Issue #172: What’s on your Christmas list?

Though the days of me scribbling out a letter to Santa in crayon are long gone, I’m hoping I see some Star Wars gear, new cookie sheets and a copy of The Golden Enclaves by Naomi Novik under the tree on Dec. 25.

But that’s not the only list I’m making this month. First, I need a packing list for Florida. Then, a things-to-do-before-I-go-on-PTO list. Also a list of gifts for my family and a grocery list for Christmas dinner. And finally, I need a financial end-of-year checklist.

Lucky for you, I’ve decided to share that last one. Consider it a gift. (Obviously I’ll be expecting one in return.)

What should be on my year-end money to-do list?

☑ Max out 401(k) contributions

The IRS limits how much I can contribute to my workplace-sponsored retirement plan every year. Dec. 31 is the last day to put money in and have it count for 2022.

This year, the maximum a person can funnel into their 401(k), 403(b), thrift savings plan or 457 is $20,500. People over 50 can stash away an additional $6,500 in catch-up contributions.

The deadline for contributing to an individual retirement account, or IRA, isn’t til Tax Day, which in 2023 will be April 18. Typically it’s April 15, but next year that falls on a Saturday, and the following Monday is a holiday for residents of D.C., Maine and Massachusetts. (That said, the deadline to convert a traditional IRA to a Roth is Dec. 31, so I can’t totally ignore the issue.)

☑ Empty my FSA

It’s time for a shopping spree for people who have flexible spending accounts, or FSAs. FSAs, which are limited to $2,850 for 2022, are intended to be used for health care costs including prescriptions and co-payments. But they can also be used to purchase a whole host of medicine-adjacent products, like tampons, bandages, sunscreen, Advil, glasses and hand sanitizer. I’ll probably need that stuff anyway, so why not get it now tax-free?

FSA funds — unlike those in a health savings account, or HSA — are use it or lose it. The deadline is Dec. 31.

☑ Call the doctor

Speaking of health care, my benefits are also on a calendar-year schedule, meaning that my deductible — the amount I have to pay out of pocket before insurance kicks in — will reset in January. To make the most of that, I should check to see if I’ve met my deductible for the year. If I have, or if I’m close, it’s probably a good idea to schedule any doctor’s/dentist’s appointments I’ve been putting off.

While doing research, I learned this is an especially important consideration for pregnant people. Anecdotes abound online of people with New Year’s Eve due dates who asked to be induced a day or two earlier for sake of cost.

(There’s also an interesting tax consideration here. If a parent wants to claim their infant as a dependent — and get the child tax credit, currently worth $2,000 — on the taxes they file in April, the baby must be born by Dec. 31 to qualify. This has led to an actual, research-verified phenomenon where the probability of having a child in the last week of December surges.)

☑ Check my credit

OK, so there’s not really a hard deadline here. But experts recommend I regularly check my credit for errors and fraud, and what better time than the present?

Usually, I’m legally entitled to one free online credit report from each of the three major credit bureaus — Experian, Equifax and TransUnion — a year. But fortunately, those agencies are still operating under a pandemic policy that allows people to pull one free report from each bureau every week. (This policy ends Dec. 31, 2023, so it’ll be on next year’s list for sure.)

I can use AnnualCreditReport.com to request my credit report. Once I've got the report, I should first verify that my personal information — name, address, date of birth, etc. — is all correct. Then I should look at the accounts and inquiries sections to see if there are any I don’t recognize. If I do see a red flag, I’ll need to call the creditor ASAP to get the issue addressed.

☑ Review my withholdings

The IRS recommends people check their withholdings at least once a year to make sure the government is taking out the right amount of federal income tax from each paycheck. If I withhold too much, then I’ll get a big refund come tax time, which may seem fun but actually means I'm giving the government an interest-free loan. If I withhold too little, then I’ll get a big bill, which is also not ideal.

Withholdings are affected by what’s going on in my life, so it’s time to take stock. Did I get married this year? Did I have a baby? Did I start a business? (No, but I did see Harry Styles multiple times, which I consider equally impressive.) I can use the IRS’s Tax Withholding Estimator to double-check that I’ve got my numbers right, then fill out a new W-4 and send it to HR.

☑ Clean up my act

Just like finally scheduling that physical I’ve been avoiding, I should also take this as an opportunity to hit reset on any problematic financial habits I may have developed in recent months. (*cough* paying for multiple Harry Styles shows *cough*)

I should ask myself: Did I ever actually get around to turning on transaction alerts, which can help me stay on top of my spending and protect me against fraud? Did I stop using my Disney+ subscription but never canceled it? Is my emergency fund still stocked with three to six months’ worth of expenses? Do I need to rebalance my investments and shift assets around? Now is the time to get to work.