End-of-Year Money Considerations for a Healthy Retirement

Hopefully you’re having so much fun in retirement that you’ve barely noticed that the end of the year is creeping up again. And while we don’t want to stand in the way of all the adventures and enjoyment, it’s important to take a few moments as we approach the end of the year to check in on your finances. To keep things running smoothly, you’ll want to evaluate your spending for the year, and plan for the year ahead. As you review your expenses, there are a few items you’ll want to make sure you tend to before we hit 2023. Here’s a financial checklist for retirees to help keep your peace of mind in retirement.

Required Minimum Distributions (RMDs): You are required to take RMDs from tax-qualified accounts like a traditional 401(k), 403(b) or IRA starting no later than April 1 of the year following the year in which you turn 72. It is important to take these distributions by year end to avoid costly taxes and penalties.[1]

Keep wills and trusts up to date: Review your wills and/or revocable living trust to ensure that documents list the appropriate executors, trustees and guardians. Also, make sure your beneficiaries are up to date — especially if you’ve welcomed a grandchild or two to the family. Remember, an estate plan is a good idea for everyone, regardless of your net worth.

Rebalance your portfolio: In retirement, it’s still important to own stocks, bonds and other assets in your portfolio[2]. The ups and downs of the market throughout the year can cause your exposure to these assets to change in ways that may be at odds with you preferred level of risk. Rebalancing your portfolio brings your asset allocation back in line with your comfort level. While rebalancing is always a good idea on a regular basis, it can be particularly beneficial following big market moves like we have experienced this year.

Review charitable giving: Discuss charitable gift-giving strategies with your advisor or tax attorney for income tax deductions and to provide immediate and future benefits to charity over time. If you’re 72 or older, consider charitable distributions from a qualified retirement account — up to $100,000 per year. That distribution is excluded from income and satisfies RMDs

Review annual and lifetime giving: You may want to consider giving income-producing assets to children in lower income brackets to reduce the family’s overall tax burden. If you have a large estate, you may want to take advantage of favorable current tax exemptions to make large gifts to dynasty trusts that can endure for multiple generations. The 2017 tax law effectively doubled the gift, estate and generation-skipping transfer (GST) tax exemptions and it has been indexed for inflation each year. However, that may not be the case if tax policies are altered in the future.[3]

Update your budget: Review your 2022 spending and build your budget for 2023. Tracking your spending can help you understand where your money is going and if it's time to eliminate some expenses that may not be as important to you. And don’t forget to account for any big-ticket expenses you anticipate in the coming year — medical procedures, travel, etc. Budgeting in retirement is important, given you’re living on the savings you’ve amassed as well as other guaranteed, fixed income streams. Balancing spending priorities with your savings will help you make your money go further, while making sure you’re able to spend on the things that are important today.

[1] Distributions may be subject to ordinary income tax and may be subject to a 10% IRS early withdrawal penalty if taken before age 59 ½.

[2] All investments carry some level of risk including the potential loss of all money invested.

[3]This publication is not intended as legal or tax advice. Consult with a tax professional for tax advice that is specific to your situation.