A financial adviser shares a 5-step checklist to complete before the end of 2016


new years

Ryan Pierse/Getty

Here's to a healthy financial future.


There's no time like the end of the year to take stock of your financial life.

"Information is power and a lot of people spend more time planning vacations than they do their finances or retirement," Andrew Rafal, an Arizona-based financial adviser at Bayntree Wealth Advisors, told Business Insider.

The end of the year, he says, "is a great time to take a high-level overview of what you have, both assets and liabilities" to prepare for the year ahead and any financial milestones or challenges you may face, including marriage, home-buying, kids, and retirement.

Below, Rafal shares the most important money steps to take before the sun sets on 2016.


1. Take financial inventory

Rafal suggests using platforms like Mint or eMoney, or consulting a financial advisor, to aggregate your accounts and identify what you have, including 401(k)s, IRAs, bank accounts, and life insurance.

"By doing that, not only do you know if you're on track but also you can look at ... are your assets properly invested for where you are in this life cycle?"

You should also take inventory of your debt and how you plan to pay it off in the coming year, Rafal said. "Being able to know where the worst debt is, that gives somebody the ability to come up with a plan to maybe pay off the high-interest bearing credit cards first. And basically get your head out of the sand and take ownership of it, because nobody else is."

2. Revisit your estate plan

People are often blasé about estate planning, brushing it off as something they'll "get to next year," says Rafal. The problem with that, he says, is tragedy can strike at any time and "if you don't plan properly and something happens to you, a lot of times your wishes won't go the way that you intended."

Whether you're updating a new will or trust, it's important to have control over what would happen to everything you leave behind, Rafal said.


3. Update beneficiary forms

Updating your beneficiary - the person or people who receive your money or benefits upon your death - is something that should be periodically revisited, especially if you've been married or divorced, had children, or retired in recent years, he says.

Rafal reminds us that a designated beneficiary on an insurance policy or IRA will take precedence over any previous estate planning, like a will or a trust, so it's crucial to make alignments following major life events.

"What we encourage is that almost on a yearly basis, reviewing and updating your beneficiary forms on all of those accounts because it will supersede any planning that you've done - it's so critical to do that," Rafal said.

4. Make smart tax moves

Understanding how taxes work on 401(k)s and IRAs is something to revisit at the end of the year to ensure you're saving the most money, says Rafal. The maximum annual contribution to a 401(k) is $18,000 - or $24,000 if you're over 50 - so if you've recently received a windfall like a holiday bonus, now is the perfect time to top off those retirement accounts. "There may be a situation where you can afford to put more away this month and that, on a pre-tax basis, will help eliminate some ordinary income taxes," he said.

Also be vigilant of taxes while gifting money, particularly during the holidays. You can gift as much as $14,000 per person each year to as many people as you'd like without incurring a gift tax. He suggests working with your adviser or CPA to determine how much you should gift this year and how it will affect your beneficiary.


Tax planning for retirement is also something to talk about, Rafal says. If you're nearing retirement, perhaps you'll consider converting your retirement money through a Roth IRA conversion ladder, he said. Under this IRS rule, money transferred from a traditional IRA - like a 401(k) - to a Roth IRA is tax- and penalty-free.

5. Assess your path to retirement

Rafal says retirement planning is valuable at every stage of life. "You should be proactive. Create a plan [because] it holds you accountable, work with a team that is focusing on the plan and not just 'set it and forget it' but continually monitor it," he said.

If retirement is within arm's reach - or if you're planning to retire early - have conversations now about "identifying guaranteed income, how to use social security properly, what type of pension options you have, if you're fortunate enough to have one, and how to utilize that into your overall income plan, and understanding the tax consequences," Rafal said.

NOW WATCH: Here's how much you need to make to be in the top 1% of every state