Yr-end monetary guidelines for top earners

The end of the year is a busy time. Are you a high income earner? Did you check all of the boxes on this year-end financial checklist?

Today’s classic is being republished by The doctor philosopher. You can see the original Here.


At work, my nickname is “Dory,” which comes from the famous but forgetful fish from the animated movie Finding Nemo. While I was born with a tendency toward complex problem-solving, I was also born with inherently terrible memories. Due to my memory deficit, I can only do things with a checklist. If you have a high income, don’t miss this financial checklist for your year-end planning.

Here are 7 items to check off before the end of the year! Did you forget one of these important tasks?

1. Roth IRA back door

Every year, you can invest $ 6,000 in a traditional IRA and then convert it to a Roth IRA through the back door. If you are married, you can do the same for your spouse even if they are not a working spouse. This enables tax-privileged Roth IRA funds ranging from $ 6,000 to $ 12,000.

If you have a high income (defined here as $ 124,000 if you’re single and $ 196,000 if you’re married), chances are you’ll have to attend a Backdoor Roth IRA every year to help you fill all tax-privileged space and meet your annual savings goals needs.

If you’ve participated, you’ll need to ensure that all of your non-Roth IRA storage space is returned by December 31st each year. Is on “zero”. In other words, if you did a Backdoor Roth IRA this year, you cannot have traditional IRA, rollover IRA, or SEP IRA money by the end of the year. Otherwise, you’ll be hit by the “proportionate” rule which essentially steals any potential benefit a Roth IRA would have brought to the back door.

Don’t miss this crucial step at the end of the year!

2. Life and disability insurance

In terms of key steps for your financial checklist, protecting assets is probably the most important part of your financial plan.

If you have a high income, you need to protect it. You can accomplish this through disability insurance that you can get from any of the recommended medical insurance agents listed on The Physician Philosopher.

If you are married or have children, you will likely need term life insurance as well. You can get this from the same list of insurance agents linked above. Remember, I always recommend getting quotes from 2-3 agents to ensure you are getting the best product at the best price!

3. Donations to charity

If you have a charitable giving goal, this is the time of year to make sure you hit that goal. Why? Because donations before December 31st Must be obtained if you want to take advantage of the tax advantage for the current tax year.

As I looked back at the community goals on this website, I found that we were falling a little short of our intended goal. So I wrote a check from The Physician Philosopher and then I sent money for something I believe would benefit future doctors and other high-income medical professionals.

If you have a specific purpose for yourself, your family, or your business, make sure to get your gift before the end of the year!

4. Annual savings target

Later in the year, this is also a good time to review your annual savings goal. When I took a look at ours, I found we were a little behind schedule in early December. Then I remembered that we hadn’t done our Backdoor Roth IRA for the year. Procrastination brings me every time!

Of course, since you’ve learned to automate wealth creation, which is a key to financial success, you should achieve most of this goal automatically. Have the money come off every paycheck automatically. Ideally, this happens before you even see it or as soon as it hits your bank account. This is what people mean when they say, “Pay yourself first”.

5. Spend flexible money

Unlike a Health Savings Account (HSA), which allows you to transfer unused funds to the account, the FSA (Flexible Spending Accounts) funds must be used up by a set date. This means it has to be on your financial checklist. The actual date will depend on what type of FSA we are discussing.

According to FSAfeds.com, your Dependent Care FSA (DCFSA) can later be used as your flexible healthcare expense account, where the costs are paid until 12/31. Must be incurred.

Of course, ask your employer if the rules at work are different!

6. Change the contributions for the next year

For 2020, the contributions to many tax-privileged accounts will increase. This includes 401K, 403B, and 457 accounts. The new employee contribution limit is $ 19,500, which is $ 500 above 2019. This needs to be part of your year-end financial checklist for obvious reasons.

For 401K / 403B accounts, the total (including employer comparison and contribution) is up to $ 57,000. That’s an additional $ 1,000.

If, like me, you are giving $ 1,583.33 each month to hit the $ 19,000 limit for 2019, you will need to change your 2020 contribution to $ 1,625 to automatically meet the full employee contribution limit.

7. Fortune Progress

The end of the year is a great time to review your annual financial progress. My favorite tool for this is personal capital. After you’ve linked all of your accounts, a net worth estimate will automatically be created for you.

[Note: If you have >$100,000 in assets, Personal Capital will call you to ask you to manage your account – based on my Do-It-Yourself Investing Page you might guess that I said “no” when they called me… you can/should too!]

If you don’t enjoy linking your accounts with other software, you can use a good ol ‘Excel spreadsheet. That’s what I’ve been doing lately when making the latest net worth updates for doctors and philosophers.

Take Home: Financial Checklist

Being a high income earner brings with it some financial problems that you should be jumping through every year. In fact, I would argue that most people should jump through many of the hoops above.

Even though you’re more like Nemo and less like Dory, I hope this list still helps you remember your financial chores for the year before it’s too late.

Have you checked off all of the items above? Are there any I didn’t mention that should have been on the list? Leave a comment below.

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