energy efficiency of your home with a solar hot water heater or solar electric equipment and enjoy a tax credit of up to 30 percent of the cost. This tax credit is available through 2016. See details at

▪ Consider deferring income.

If 2014 is a high income year, determine if deferring income to 2015 would help you tax-wise, Siegel said. If you expect to earn less income in 2015 and have control of when you get income, it may be advantageous. “Familiarize yourself with the tax bracket so you don’t inadvertently bump yourself into a higher bracket when you delay income,” she said.

▪ Revisit your withholding.

If your savings strategy consists of over-withholding and counting on a big refund come tax time, reconsider. “A lot of people love getting a tax refund. It’s their savings plan,” Siegel said. “If they understand they’re making a tax-free loan to the government” they may feel differently.

“It’s better to under-withhold, and write the IRS a check in April,” she said. “It allows you use of your money… Of course, the best strategy is to change your withholding so you don’t get a refund, and don’t pay.”

▪ Review your budget.

Ring in the New Year with a fresh start. If you use credit cards for most expenses (and hopefully pay them off each month), Siegel suggests reviewing your end-of-year statements, which will break out expenses by category such as travel, entertainment, medical and auto. “You don’t have to do Quickbooks or Quicken, or hand ledger,” she said. “This will give you a quick assessment of where your money went.”

If you can’t drag yourself from holiday festivities, it’s OK, Siegel said. “Most people are distracted by travel plans, holidays, food and shopping and they’re really not in a mood to sit down and look at their money,” she said. “Make an appointment with yourself in January to look at your bills and assess where your money is going.”

A comprehensive financial planner who insists on an annual review also can be of value. “Nobody wants to look at this stuff unless they’re going in for open heart surgery or planning a trip to the wilds of Nigeria,” Siegel said. “The typical person doesn’t put themselves high on the ‘to take care of’ list.”