TABLE OF CONTENTS: What is Life Insurance? Why Life Insurance Matters in Your 20s-40s Locking in Lower Rates Protecting Your Loved Ones Covering Final Expenses Tax-Free Payouts The Cost of Life Insura...
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3 min read
Whew—what a year it has been! There’s no doubt that 2020 has been long for everyone, and keeping up with the many adjustments we’ve all had to make has been a lot. With promising news on the vaccination front, we are all looking forward to a better 2021.
As we head toward the end of the year, carving some time out to take care of personal financial-related tasks will put you on the right path for a financially sound 2021.
1. Lower Your Tax Bill
Although April 2021 may seem like a long way off, it won’t be long before tax season rears its ugly head. Luckily, there are a few things you can do now to help lower your tax bill for next year:
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Max out retirement contributions
It’s been a year of melancholy economic news, but there is one silver lining—if you participate in a 401(k) program at work, you can save more in your retirement plan this year than last year.
For 2020, you can contribute up to $19,500 to a 401(k) or 403(b) account, or up to $26,000 if you're 50 or older. So, if you can, max out your retirement contribution to help lower your 2021 tax bill.
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Contribute to charity
We're in the season of giving, so now is a great time to contribute to your favorite charities. Not only does it give you the warm fuzzies—it will also help lower your tax bill.
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Contribute to College Savings plan(s)
College savings accounts, such as 529 plans, have many benefits. Not only do beneficiaries benefit from tax-free withdrawals when used for college-related expenses, but if you live in a state with state income taxes, you can receive a deduction or credit for any contributions to the plan.
2. Revisit Rates
It’s a good habit to shop around for better rates at least once a year. Whether it’s your car insurance, cell phone, cable bill, mortgage, or other expenses that impact your daily life, reviewing these can often save you more than you think.
3. Consider Refinancing Your Home
Interest rates are currently at historic lows, so now may be a great time to consider refinancing your home loan. When you refinance your mortgage, you take out a new loan that pays off your original mortgage. The new loan can have a lower interest rate, a shorter or longer loan term, and depending on the appraised value of your home, you may be able to borrow more.
There are a number of reasons you may benefit from refinancing. Some of the most common reasons include:
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Lowering your interest rate
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Eliminating private mortgage insurance (PMI)
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Lowering your monthly payment
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Cashing out home equity to use the money for other purposes
Related Reading: If You're Thinking About Refinancing Your Mortgage, Ask Yourself These Questions
4. Review Your Credit Report
Your credit history greatly impacts your financial future. Having a healthy credit score can impact the interest rate lenders are willing to give you on auto or home loans, which can ultimately affect your monthly payments.
Reviewing your credit report at the end of the year can help you identity theft, find inaccuracies, and prepare you for a major purchase in the near future. You can request your annual free credit report at annualcreditreport.com.
5. Meet with a Financial Advisor
One of the best ways to get a full picture of your financial health is to meet with a financial advisor. They have the skills and the knowledge to assess every aspect of your portfolio, give advice on ways to maximize your tax deductions, and provide steps and strategies that you can take to meet your short- and long-term goals.
The end of the year is a great time to meet with an advisor, discuss any changes or progress you made in 2020, talk about your goals for 2021, and put a plan in place to help you meet them.
6. Invest in Peace of Mind for the Future with a Life Insurance Policy
If you don’t have a life insurance policy—it’s time to get one. If this year has taught us anything, it’s that life can change in an instant. This time last year, none of us knew what 2020 would bring. Now that we’re wiser, getting life insurance should be a part of everyone's financial plan.
Whether you are young and healthy or more seasoned with a family, life insurance offers peace of mind and protection for your loved ones—and it’s less expensive than many people think. On average, a healthy, 30-year-old male can get a 20-year, $250,000 term life policy for approximately $160 a year, or about $13 a month.
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