As the tryptophane wears off and the jingle bells start to ring I thought we’d put together a year end checklist for your review. Checklists seem trivial and beneath the intellect of high finance, but I’m convinced that they’re one of the most important practices in a world with deadlines, hustle and stress.
Atul Gawande, a surgeon, Harvard Medical School professor, and writer, wrote a book on the subject called “The Checklist Manifesto” several years ago and I still think back to it when I hear the word checklist. It’s worth the read in its entirety but if you’re a cliff notes reader he identifies two basic types of checklists. The first type is what he calls a ‘Read-Do’ list. Think of this as a recipe to make chocolate chip cookies or the list my wife sends with me to the grocery store. The alternative type, best suited for an ever-changing world, is what he refers to as a ‘Do-Confirm’ checklist. This is the checklist that pilots use in an airplane and with Gawande’s help is now used by surgeons across the country.
The ’Do-Confirm’ checklist is where you handle a process from memory and experience but have certain checkpoints along the way where you should stop and confirm that everything was done. The goal of a process or a checklist isn’t necessarily to tell you the perfect thing to do at the perfect moment but instead gives you the ability to make good decisions under pressure and in real time as the world spins. This is exactly why we believe in financial planning by the way. Our financial planning process with clients is certainly a ‘Do-Confirm’ checklist.
A good checklist most likely won’t spell out everything. At some point a pilot must fly the plane and a surgeon wield a scalpel, but the checklist can give you road signs, reminders, and important goals along the way. The point of the ‘Do-Confirm’ checklist is to plan things out in advance so that we know how to react when life gets in the way. Life will always be ready to get in the way, especially as Santa prepares to fly the globe and someone tries to fill Dick Clark’s shoes to ring in the new year. You’re doing this personal finance journey from memory and experience, maybe with the help of an advisor who thinks about your checklist, but here’s your chance to stop and confirm:
- Have you maxed out your 401(k)?
Max out your company match and then set your sights on the $20,500 limit
- Have you maxed out your HSA?
Tax deductible contribution, grows tax deferred, used tax free for qualifying health care costs. There may not be a more tax favored vehicle in the world. We’re living longer, retirement health care costs should be in your plan.
- Do you have any tax losses you can harvest?
A down year in the market is no fun. Harvesting and realizing losses may be an appropriate strategy to help the tax return. Make sure you understand wash sale rules.
- Should you contribute to your 529 college savings account?
In many states, a contribution is a deduction on the state tax return. This contribution needs to be made before 12/31 to show for this year.
- Did you think through a Roth conversion?
If you were considering a Roth conversion, lower asset values here in 2022 make it look even more appealing probably.
- Can you complete the backdoor Roth strategy?
- Should you be utilizing your annual gift limitation to move wealth amongst the family?
- Did you take your required minimum distribution?
- Are your beneficiaries correct and accurate? What about the beneficiaries on your work-related benefits?
- Is the protection part of your plan (insurance) up to date and in line?
- Is your stock/bond mix correct?
A year where both equity and bond markets are down might mean your 70/30 stock vs bond mix moved to something less than 70/30. Is it appropriate for your goals and objectives or is it out of whack?
This years’ trip around the sun is almost complete. Have a safe, happy, and healthy end to the year!