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Year-End Financial Planning Tips to Prepare for the New Year

Matthew Allgood |
Categories
Tax Planning
College
Retirement

As the holiday season approaches and the New Year draws near, it’s the perfect time to review your finances. Evaluating potential tax deductions, retirement savings, and other financial strategies now can help you maximize the efficiency of your resources.

These tips are not one-size-fits-all; what works best depends on your unique situation. Before taking any action on any of these, be sure to consult a tax professional to ensure these strategies align with your goals.

Here are 10 financial planning ideas to consider before year-end:

  1. Required Minimum Distributions (RMDs)
    • If you’re of RMD age or a non-spousal IRA beneficiary, confirm the required withdrawal amount and deadlines to avoid penalties. A little planning can make a big difference in your financial outlook.
  2. Roth Conversions
    • Depending on your financial situation, converting to a Roth IRA could be advantageous. Paying taxes now may save you from paying taxes on future gains, especially if you expect tax rates to be raised to higher levels later.
  3. Tax-Loss Harvesting
    • Offset capital gains by reviewing your portfolio for potential losses. Harvesting losses can help reduce your taxable income while keeping your investment strategy intact.  With the good year that 2024 has been for many assets, you may find slim pickings for harvesting, but if you’ve not looked for these opportunities in a while, you may be surprised at what you find, and for any losses you DO have, there are techniques for keeping exposures aligned while still recognizing any losses you may be showing for now.
  4. Charitable Giving
    • Beyond cash donations, explore opportunities like employer gift matching, donating appreciated securities, or making Qualified Charitable Distributions (QCDs) if you’re over 70½. QCDs can satisfy RMDs while lowering taxable income.
  5. Expense Timing
    • Prepay deductible expenses like January’s mortgage payment or property taxes to reduce your current year’s tax liability.
  6. Flexible Spending Accounts (FSAs)
    • Don’t let your hard-earned funds go to waste! Use any remaining FSA funds before the deadline, or check if your plan allows carryovers.
  7. IRA Contributions
    • While the deadline for IRA contributions extends to Tax Day, year-end is a good time to evaluate your contributions and plan to maximize them for both the current and coming years.
  8. College Planning
    • Maximize 529 plan contributions to take advantage of state tax benefits. Grandparents and other family members may also consider gifting to 529s as part of their estate planning strategy.
  9. Gifting Strategies
    • The annual gift tax exclusion allows you to gift up to $17,000 per person in 2024 without triggering gift taxes. This can be a tax-efficient way to support loved ones.
  10. Meet with Your Financial Professional
    • Now is an ideal time to review your financial plan, reflect on your goals, and make adjustments for the year ahead. A tax professional can also provide tailored advice to ensure these strategies align with your needs.

Take the Next Step
If any of these ideas resonate with you but you’re unsure where to start, we’re here to help. Contact us today to schedule a complimentary consultation and begin the New Year with a clear financial plan.

Wishing you a joyful holiday season and a prosperous New Year!