The Holiday Rush You Can’t Afford to Miss

Your December to-do list is likely overflowing with last-minute errands and festive preparations. Still, one important task should get top billing on your holiday agenda - a year-end financial review. Before you dash to the store to grab the last carton of eggnog, set aside time to explore five simple strategies that can turn your holiday busyness into lasting financial benefits.

1. Snag Your Last-Minute Match

Maximizing retirement contributions before year-end can provide significant tax advantages while securing your financial future. A workplace retirement account like a 401(k) offers a valuable way to reduce taxable income while building long-term wealth. Plus, some employers will match your contributions up to a pre-set limit. Review your workplace 401(k) matching policy to ensure you don’t miss out on funds that essentially amount to free money.

2. Don’t Let Your FSA Spoil

Empty your Flexible Spending Account (FSA) before the expiration date to prevent valuable benefits from going to waste. These annual pre-tax dollars are meant to pay for qualified medical expenses and must be used by midnight on December 31. However, some employers offer a grace period or limited rollover. Check your current FSA balance, review your plan’s deadline, and schedule any needed medical appointments or stock up on eligible healthcare items.

3. Unwrap Your RMDs

If you’re age 73 or older, take your Required Minimum Distributions (RMDs) by year-end. RMDs are the Internal Revenue Service’s (IRS) way of ensuring retirement account holders eventually withdraw and pay taxes on their tax-deferred savings. Missing the deadline or not withdrawing enough could result in significant financial penalties. Calculate your required distribution amount based on your account balance and the IRS life expectancy tables, then arrange the withdrawal with your financial institution.

4. Gift Financial Savings

The annual gift tax exclusion lets you spread financial cheer without wrapping yourself up in tax complications. The IRS permits you to give up to $18,000 per person in 2024 without triggering gift tax reporting requirements or dipping into your lifetime estate tax exemption. To take advantage of this opportunity, identify your intended recipients, determine the gift amounts, and ensure the transfers are completed and documented before year-end.

5. Fill a Child’s 529 Stockings

Contributing to a 529 college savings plan before year-end can stuff your tax benefits and a little one’s educational nest egg to the brim. While the April 15 tax deadline offers flexibility, contributing by December 31 gives the money extra time to grow tax-free and benefit from compound interest, making college savings easier to manage. Check your state’s tax deduction limits for 529 contributions, review your annual gifting goals, and ensure your contributions are processed before the December 31 deadline.

Opening a Coverdell Educational Savings Account (ESA) at SAFE is another great way to prepare for education-related costs. Annual contributions up to $2,000 per child can be used for a wide range of qualifying expenses like tuition or tutoring. Contributions can be made until your child or grandchild reaches the age of 18, so it pays to start early! And, don't forget--as is with any tax-advantaged account, it's always best to consult with your own tax advisor. 

While the holiday season brings its festive chaos, taking time for these year-end financial moves is a gift that keeps giving long after the decorations are packed away.