Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority.
For individual financial information, click here.
For Small Businesses, including the Paycheck Protection Program (PPP), click here.

4 Things to Do for Your Finances Before the End of the Year

December 22, 2017 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

4 Things to Do for Your Finances Before the End of the Year

If you didn’t get around to some of the things you planned to do this year, there’s probably no real consequence. You can always run that 10K or clean out your storage unit in 2018, right?

But when it comes to your annual financial to-dos, procrastinating can backfire (big time).

“There are a few situations where the clock really is ticking and you should consider doing them by the end of the calendar year,” says Katy Song, a Certified Financial Planner at SoFi.

So before you grab that glass of champagne on December 31, doing these four things may help you celebrate guilt-free.

1. Max out Your 401(k)

You can put up to $18,000 into an employer-sponsored 401(k) in 2017, and if you can afford it, most financial planners recommend contributing the maximum.

What many people don’t know is that the contributions don’t have to be in even, biweekly or monthly chunks. So if you haven’t been contributing much (or anything)—or if you started a new job and weren’t eligible to contribute to a 401(k) for a few weeks or months—there is still time to make catch-up payments. But you need to hurry.

Here’s an example of what that might look like: If your annual salary is roughly $108,000 or more, and you haven’t contributed anything from January through October, you could contribute $9,000 this November and $9,000 this December to hit the maximum for 2017.

One caveat: All of the money that goes into your 401(k) has to come directly from your paycheck. In other words, it would be smart to first make sure that you have enough money in your savings account(s) to cover your living expenses for November and December before making additional payments.

Even if you can’t contribute the maximum amount this year, anything is better than nothing because of the tax benefit, Song recommends. “Also, keep in mind that Congress is working on tax reform right now, so these rules could potentially change in the future. That’s another reason to take advantage of them now.” Just keep in mind that there’s a penalty for withdrawing from your 401(k) early, so don’t put in anything you might need sooner rather than later.

Don’t have a 401(k) plan, or already maxed yours out? You’ve got options, which brings us to:

2. Open (and Fund) an IRA

An Individual Retirement Account, or IRA, is another type of account that you can open and contribute to annually to save for retirement. If you have an employer, Song says it’s probably best to take advantage of whatever plan your employer is offering first and then consider opening a Traditional or Roth IRA on top of that, if you can, for extra retirement income. The difference between the two? Eligibility requirements and tax treatments. Read more about Traditional vs. Roth IRAs to see which is right for you.

If you work for yourself (or even have a side gig or do freelance work) consider opening a SEP IRA because, depending on your income, you can often contribute more money each year to a SEP IRA than you can to a Traditional or Roth IRA. With a SEP IRA, you can contribute up to 25% of your net business income, up to a maximum of $54,000 this calendar year. For instance, if your net business income this year is $50,000, you can put up to $12,500 into a SEP IRA, which is more than twice what you can put into a traditional or Roth IRA.

“The cool thing is that if you have a day job with an employer that provides W-2 income, you can likely contribute to a 401(k) at your office, and if you have a side gig on top of that—like consulting or freelancing—then you can also open a SEP IRA on top of that and max out both,” says Song.

Technically, you can open an IRA and contribute to it for 2017 up until you file your 2017 taxes in the spring of 2018. So you don’t have to make this particular move by December 31 of this year, but the sooner you open one, the sooner you can contribute to it and the more money you can potentially earn over time. Not sure which IRA account is right for you? Use our IRA calculator for more information!

3. Spend the Money in Your Flexible Spending Account

If you participate in a Flexible Spending Account (FSA) through your employer, you have to spend almost all of that money by the end of the calendar year or else you will lose it. (You can roll over only $500 of it to 2018.) You don’t have to process all the paperwork until March 31, 2018 but you have to make the purchases by the stroke of midnight on December 31, 2017.

It’s important to note that a FSA is different from a Health Savings Account (HSA). If you have a HSA, you don’t have to rush to spend your money because you won’t lose any of it next year. Most people who work for an employer that offers health insurance are eligible to enroll in an FSA, even if they don’t use their company’s health insurance plan. However, HSAs are generally offered only to people who have high-deductible health insurance plans.

Not sure what to spend the rest of your FSA money on? If your FSA is for medical expenses, go to a site like FSA Store that features eligible purchases, such as sunscreen, insect repellent, bandages, contact lens solution, heating pads, thermometers, eye drops, condoms, pregnancy tests, prenatal vitamins, breast pumps, children’s medications, prescription glasses, and more.

Or talk to your dental office to see if there are any teeth-related procedures that might be covered (for instance, whitening is generally not covered because it’s considered cosmetic, but a root canal or crown might be).

“If your FSA is for dependent care and you’re not already spending all of it on preschool or a nanny, think about pre-paying for a children’s camp over winter break or spring break if school will be out but you and your partner will be working during that time,” says Song.

4. Create a Holiday Game Plan

“People tend to overspend around this time of year, so proactively plan how much you’re going to spend on holiday travel, entertaining, gift giving, and charitable giving,” says Song. “Think about it now, before the lights get all shiny in the stores, so you can stay on track financially.”

If you want to spend more in November and December than usual but your income is stagnant, check whether you’ve accumulated any credit card rewards points, and see if you have any old gift cards in your wallet that you’ve forgotten about that haven’t yet expired.

And don’t just think about your spending—think about how much more you can save or invest, too. If you tend to get an end-of-the-year or holiday bonus, think about your biggest financial goals, like going on a vacation or saving for a down payment, and talk to a SoFi financial advisor about the smartest way to reach them.

Need some help on your end-of-year financial planning? SoFi Wealth is all about empowering you and your financial future, and we’re here to help. Schedule a free personal consultation with one of our licensed financial advisors who can help you plot your path forward.


SoFi Wealth, LLC does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.
The SoFi Wealth platform is operated and maintained by SoFi Wealth LLC, an SEC Registered Investment Advisor. Brokerage services are provided to clients of SoFi Wealth LLC by SoFi Securities LLC, an affiliated broker-dealer registered with the Securities and Exchange Commission and a member of FINRA / SIPC. Investments are not FDIC Insured, have No Guarantee and May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Clearing and custody of all securities are provided by APEX Clearing Corporation.
WM17127

TLS 1.2 Encrypted
Equal Housing Lender