End-of-Year Investing Strategies

The end-of-year crunch can be overwhelming, but this investing checklist will help you save money and get your portfolio ready for the new year.
Cross These 4 Items Off Your Year-End Investing Checklist

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Good news: There’s still time to slash your tax burden, boost your retirement savings and get a head start on investing wisely in the year ahead — all before Auld Lang Syne plays on New Year’s Eve.

Use this simple checklist to save money and prepare your finances for the new year.

Max out 401(k) contributions

Perhaps you began the year intending to max out your 401(k). If that hasn’t happened yet, you have until Dec. 31 to fund your account.

The IRS imposes strict contribution limits on 401(k)s: $19,500 for 2021 ($26,000 for those age 50 or older).

Find out how close you’ve come to the max this year, then calculate how much of the difference you can set aside by year-end without upending other financial goals. Finally, ask your payroll department about rules for lump-sum contributions and cutoff dates for plan changes.

Even if you can’t hit the max, your contributions will grow over time thanks to compound interest — and they’ll lower your taxable income. Keep the max-out mentality going into the new year and you won’t face a last-minute scramble again.

» How much should you be saving? Check our 401(k) calculator

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Get ahead of your taxes

Don’t ignore taxes until April, especially if you’re a mutual fund investor.

Actively managed mutual funds generally pay realized annual gains in December, and all shareholders who own the fund in a taxable account must pay taxes on distributions, no matter how long they’ve held it. If you’re investing in a fund for the first time, do so after the date determining eligibility for distributions, known as the ex-dividend date, so you don’t pay taxes on gains you didn’t enjoy.

Re-examine your portfolio

Want a useful ritual? Spend some time reviewing your portfolio. You could accomplish these basic maintenance tasks by Dec. 31:

Offset gains and losses in taxable brokerage accounts

Also known as tax-loss harvesting, this involves selling investments at a loss before Dec. 31. The goal? Lower or eliminate the taxes on gains you made in taxable accounts during the year — or even the taxes you'll pay on ordinary income. Note: Investors may claim a limited amount of losses on taxes in a given year.

Rebalance your portfolio

Not all assets move in lockstep, so over time your portfolio will drift from its ideal weighting. If a portfolio that’s meant to be 70% stocks has ballooned to 80%, you must sell stocks and buy bonds to restore the balance. Some 401(k) providers offer rebalancing tools, but this is a hands-on project for other types of accounts.


Now’s a good time to check your portfolio’s diversification among assets, such as stocks and bonds, and categories within each. You want stocks and bonds representing different company sizes, industries and locations, for example. Diversification reduces your investment risk by ensuring you’re not overly exposed to any individual investment.

» Read more: Diversification 101

Plan for next year

Don’t wait until January to strategize for the new year. You can get a head start with the following:

Map out an investing strategy

The changing calendar year offers an opportunity to take a look at your portfolio and see what worked in the past 12 months and what didn't. And we're not necessarily talking performance here. Did you start the year steadily adding money to your portfolio and trail off? Did you load up on a particular sector of stocks and neglect others? Have you been paying higher fees than you realized?

As you reflect, ask yourself one more question: Is it time to bring in help? If managing your investments always seems to get pushed aside in lieu of, well, life, then working with a financial advisor may help keep you on track.

Don't dismiss the idea because you assume advisors are expensive: Many robo-advisors offer low fees along with some access to human advisors, while fee-only financial planners may be a good fit if you need help with something very specific.

» Is a robo or human right for you? How to choose an advisor

Schedule regular check-ins

You know how it is — one minute it's January, the next, it's June. Don't let the year slip by and end up in a last-minute scramble again next year. Instead, put some appointments on your calendar to check on your portfolio. No need to block out more than an hour; rather, the point is to create a habit that'll reduce end-of-year surprises. The frequency is up to you, though once a quarter should be sufficient.

Fund an IRA

Feeling overwhelmed by the end-of-year crunch? Here's some good news: You have until mid-April to fully contribute to an individual retirement account for the tax year ending Dec. 31. That's especially helpful if you need a bit more time and money (say, a bonus) to fully fund that account with up to $6,000 in 2021 ($7,000 if age 50 or older). Don't have an IRA yet? Start with our guide to all-things IRA or skip ahead to some tips for maxing out contributions.

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