As the year winds down, it’s time to take stock of your financial situation and make sure you’re in the best position to transition into 2025. Year-end financial planning is an excellent opportunity to assess your progress and take steps that can have lasting benefits for your wealth, tax planning, and retirement strategy. Here are some key areas to consider as 2024 comes to a close.
Maximize Retirement Contributions
Take a moment to review your retirement accounts, including 401(k)s, IRAs, and other investment plans. If you haven’t maxed out your contributions, consider doing so before December 31. For those over 50, take advantage of catch-up contributions, which allow you to save even more on a tax-deferred basis.
By reviewing your retirement accounts now, you can ensure you’re on track to meet long-term goals and perhaps even reduce your taxable income for the year.
Assess Your Tax Situation
Year-end tax planning can make a meaningful difference to your overall tax liability. Now is the time to work with your tax advisor to review any realized capital gains or losses, ensure cost-basis information is in order, and confirm if there are opportunities for tax-loss harvesting. It’s also crucial to revisit last year’s carried-forward losses, as they can be applied to offset gains this year.
Selling assets? Be sure to understand how capital gains taxes could impact your return. Planning ahead will give you a clearer picture and help you avoid surprises when you file in 2025.
Plan for Charitable Giving
Charitable contributions are an impactful way to support causes you care about while reducing your taxable income. Before the year ends, consider making donations to qualified charities or setting up education savings plans for loved ones.
In 2024, the annual federal gift tax exclusion allows you to give up to $18,000 per person without triggering gift tax consequences. This is a great opportunity to make meaningful gifts to family members or fund trusts. Just remember that trust planning comes with its own tax considerations, so be sure to work with a knowledgeable advisor.
Review Life Insurance Policies
Now is an ideal time to check your life insurance policies and beneficiaries. Have your financial needs changed? Have you had any major life events that would impact your coverage? Make sure you’re still adequately insured and that your policies reflect your current circumstances.
Remember that factors like age, health, and policy type affect cost and availability. If you’re thinking of updating or purchasing new coverage, assess whether you’re still insurable and work with your insurance provider to confirm the policy’s guarantees are solid.
Reflect on Major Life Events
Any significant life changes this year? These could include:
- Marriage or divorce
- Moving or relocating
- Changing jobs or retiring
- Buying a home or starting a business
- Receiving an inheritance or making large gifts
- Welcoming a new addition to the family
Each of these events can have financial consequences that might affect your retirement planning, insurance needs, or overall investment strategy. Be sure to discuss these changes with your financial advisor during your annual review to ensure your financial plan aligns with your current life situation.
The Bottom Line
Year-end planning is about more than just tying up loose ends; it’s an opportunity to take meaningful steps that can improve your financial future. By reviewing key aspects of your financial life now, you’ll be better prepared for the new year. Remember to lean on your financial advisor for guidance and ensure any strategy aligns with your broader goals.
By Stephen O’Neill, Senior Wealth Advisor and Shareholder
Category: Financial Service Team
