Your 2023 Financial Checklist

2023 is here, and it’s a great time to take financial inventory. Here are some areas you should check.

With the chaos of 2022, it might have been difficult to find a moment to step back and look at the bigger picture, so as we welcome in the new year, it can be a great time to take inventory of our finances. It’s something we believe you should do often, whether your individual picture has changed or not. The world is always evolving, and we think the best thing you can do is attempt to prepare yourself for any outcome. Here is a checklist to give you a starting point for your financial self-assessment!

1. Review Your Budget

Your budget should be a complete look at your financial situation. It accounts for everything coming in and everything going out, and as we enter this new year, it can be a great time to look at your budget and determine if you need to make changes. Maybe you’ve been faced with a new life event, or maybe you’ve realized that your goals have changed, pushing you to allocate more of your income to saving instead of spending for pleasure. Even if you decide not to make any changes, you’ll likely walk away with a better understanding of your objectives and situation.

2. Adjust Your Tax Withholding

New years bring new tax brackets, meaning that your obligation may have changed. No matter if you owe on tax day or you often get a nice refund, it can be a good idea to adjust your income tax withholding to get closer to your actual obligation. If you owe, it can cause undue stress, especially if you haven’t accounted for that payment when it comes due. If you’re due to receive a refund, it means that you gave the government an interest-free loan when you could have, at the very least, accrued interest in a savings account. A financial or tax professional can help you find the right balance to ensure that your withholding meets your obligation as closely as possible.

3. Account for New Life Events

New life events can alter your financial picture in a variety of ways. Starting a business, the birth of a baby, having a wedding, and getting a raise or promotion at work can all figure prominently into your financial situation, and they may give you more, or less, flexibility when it comes to your money. For example, if you started a business out of your home, you may be able to take a home office deduction in your taxes. You may also be able to file jointly with a spouse if you’ve recently married, and you may be able to claim a dependent if you recently had a baby. On the other hand, the expenses of raising a child may now play a big role in your budget. It’s important to understand how each part of your situation affects the greater whole.

4. Assess Contributions to Retirement Plans and Savings

While having pre-tax funds automatically deducted from paychecks to go to tax-deferred retirement accounts can help that money stay out of sight and out of mind, we can often forget just how much we’re contributing. Now is a great time to look at your contributions to retirement accounts and savings accounts and decide if it’s possible to contribute more. Maybe you have money growing in a savings account and accruing minimal interest, or you might have too much money allocated to recreational spending. That money can be moved over to a retirement account like traditional or Roth IRAs if you haven’t yet hit your contribution limit. It can be also placed into an annuity or permanent life insurance policy that has the potential to offer more guaranteed growth than a traditional savings account.

5. Take RMDs

Required minimum distributions, or RMDS, are annual, mandatory minimum withdrawals that must be made by those with qualified retirement accounts. Prior to the signing of SECURE Act 2.0, retirees were required to take those withdrawals beginning at age 72, but that age has since been increased to 73. It will again increase to 75 in 2033. SECURE Act 2.0 also decreased the penalty for failure to make adequate withdrawals from 50% to 25% of the RMD amount. Furthermore, that penalty can decrease to 10% if corrected quickly, but when you’ve worked your entire life to build your qualified retirement accounts, there’s no doubt you’d love to pocket as much of that money as possible. A financial professional can help you ensure that you meet your requirement and avoid penalties on your hard-earned money.

If you have any questions about preparing yourself for the new year, please give Roth IUL a call!

You can reach us at (800) 202-7398.

Sources: 1.