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Less than two months left in the calendar year. While many of us use this time to prepare for the holidays and enjoy vacations with loved ones, there are important financial areas we can focus on now to move forward into 2023.
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Here are some of the best ways to start financially preparing for 2023, even during the holiday season.
Prepare Now for Next Year’s Positive Tax Return
MassMutual’s CFP and Head of Product Paul LaPiana recommends getting your income tax form for this year and making a list of the items you need to complete it. Create a folder and drop all the items you need, such as statements and receipts, into it so tax time doesn’t come.
We need to determine if there are steps we can take now to make returns more secure next year. Answer a few questions to ensure long-term benefits for you and others.
- Would you mind contributing a little more to eligible retirement and college savings plans to help ease your tax burden next year?
- What if we withhold more or less?
- What if you’re requesting and keeping all receipts for cash and in-kind donations to apply to next year’s tax returns?
Ensure proper withholding and estimated tax payments
The last few months of the year are a good time to check whether your withholding and estimated tax payments are appropriate.
“Over the last few years, the federal underpayment rate has been so low that some taxpayers have become less interested in meeting the estimated payment requirements,” said MassMutual’s Real Estate and Business Planning, ChFC’s Al. Kingan said. “As of October 1, the underpayment rate is 6% for him.”
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If you make quarterly estimated tax payments throughout the year, use this time to check in with your CPA to see if you need to make an estimated tax payment in January.
“Generally speaking, investors with taxable accounts are likely to see lower capital gains this year, so they may not need to make additional payments in January. It could mean keeping it in your pocket,” said Stephanie Richman, CFP and regional director for Northern California/East Bay at EP Wealth Advisor.
Determine if you can get the most out of your 401(k)
Have you made the most of your 401(k) this year? If not, Bruce Tannahill, CPA and MassMutual’s director of real estate and business planning, tells you to ask if you can afford to increase your donations. rice field. It is especially important to ask if you have not obtained the full employer match possible.
What about maximizing your IRA contributions? Richman said this still takes time.The 2022 IRA/Ross IRA contributions need to be made before the tax date of April 2023. Contributions for the 2023 tax year starting in January are also due. Is possible.
Prepare to itemize deductions in 2022, if applicable
Please check if this applies to you. Tannahill said the standard deductible is now $12,950 for him if he is single and $25,900 for him if he is joint, so many people are not eligible to classify deductibles.
If deductions cannot be itemized, consider deferring charitable contributions until 2023 when deductions can be itemized. You may also consider donating to a Donor Advised Fund in 2022 for distribution to charity in 2022.
Check emergency fund status
Whether you’re single, part of a household, or retired, use the last few months of 2022 to determine your emergency fund status. Brian Mawhinney, his CFP and head of financial planning at MassMutual, said that the accumulators for households with one source of income, or those with variable income, would include six months’ worth of expenses as a contingency reserve. We recommend paying. For dual-income households, 3 months’ worth is required.
Retirees need several years of emergency funds to fall back on. Mawhinney recommends storing one to three years’ worth of her expenses in a financial instrument for quick access to cash. Retirees may take advantage of her three-step approach, sometimes called the Bucket Retirement Strategy. The first tier is checking and savings account liquidity, the middle tier is typically money market type investments, and the third tier is ladder CDs or short-term bonds.
“By putting a third of our cash in each stage, we can insulate ourselves against market volatility. Laddering CDs and short-term bonds provides new opportunities to increase yields as the product matures. It gives us the flexibility we need to find ,” says Mawhinney. .
Give yourself the gift of a financial fresh start
It is an acronym used by Jacqui Kearns, Chief Welfare Officer of Affinity Federal Credit Union. GIFT is divided into his four words: Gain, Investigate, Find and Treat.
gain
Now is the time to understand your spending and make a plan to pay off your debt. According to Kearns, most credit cards, checking accounts, and/or savings accounts have online spending profiles in key categories, providing an individual’s spending habits and profile.
Take a moment to get a good sense of where your money went last year. According to Kearns, this can provide key insights on whether budgets can be improved, lowered, or alternatives for high-spending categories can be found.
Investigation
Which other financial partners can offer better savings rates or lower interest rates on credit cards and auto loans?
“By investing by the end of the year, you can find a financial services partner that is in your best interests, rather than having their interests in mind,” Kearns said.
seek
This is the time to find a financial partner. Kearns said having a financial partner helps her budget to pay off debt while finding ways to save more money faster.
deal
Remember: This acronym spells GIFT! Kearns said: “Take a moment to flip through the pages of the next financial chapter. Spending a little time understanding your spending habits and finding a true financial partner can set you on the path to prosperous financial well-being.” ‘ said Kearns.
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