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End of the Year Checklist
The end of the year tends to be associated with multiple holiday celebrations, parties and vacations. There are also a few very important things federal employees should be addressing this time of year. I have put together a short list of things that should be on your financial calendar to be addressed. Many on this list have sign up deadlines that occur sometime in December.
- Dependent Care Flexible Spending Account (FSA) – Contributions for this account come out of your check before taxes or FICA are taken out, and qualified distributions are taken out of tax free. The funds can be used to pay for dependent care such as babysitters, after school programs, summer day camp and more. The maximum an individual can contribute is $2500 if you are single and $5000 if married filing jointly. The downside is that money in the account must be used in the year it is contributed, otherwise it will be lost. If you know that you will have dependent care expenses this is a great way to save some tax dollars for 2017. You can find more information here.
- Health Care Flexible Spending Account (FSA) – This FSA works the same as the dependent care FSA but it’s for health care. For individuals that know they will have health expenses in 2017 this is a no brainer. You can contribute up to $2600 for 2017 and use the entire amount on the first of the year. With the health care FSA, individuals are allowed to carry over $500 of unused benefit to 2018. You can find out more information on the health care FSA here.
- Health Savings Account (HSA) – Health Savings Accounts are similar to FSA’s except for three things; you still pay FICA on your contributions, you don’t lose your contributions at the end of the year if you don’t use them, and you must have a high deductible health plan in order to contribute. If dollars in an HSA are not used they can remain in the account and be invested for retirement. Any dollars not used for health care in an HSA can be withdrawn penalty free after the age of 65. You can find more info on HSA’s in this previous article.
- Sign up for the TSP catch up contribution – The catch up contribution allows employees age 50 and over to contribute and extra $6000 to their TSP. Unlike normal TSP contributions, the catch up contribution needs to be elected every year that a person wishes to contribute.
- Evaluate TSP balance – This is always a good time to do some analysis on your TSP. Has one fund done really well since you last adjusted your balance? If so your allocation could be heavy in stocks or bonds and may need to be adjusted. This is a good time to look at rebalancing your TSP.
- Charitable Donations – This is the last month to make charitable donations in order to receive a tax deduction for 2016.
- Get a Plan – Yes, maybe 2017 will finally be the year that you get a financial plan. If you don’t have one now is the time to establish a plan for your future. This can be done on your own or through the help of a professional.
Taking a little time to go through your financial checklist this December should help you reap future rewards in tax savings and retirement savings. Please take an hour or two and evaluate this list to see what points may be applicable to your situation.
Brad Bobb, CFP® is the owner of Bobb Financial Inc, and an expert in retirement planning for federal employees.