As 2024 winds down, it's the perfect time to take stock of your financial goals, reflect on any life changes, and prepare for the year ahead. Financial planning doesn't have to be overwhelming—a few proactive steps now can help you feel more confident heading into 2025.
Let's dive into some key considerations to get you started.
Are You Maxing Out Your Retirement Contributions for 2024?
Saving for retirement is one of the most impactful ways to secure your future. Here's what to keep in mind:
- Workplace Retirement Plans: Are you maximizing contributions to your 401(k) or similar plan? For 2024, you can defer up to $23,000—or $30,500 if you're 50 or older.
- IRAs: Don't overlook traditional or Roth IRAs. You can contribute up to $7,000, with an additional $1,000 catch-up for those 50 and older. Check your eligibility for tax deductions or Roth contributions based on your income.
Use Up Your FSA and HSA Funds Before They Expire
These accounts can save you money, but they require a little planning:
- FSAs: Check how much you've used this year. For 2024, up to $640 of unused funds can roll over—but rules vary by employer.
- HSAs: If you have a high-deductible health plan, max out your HSA contributions. The limits are $4,150 for individuals and $8,300 for families, with a $1,000 catch-up for those 55 and older.
Is a Roth Conversion a Smart Year-End Move?
Does it make sense to pay taxes now for tax-free growth later? If you're in a lower tax bracket this year, a Roth conversion might be worth discussing with your advisor. They can run the numbers to see if this strategy fits your overall plan.
A Roth conversion can also be a powerful legacy planning tool, enabling you to transfer wealth to the next generation tax-free. By converting traditional IRA funds to a Roth IRA, you pay the taxes on the converted amount now, allowing the funds to grow tax-free for your heirs. When your heirs inherit the Roth IRA, they can withdraw the funds tax-free, providing them with a significant financial advantage and preserving more of your legacy.
👉 Keep in mind, distributions from an IRA when the participant is under 59 1/2 may be subject to a 10% penalty. In order for converted dollars to be distributed without 10% penalty, the converted funds have to be held at least five years or the Roth IRA owner must be 59 1/2. A separate five-year period applies for each conversion.
Offset Gains with Tax-Loss Harvesting Strategies
If you've had some investments underperform, selling them to offset gains can reduce your tax liability. Be mindful of the 30-day wash-sale rule, which prevents you from repurchasing the same investment too soon.
Make Charitable Donations Before Year-End for a Tax Benefit
Charitable giving is a meaningful way to make a difference while reducing your taxable income:
- Consider donating directly to qualified charities or using a donor-advised fund.
- If you're 70½ or older, qualified charitable distributions (QCDs) up to $105,000 (for 2024) from your IRA can be a tax-savvy way to give.
Review Stock Options Before the New Year
If your compensation includes stock options, timing is everything. Work with a tax professional to determine the best year to exercise or sell options, especially if the alternative minimum tax (AMT) could come into play.
Take Your RMDs if You’re Over 73
If you're 73 or older, you'll need to take RMDs from your retirement accounts. Missing this deadline can result in steep penalties, so review your accounts carefully.
Plan for Capital Gains and Your 2024 Tax Bracket
- Manage Your Marginal Tax Rate: Timing income and deductions strategically can help you stay in a lower tax bracket.
- Capital Gains: Be mindful of thresholds that trigger higher tax rates or surtaxes.
Review Your Estate Plan After Major Life Changes
Has your life changed this year? Major events like marriage, divorce, or the birth of a child mean it's time to revisit your estate plan. Ensure that your beneficiary designations, power of attorney, and health care directives are up to date.
Monitor Your Credit Before Year-End
It's important to monitor your credit report regularly for suspicious activity that could indicate identity theft. Federal law requires that each of the nationwide credit reporting companies provide you with a free copy of your report every 12 months at your request.
Let’s Make a Year-End Financial Plan Together
Year-end financial planning can feel like a lot, but you don't have to go it alone! Whether you're managing investments, planning for retirement, or navigating taxes, working with a financial advisor can make all the difference. Schedule an introductory meeting with us to create a plan tailored to your goals.
Jordan Hickey is a CERTIFIED FINANCIAL PLANNER® professional who helps clients create personalized financial plans. Based in Glastonbury and Wilton, CT, Jordan offers guidance on retirement, insurance, investments, and overall wealth management. Schedule a complimentary introductory meeting with Jordan.
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. RMD's are generally subject to federal income tax and may be subject to state taxes. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes.