As the end of the year approaches, it’s easy to get swept up in the holiday hustle. But while you’re planning festive meals and gift lists, don’t forget to make time for your financial health. A little year-end financial planning now can set you up for success in the new year and help you take advantage of opportunities that disappear after December 31.
Here’s a checklist to guide you through the process:
Maximize Tax-Advantaged Contributions
Retirement Accounts: If you haven’t maxed out contributions to your 401(k) or IRA, now is the time to do so. For 2024, the contribution limit is $22,500 for 401(k)s (or $30,000 if you’re 50 or older) and $6,500 for IRAs (or $7,500 for those 50+).
Health Savings Accounts (HSAs): HSAs offer triple tax benefits—contributions, growth, and withdrawals for qualified expenses are all tax-free. For 2024, you can contribute up to $4,150 for individuals and $8,300 for families.
If your budget is tight, even small contributions can help. Consider reallocating holiday bonuses or windfalls to these accounts.
Review Your Investment Portfolio
Rebalance: Has the market changed your asset allocation? Make sure your investments align with your goals and risk tolerance.
Tax-Loss Harvesting: If you have investments that lost value, selling them could offset gains and reduce your tax bill. Just watch out for the wash-sale rule, which prohibits repurchasing the same security within 30 days.
Evaluate Charitable Giving
Donations to qualified charities can reduce your taxable income if you itemize deductions.
Donor-Advised Funds (DAFs): If you want to give but need time to decide which charities to support, contributing to a DAF by year-end secures the deduction now.
Use Flexible Spending Accounts (FSAs)
Many FSAs are “use-it-or-lose-it”. Check if your plan allows you to roll over unused funds or if you need to spend them before year-end. Qualified expenses might include medical bills, prescriptions, or even new glasses.
Assess Your Budget and Spending
Review your 2024 budget: Did you stay on track? If you exceeded your spending goals, identify patterns so you can plan better for 2025.
Start a holiday spending plan: Avoid credit card debt by creating a holiday budget and sticking to it.
Plan for Big Life Changes
Are you expecting a new baby, buying a home, or starting a new job in 2025? Plan ahead for how these changes might impact your financial goals, insurance needs, or tax situation.
Check Your Insurance Coverage
Life insurance and disability policies should align with your current needs. The end of the year is a great time to evaluate whether your coverage is still sufficient.
Review beneficiaries on all accounts, including retirement accounts, insurance policies, and wills, to ensure they’re up to date.
Use Your Annual Gift Tax Exclusion
You can gift up to $17,000 per recipient in 2024 without impacting your lifetime gift tax exemption. This is a great way to help loved ones while reducing the size of your taxable estate.
Plan for Required Minimum Distributions (RMDs)
If you’re 73 or older, make sure you take your RMDs before the end of the year to avoid hefty penalties. Remember, you can also use a Qualified Charitable Distribution (QCD) to donate your RMD directly to charity.
Set Goals for 2025
Reflect on the progress you made this year and set clear, actionable goals for next year. Whether it’s saving for a dream vacation, paying down debt, or building your emergency fund, having a plan can help you stay motivated.
A Final Note
Year-end financial planning can feel overwhelming, but it doesn’t have to be. Tackle one item at a time, and don’t hesitate to reach out for guidance. Whether you need help fine-tuning your investments, navigating tax strategies, or reviewing your financial plan, a trusted advisor can make all the difference.
Here’s to wrapping up 2024 with confidence and stepping into 2025 ready to achieve your goals!