Your Year-End Investment Checklist

The end of the year is fast approaching, and with it comes the opportunity to check in on your investment plan and make sure everything is on track.

Here’s a checklist that will help you do just that.

1. Check on Your Emergency Fund

Your emergency fund serves as a valuable buffer that makes it easier for you to keep your investment plan on track.

With a safety net in place, you can weather just about any financial storm without dipping into your investment accounts, and potentially without even pausing your contributions.

Here’s a step-by-step guide to building a big, healthy emergency fund.

2. Take Stock of Your Debts

If you have high-interest debt, it may be worth paying that off before putting extra money towards your investments (though it’s almost always worth maxing out your 401(k) match first).

Now is a good chance to take stock of your debts, noting the balance, interest rate, and minimum payment due on each one. Then you can use this guide to decide whether you should be prioritizing investing or making extra debt payments.

3. Update Your Retirement Savings Target

The most important part of your investment plan, by far, is your savings rate. And to get it right, you need to know how much you should be saving based on your personal investment goals.

To see whether you’re on pace or need to step up your savings rate, you can use this spreadsheet to calculate exactly how much you should be saving for retirement each month.

4. Update Your Retirement Contributions

With that savings target in hand, it’s time to update your retirement contributions to make sure that you’re on the right track. You can click here for a complete guide to picking the right accounts, but the following pointers will get you started:

  • First and foremost, do what you can to max out your 401(k) match. That’s almost always the best return available to you.
  • If you have access to a health savings account (HSA), that may be the next best option. It has several features that make it a fantastic retirement account.
  • If your 401(k) offers good, low-cost investment options, you can increase your contributions there up to the annual limit (currently at $18,500, though it may increase to $19,000 for 2019).
  • If your 401(k) doesn’t offer good investment options, or if you’ve already maxed it out, you can contribute to a traditional or Roth IRA. The combined annual IRA contribution limit is currently $5,500 for those under 50 and $6,500 for those 50 and older.
  • If you’ve maxed out all of those accounts and you still want to contribute more, a taxable brokerage account is likely your next best option.

Even if you can’t contribute enough to fully reach your savings target, see if you can increase your contributions by just a bit. Then set a calendar reminder for six months from now to make another small increase, and again in another six months, and so on.

Regular small increases over an extended period of time will have a big long-term impact on your savings rate without ever forcing you to make too big of a change all at once.

5. Check for New 401(k) Investment Options

Every now and then, your 401(k) might update some or all of its investment options, and the end of the year is a good opportunity to make sure that you’re aware of them.

It’s possible that lower-cost options have been introduced or that new funds have been added that are a better fit for your desired investment plan. Or maybe fees on your current fund selections have been raised, in which case it might make sense to switch.

Here’s a guide that will help you evaluate your options and make the right choices: How to Choose Investments in Your 401(k).

6. Rebalance Your Investments

Your asset allocation is one of the most important parts of your investment plan. By choosing the right mix of stocks and bonds, you can shoot for a reasonable return without taking on more risk than you’re either willing or able to take.

But even if you do nothing, your asset allocation can shift over time. Depending on which markets are performing well compared to others, your balances will rise and fall, and your asset allocation could become either more or less aggressive than you’d like.

That’s why it’s so important to rebalance your investments and bring them back in line with your target asset allocation. Doing so will make sure that you stay true to your long-term plan.

7. Check for Tax-Saving Opportunities

With the help of a good CPA, you may be able to take advantage of some helpful tax-saving opportunities.

If you’re in the 10% or 12% tax bracket, any long-term capital gains are actually taxed at 0%. So if you have investment gains in a taxable account, you could take advantage of a strategy called tax-gain harvesting, in which you sell those investments and quickly repurchase them, ensuring that those gains will never be taxed.

If, on the other hand, you have losses within a taxable account, you could take advantage of a more complicated strategy called tax-loss harvesting. In this case, you would have to sell the investments that have a loss and buy similar, but not identical, investments to replace them. Those losses could then be used to offset gains elsewhere, or to reduce your regular income by up to $3,000 per year.

If you have money in a traditional IRA, you could also consider converting some of that money to a Roth IRA. This is generally most effective when your tax bracket is currently lower than what you expect it to be in retirement, and even then should be done cautiously.

The Sooner the Better

The end of the year is the perfect time to take stock of your investment plan and make sure everything is on the right track, but it’s also easy to run out of time once the holidays hit and your life gets hectic.

All of which means that the sooner you start working through this checklist, the better. With the right moves now, you can put yourself on pace for a successful 2019.

Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families.

More by Matt Becker

Matt Becker

Contributor for The Simple Dollar

Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money where he helps new parents take control of their money so they can take care of their families. His free time is spent jumping on couches, building LEGOs, and goofing around with his wife and their two young boys.