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Financial Planning

Money Moves to Make Now

Take action before the end of the year to save money and improve your finances for 2019.

Illustration by Richard Borge

Many people wait until the new year—and the annual ritual of New Year’s resolutions—to take stock of their finances. But there are compelling reasons to attend to some financial tasks before December 31.

The bulk have to do with taxes, so check out Last-Minute Tax Tips to Lower Your 2018 Tax Bill. We have plenty of other timely suggestions, though, including health care housekeeping, investing and saving, making the most of your credit and rewards programs and paying for college.

Health care

Spend your FSA money

If you have a health care or dependent care flexible spending account, check its balance and rules. In many cases, you’ll lose anything left in the account at year-end—although some accounts allow you to carry over up to $500 or offer a grace period for claiming expenses from the previous year. If you still have cash in the account that needs to be spent, start by reimbursing yourself for any eligible health or dependent care expenses that you overlooked earlier in the year, including deductibles and co-pays as well as uncovered expenses for glasses or contacts, prescription drugs, or dental care. Beyond that, stock up on FSA-eligible products, such as contact lens solution, first aid items and thermometers. For a list of FSA-eligible items, visit fsastore.com.

Round up HSA-eligible expenses

Unlike FSAs, health savings accounts offer an unlimited amount of time to reimburse yourself for eligible medical expenses and don’t have a use-it-or-lose-it rule, so you can let the money grow tax-free until you need it. Gather the receipts for any medical expenses that you paid out of pocket. If you didn’t reimburse yourself for those expenses this year, file the receipts so you can reimburse yourself for the expenses, tax-free, any time in the future—even in retirement.

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Fund a health savings account

Were you enrolled in a high-deductible health insurance plan this year? If you haven’t already opened an HSA, there’s still time. Most policies with deductibles of at least $1,350 for single coverage or $2,700 for family coverage qualify for an account. The account will give you a triple tax break: Contributions are made pretax or are deductible on your tax return, the money grows tax-free, and the funds can be withdrawn tax-free for medical expenses. If you had an HSA-eligible policy throughout 2018, you can contribute up to $3,450 if you had single coverage or up to $6,900 if you had family coverage. People who are 55 or older anytime during the year can make an additional $1,000 contribution.

Squeeze in appointments

If you’ve met your health insurance deductible for 2018, you may save money by scheduling appointments and procedures before the end of the year—rather than in the new year after your deductible kicks in again. And most dental insurance plans cover two cleanings and have a maximum dollar amount that they will pay toward your dental care each year. If you have benefits remaining or your dentist has recommended treatments that you haven’t completed, schedule an appointment before your unused benefits disappear.

Qualify for a health care subsidy in 2019

Premiums for many insurance policies you purchase on a health care exchange are high enough to induce sticker shock, especially if you don’t qualify for a subsidy. But if you’re near the cutoff to receive a subsidy (400% of the federal poverty level, or $48,560 for singles, $65,840 for couples and $100,400 for a family of four), you can take steps before year-end to lower your income—and the amount you’ll pay for your 2019 coverage. Contributions to a 401(k), a health or dependent care flexible spending account or a health savings account, or selling stock at a loss, help reduce your modified adjusted gross income, which is used to calculate subsidies. Early retirees may also be able to qualify for a subsidy if they have the flexibility to reduce withdrawals from tax-deferred IRAs or 401(k)s.

Credit and rewards

Freeze your credit reports

A freeze is the best way to prevent identity thieves from opening new credit accounts in your name because it blocks new lenders from viewing your credit reports, reducing the chances that someone will successfully pose as you when applying for credit. Thanks to a new federal law that took effect on September 21, both placing and lifting a freeze on your credit reports is now free. (Previously, consumers in most states paid fees.) Given the pileup of data breaches in recent years, a freeze is a wise move even if you haven’t suffered ID theft because your personal data may sit for years before someone attempts to use it.

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When you request a freeze with each of the three major credit agencies—Equifax, Experian and TransUnion—by phone or online, they must place the freeze within one business day. And if you ask them to lift a freeze, they must act within an hour. For more details on how to take action , including web links and phone numbers for each agency, see Freeze Your Credit in 3 Steps.

Run a credit checkup

If you haven’t checked your credit reports in the past 12 months, visit www.annualcreditreport.com to get a free copy from Equifax, Experian and TransUnion. Review each for errors or signs of identity theft, such as an incorrect address, a credit account that you never opened, or a collection account that you don’t recognize. If you spot an error, contact any lender that’s involved to resolve the issue and file a dispute with each credit agency that’s reporting the mistake. Identity-theft victims can follow the steps at IdentityTheft.gov to have fraudulent information blocked from their credit reports.

Keep tabs on your credit reports throughout the year by signing up for a credit-monitoring service, which regularly scans your reports and notifies you of significant changes. You can cover all three credit agencies by enrolling in free monitoring at CreditKarma.com, which tracks your Equifax and TransUnion reports, and at FreeCreditScore.com, which monitors your Experian report. Each service also offers free credit-score updates and access to information in your credit reports from the corresponding agencies.

SEE ALSO: The Best Rewards Cards

Redeem your credit-card rewards

Looking for some extra green for holiday gifts or travel? Check the balance of cash back, points or miles you’ve earned with your rewards credit cards. You may be able to redeem cash back as a statement credit, a deposit into your bank account or a check. Points or miles are often exchangeable for travel bookings, cash, gift cards or merchandise. Find out which types of redemptions offer the most value; travel credit cards, for example, often provide the highest values per point or mile when you use them for travel bookings.

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Sign up for a premium credit card

If you’ve been eyeing a premium credit card that’s packed with perks, now is a good time to apply. These cards often provide a yearly credit toward airline incidental fees, such as for checked baggage or in-flight meals. If the credit is provided on a calendar-year basis (rather than on your cardmember anniversary), you can claim your 2018 reimbursement for any airline fees you rack up before the end of this year, then start with a refreshed credit in 2019. Among cards offering calendar-year credits are PenFed Pathfinder Rewards ($100 credit), Bank of America Premium Rewards ($100 credit; $95 annual fee) and American Express Platinum ($200 credit; $550 annual fee).

Investing and Saving

Rebalance your portfolio

Suppose that three years ago you put $60,000 into Vanguard Total Stock Market Index fund and $40,000 into Vanguard Total Bond Market Index fund because you wanted a 60%-40% split between stocks and bonds. Looking at your portfolio today, you have $127,270 in your account. (Returns are as of October 12.)

Great! But now the split is 68% stocks and 32% bonds because stocks have soared and bonds have bored. You have a riskier portfolio than you wanted. It’s time to rebalance by moving enough from your stock fund into your bond fund to regain a 60-40 mix. (In this case, you’d sell $9,852 from Vanguard Total Stock and invest it in Vanguard Total Bond.)

Aside from reducing your risk, you’re also selling high and buying low. You don’t have to rebalance often because stocks and bonds are remarkably self-balancing. But check your asset mix at least once a year to make sure you’re not out of whack. And examine your portfolio for other imbalances: Your Apple stock may have been a great call, but if it’s now 30% of your portfolio, you’ve got a lot riding on cell phones. Consider trimming it.

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Finally, think about your asset mix and whether it’s still right for you. If a mix of 70% stocks and 30% bonds was good a decade ago, for example, it might be time to slice stocks to just 60% and maybe add some cash. After all, you are 10 years closer to retirement, and the recovery and the bull market are long in the tooth.

Get a better rate on your savings

The Federal Reserve is expected to raise interest rates once more before the end of 2018. That means yields on savings accounts should continue rising as well. Rates at online banks are generally much better than those at brick-and-mortar institutions. For example, the MySavings Account from internet bank MySavingsDirect recently yielded 2.25%, with no minimums or monthly fees. And don’t discount money market deposit accounts, which may offer limited check-writing. Ken Tumin, of DepositAccounts.com, says rates are similar to those of savings accounts at many banks.

To compare rates in your region, visit www.depositaccounts.com and select “Savings Accounts,” then “Personal Savings Accounts.” Scroll past any sponsored accounts and click on the “Details” arrow for each bank. The rate history chart will tell you how its rate has fluctuated over time. Bank accounts that have offered consistently high rates for several years are better bets than a brand-new account with a high promotional rate.

Education

Prepay college expenses

If you have a student in college, consider paying the tuition bill for the first quarter of 2019 by New Year’s Eve, so you can take full advantage of the American Opportunity tax credit on your 2018 tax return. This credit, which you can claim for students who are in their first four years of undergraduate study, is worth up to $2,500 for each qualifying student. You don’t have to itemize to claim the credit, which gives you a dollar-for-dollar reduction in your tax bill. Married couples filing jointly with modified adjusted gross income of up to $160,000 can claim the full credit; those with MAGI of up to $180,000 can claim a partial credit.

Planning to take a class next year to boost your own career? If you pay your January bill before December 31, you may be eligible to claim the Lifetime Learning Credit on your 2018 tax return. The credit is worth up to 20% of your out-of-pocket costs for tuition, fees and books, up to a maximum of $2,000. It’s not limited to undergraduate expenses, and you don’t have to be a full-time student to claim it. Married couples filing jointly with MAGI of up to $112,000 can claim the full credit; those with MAGI of up to $132,000 can claim a partial credit.

Contribute to a college-savings plan

Contributions to a 529 college-savings plan won’t reduce your federal taxes, but they could provide a state tax break. More than 30 states offer a state income tax deduction for 529 plan contributions. A few states give you until April 15, 2019, to make a tax-deductible contribution for 2018, but most require the contribution by year-end. In most states, you must contribute to your own state’s plan to get the tax break, but seven states allow you to deduct contributions to any state’s plan. Check out your own state’s rules at www.savingforcollege.com. Many states allow grandparents and others to contribute to your child’s plan, and a few will allow them to deduct their contributions, too.

If you or someone in your family has special needs, you can contribute up to $15,000 this year to an ABLE account, which allows people who developed a qualifying disability before age 26 to save money without jeopardizing government benefits. You don’t have to invest in your own state’s plan, but nine states offer a tax deduction for contributions.

SEE ALSO: ABLE Accounts Give Disabled More Financial Freedom