Year-End Financial Checklist for Retirees

Year-End Financial Checklist for Retirees
Year-End Financial Checklist for Retirees


Cameron Huddleston

You might be glad to say goodbye to 2021. However, there are things you can do between now and the end of the year to be in a better position financially in 2022. 

You can safeguard your budget, reduce the taxes you’ll pay (or boost the refund you’ll get) next spring and be better prepared for financial emergencies by taking these steps. Time is running out, so get started now.

Review 2021 spending and update your budget

Pull out those bank and credit card statements or review your accounts online to see where your money went over the past year. If you spent more than expected, you might need to find ways to trim your spending in 2022—such as eliminating unnecessary subscriptions and shopping around for lower rates on services such as cable TV and Internet.

Also, make room in your 2022 budget for rising costs. For example, the Medicare Part B monthly premium will increase 14.5% to $170.10 in 2022 from $148.50. And the cost of other necessities, such as food and gas, could continue to rise.

[ Find Out: How Retiress Can Cut Healthcare Costs ]

Check in on your investment portfolio 

You might find that, as a result of market swings during the year, your allocation of stocks and bonds isn’t where you want it to be. For example, your stock holdings might have increased in value and might be making up a larger percentage of your portfolio. As a retiree who is interested in reducing risk, you might need to sell some stock holdings and invest in safer bond holdings. 

Schedule a meeting with your financial advisor or accountant to discuss what year-end adjustments you should make to your portfolio. If you aren’t working with an advisor, you can find one through Wealthramp, the Garrett Planning Network or the National Association of Personal Financial Advisors.

Take required minimum IRA distributions

Required minimum distributions from IRAs were waived in 2020 but are required once again in 2021. So if you turned 72 this year, you are required to withdraw a certain amount of money from your IRA. Otherwise, you’ll have to pay a 50% tax on the amount that you were supposed to withdraw but didn’t. Charles Schwab has a free IRA RMD calculator you can use to determine what your withdrawal should be.

If you’re required to make a distribution but don’t need the income (lucky you), you can avoid paying taxes on a distribution of up to $100,000 by donating it directly to qualified charities. See IRS Publication 590-B to learn more.

Prepare for Medicare Advantage open enrollment

If you are enrolled in a Medicare Advantage plan, you should have received an “Annual Notice of Change” from your plan by now. Take the time to review it to find out whether there will be changes in costs and coverage starting in January 2022. 

If you aren’t happy with your coverage or upcoming changes to your coverage, you’ll have the opportunity to switch to another Medicare Advantage plan or switch back to original Medicare from January 1 to March 31.

Review your medical spending

If you’ve had a lot of out-of-pocket medical costs this year, you might be able to deduct the amount of your medical expenses that exceed 7.5% of your adjusted gross income if you itemize on your tax return. Add up your unreimbursed expenses (such as co-pays, deductibles and other costs not covered by Medicare) to see if you’ve passed the threshold. 

If you’re close, consider getting treatments you’ve put off or buying items you might need, such as prescription glasses, hearing aids or false teeth, before the end of the year. See IRS Topic 502 to learn more about medical expenses that can be deducted.

Be charitable

If you claim the standard deduction on your federal income tax return, you can deduct up to $300 in cash donations to charities—$600 if you’re a married couple filing jointly. Don’t forget to get statements from charities to have a record of your donations if they exceed $250.

If you itemize on your tax return, you can deduct cash contributions and the value of donated items. So you might want to take the opportunity to declutter before the end of the year and donate items you no longer need to boost the amount of contributions you can claim on your 2021 tax return. 

Review your estate planning documents and beneficiaries

Make sure that you can find all of your estate planning documents—will, trust, power of attorney and advance directive—and that all of the documents have been signed by you and are up-to-date. If there have been any major changes in your life over the past year (divorce, marriage, death of a spouse, etc.), you should update your estate planning documents to reflect those changes. After all, if you got divorced, for example, you probably don’t want to leave your ex-spouse as the recipient of all your assets.

If you don’t have estate planning documents, make an appointment with with an elder law or estate planning attorney as soon as possible to draft a will, power of attorney and advance directive. It’s important that you put your wishes in writing and name someone you trust while you still are mentally competent to make financial and healthcare decisions for you if you become unable to do so yourself.

Also, review your life insurance policy, retirement account and other financial accounts to make sure that you have named beneficiaries for those accounts. Naming beneficiaries will ensure that payouts from those accounts will go directly to your loved ones when you die.

[ Read: The Ulimate Guide to Power of Attorney ]

Create an in-case-of-emergency file

The pandemic has highlighted the need to be prepared for emergencies. So take time before the end of the year to create an in-case-of-emergency file that includes your estate planning documents, life insurance policies, final wishes, list of accounts with usernames and passwords, and list of doctors, medical history and prescription drugs. Then let your loved ones know how to access this file if something happens to you so that they will have all of the information they need when an emergency strikes.

Sign up for monitoring to protect your credit and identity

Unfortunately, older adults often are the targets of scammers because scammers assume retirees have ample retirement savings or a stream of income from pensions or Social Security they can steal. To boost your defenses against scammers, consider using technology such as Carefull to monitor your credit and personal information for misuse and your financial accounts for unusual transactions. You’ll get alerts by email and text message when Carefull spots something unusual. 

Revisit your plan for long-term care

Each year you wait to buy a long-term care insurance policy or life insurance policy with long-term care benefits, the more it will cost you. If you wait until your late 60s or early 70s, you run the risk of not qualifying for coverage. 

It’s essential to have a way to pay for long-term care because there is a high chance that you will need it (more than half of adults 65 and older do). The cost of care ranges from more than $4,000 a month for a home health aide or assisted living to more than $8,000 a month for a private room in a skilled nursing facility, according to Genworth’s Cost of Care Survey. And Medicare does not pay for this sort of care.

To find out more about long-term care insurance, work with an insurance broker who works with several insurance companies and can help compare plans for you. You can find a broker through the American Association for Long-Term Care.

[ Keep Reading: How to Pay for Long-Term Care ]

Cameron Huddleston