Jamie Spencer
As the year winds down, it’s a perfect time to assess your financial situation and make adjustments that can set you up for success in 2025. Taking a proactive approach to your finances now can provide clarity and help you make informed decisions for the new year. Here are six strategies to consider as you close out 2024.
Increase Contributions to Your Retirement Savings
Retirement accounts can sometimes feel like they’re on autopilot, but periodic check-ins can help ensure you’re on track with your goals. Consider boosting your contributions as you wrap up the year, or even setting up an automatic annual increase. This approach allows for steady growth without requiring frequent adjustments.
With recent legislative changes, like the SECURE Act 2.0, retirement contribution limits have shifted, potentially impacting your savings strategy. Consulting with a financial advisor could help you understand how these updates affect your retirement planning.
Manage Required Minimum Distributions
If you’re 73 or older, be mindful of required minimum distributions (RMDs) from your retirement accounts. Missing these withdrawals by year-end can lead to significant penalties. New regulations have also introduced RMD requirements for some inherited IRAs starting in 2025, so it’s wise to familiarize yourself with these rules. Financial professionals can guide you through these requirements to avoid costly mistakes.
Use Tax-Loss Harvesting to Offset Gains
A well-known strategy for reducing taxable income, tax-loss harvesting involves selling underperforming investments to offset gains elsewhere in your portfolio. However, be cautious of the “wash sale” rule, which prohibits repurchasing the same or a similar investment within 30 days. A tax advisor can help you navigate this strategy, ensuring you maximize your tax benefits while staying within IRS guidelines.
Plan Year-End Gifts to Loved Ones
The annual gift tax exemption allows you to give up to $18,000 per recipient in 2024 without incurring gift taxes. This limit resets each year, making it an effective tool for reducing the size of your taxable estate while benefiting family and friends. Thoughtful planning now can help you make the most of this opportunity before the year ends.
Support Charitable Organizations
Charitable giving can reduce your tax burden while supporting causes that matter to you. For those aged 70½ or older, qualified charitable distributions from an IRA can count toward RMDs without being taxed as income, benefiting both you and the charity. A financial advisor can help you weigh the advantages of different donation options, whether through cash gifts or other assets.
Schedule a Meeting with a Financial Advisor
Year-end is an excellent time to check in with a financial advisor, especially if you’re navigating complex planning decisions. An advisor can offer insights into maximizing your tax strategies, preparing for market fluctuations, and setting realistic goals. If you don’t yet work with a financial advisor, consider making it a priority in the new year for a clearer, long-term roadmap tailored to your financial goals.
Final Thoughts on Year-End Financial Planning
Taking time to review and adjust your financial strategy as the year ends can set a strong foundation for 2025. Whether it’s optimizing retirement contributions, managing taxes, or giving to loved ones and charities, these moves can help ensure your finances align with your personal goals. With careful planning, you’ll be ready to take on the new year with confidence and focus.
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