As we head into the fourth quarter of 2024, it is important to revisit key financial and investment planning steps that can make a big difference to your success. Whether 2024 was a great year for your portfolio or your wealth goals did not go according to plan, taking the right measures now can help set you up for a strong start to 2025.
One significant challenge investors face with year-end planning is that it often sneaks up on them. The winter holidays arrive before you know it, and lots of helpful steps can go untaken. However, a little attention now can deliver massive benefits in the years ahead.
To help you get started, we have put together a checklist of essential end-of-the-year financial and investment planning items. Whether you are a do-it-yourself (DIY) investor, already work with a financial advisor, or are considering working with one, use this list as a guide to ensure you are taking the right steps to optimize every financial aspect of your life, save on taxes, and stay on track to achieve your goals.
If you are not sure where to start or simply do not know the right steps to take, working with a quality financial advisor can help. If you do not yet have a good advisor to go over this checklist with, consider scheduling a free consultation with us.
With that said, here are 32 areas of your comprehensive financial plan you may want to take a look at before the end of 2024:
Give Your Portfolio a Year-End Tune-Up
Rebalance Your Portfolio. The end of the year is an ideal time to look at your investment portfolio to ensure your asset allocation aligns with the component target weights. Market volatility can cause your target mix of stocks and bonds to drift as certain investments gain or lose value. Rebalancing, that is, buying and selling to realign your portfolio with your goals, not only keeps you on track but can also be done in a tax-smart way to avoid surprises come tax season.
Evaluate Your Cash Holdings. By now, you have likely noticed that yields on cash-equivalent investments are still at their highest levels in decades. Investments like money market funds, treasury bills, and CDs are currently offering yields over 4.25%, making them a compelling choice for idle cash. Ensure every dollar is working to build your wealth by taking advantage of these opportunities.
Replenish Your Emergency Fund. If something in 2024 had you dip into your emergency fund, the end of the year is a great time to rebuild. This ensures you have enough funds in place to protect you when unexpected events arise in the future.
Year-end mutual fund distributions. Mutual funds typically distribute income and capital gains toward the end of the year. If you hold mutual fund investments in a taxable account (e.g., trust account or brokerage account), it may be worth considering strategies to minimize your tax liability. Also, if you plan to purchase a fund late in the year, check whether it has already made its distributions to avoid unexpected taxes.
Contributing to 529 Accounts. If you want to save for a loved one’s education expenses, consider funding a 529 account. You can contribute up to $18,000 for 2024 ($36,000 for married couples) to a beneficiary’s 529 account, using your annual gift exclusion and avoiding gift tax. Alternatively, you can also make a lump sum ‘super-funding’ contribution of up to $90,000 ($180,000 for married couples) to a beneficiary’s 529 account and elect to treat it as though it were made evenly over five years. Also, you may be able to transfer unused 529 funds to the beneficiary’s Roth IRA, subject to certain rules and limitations.
Seek help if necessary. If you have questions about your portfolio or hold assets not managed by a financial advisor, consider reaching out to determine if the portfolio aligns with your objectives, risk tolerance, and risk capacity. It is also a good idea to assess whether your investments are low-cost and positioned to maximize returns based on your risk level.
Tax Savvy Strategies
Tax loss harvesting. While most markets are up this year, if your taxable investment accounts – such as a revocable trust or brokerage account – have experienced losses this year, you might consider selling those investments before the end of the year to offset current or future gains. This strategy, known as tax loss harvesting, can be especially useful if you hold concentrated stock positions. Also, the IRS allows you to deduct up to $3,000 of losses against your ordinary income after offsetting gains, with any excess losses carried forward to future years.
Capital loss carryforwards from prior years. If you have capital losses carried over from previous years, assess whether you should use them to offset gains of highly appreciated positions in your portfolio – especially given the strong market performance in 2024. Or, again, you may be able to apply the carryforward loss to reduce your ordinary income by up to $3,000.
Future income expectations. Your expectations about future income can guide your decision-making to maximize tax efficiency this year.
If you expect your income to increase in the future: You may want to focus on strategies that minimize your future tax liability. This could include contributing to Roth retirement accounts (like a Roth 401(k) or Roth IRA) or performing Roth conversions. If eligible, check if your employer offers matching Roth contributions as well.
If you expect your income to decrease in the future: Consider strategies to reduce your tax liability now, such as contributing to pre-tax retirement accounts (like a 401(k) or traditional IRA) rather than Roth accounts.
Consider a Roth conversion. A Roth conversion involves moving pre-tax funds from a 401(k) or traditional IRA into a Roth account. Since pre-tax retirement accounts are tax-deferred and Roth accounts are tax-free, you will need to pay taxes on the amount you convert. This strategy is usually most beneficial in years when you expect to be in a lower tax bracket or when markets are down, making it more advantageous to pay taxes now rather than in retirement. The upside? Withdrawals in retirement will be tax-free.
Tax Bracket Thresholds. If you are close to the threshold of your income tax bracket, consider strategies to defer income or accelerate deductions to stay in your current bracket or move to a lower one. Also, be mindful of other thresholds, such as long-term capital gains tax rates, the Net Investment Income Tax (NIIT) for high earners, and the Income-Related Monthly Adjustment Amount (IRMAA) if you are on Medicare.
Changes to your marital status. If you have recently had a change in marital status (e.g., betrothal, divorce, or spousal death), consider how it might affect your tax liability. If you got married this year, it is also a good idea to sit down with your spouse to discuss adjustments to your spending, how you will share costs, and start saving for future goals (e.g., a down payment, vacation, kids’ education, etc.).
Windfalls. If you anticipate receiving a significant windfall (e.g., inheritance, stock options, large bonuses, etc.) before the end of the year, you may want to review your tax withholdings to determine if estimated payments are needed. If possible, consider delaying the receipt of year-end bonuses until 2025. By deferring your bonus into next year, you may be able to reduce your taxable income for 2024, stay in a lower tax bracket, and minimize the immediate tax impact. This approach can be especially effective if you do not expect to make as much next year.
Stock option planning. If you have unexercised stock options and the stock price has changed substantially, now is the time to assess your strategy. Planning before year-end can help you align your decisions with your financial goals and minimize any tax surprises. Depending on the type of stock option you hold, exercising them can have significant tax implications. Be sure to work with your financial advisor and tax professional to explore your choices and optimize the tax treatment of your decisions.
Building and Securing Your Dream Retirement
Maximize your 401(k) contributions. The maximum you can contribute to your 401(k) in 2024 is $23,000, or $30,500 if you are 50 or older. Even if you cannot reach the maximum, every dollar you contribute reduces your taxable income for 2024. Just remember, employees have until December 31st to make your contributions count for that year.
Consider maximizing your IRA contributions. The contribution limit for Traditional and Roth IRAs in 2024 is $7,000, or $8,000 if you are 50 or older. You have until Tax Day (April 15th, 2025) to make the IRA contribution, allowing you to evaluate your year-end financial situation before deciding. However, be aware that if you participate in a company retirement plan, certain rules could limit how much of your IRA contribution is tax-deductible. These limits depend on your income and filing status, so it is a good idea to review the guidelines with a financial advisor or tax professional to ensure you are maximizing your benefits.
Maximize your Health Savings Account (HSA) contributions. If you are eligible, it is worth exploring Health Savings Accounts due to their triple tax-advantaged benefits –deductible contributions, tax-free growth, and tax-free qualified distributions for qualified medical expenses. In 2024, you can contribute up to $4,150 as a single individual or $8,300 for a family, with an extra $1,000 allowed if you are 55 or older. You generally have until Tax Day (April 15th, 2025) to contribute to an HSA.
Required Minimum Distributions (RMDs). If you are subject to RMDs this year, including those from inherited IRAs, here are some things to consider:
Aggregating RMDs from multiple IRAs: With the exception of inherited IRAs, you can calculate RMDs for multiple traditional IRAs and take the total amount from a single account. However, RMDs from inherited IRAs must be taken separately and cannot be aggregated with other IRAs.
Employer plans: RMDs from employer retirement plans, like 401(k)s, must be calculated and taken separately from IRAs. An exception applies to 403(b) accounts, where RMDs from multiple 403(b)s can be aggregated and taken from one account.
SECURE Act 2.0 Updates: The RMD age increased for some individuals beginning January 1, 2023. Consult your financial advisor or tax preparer to confirm how this change affects you.
Tax Withholding: If you’re already taking RMDs or will begin soon, review your tax withholding to ensure it aligns with your tax situation for the upcoming year.
Review your employee benefits. If you are still working, the enrollment period runs from November to the middle of January. This is a great time to review your employer-provided benefits and ensure you are making the most of them, especially by taking advantage of any company match that may be available to you.
Roll Over Your Retirement Plan from a Previous Employer. If you have a retirement plan from a previous employer, such as a 401(k), it is a good idea to consider rolling it over into an IRA or your current employer’s plan before the year ends. Doing so can help simplify your retirement savings and give you more control over your investments.
Monitor your credit. Credit is easily lost and difficult to repair. You can access your credit reports from the three major reporting agencies (Experian, TransUnion, and Equifax) once a year without penalty for free on AnnualCreditReport.com. It is a good idea to take advantage of this to check for accuracy. If you spot any errors or discrepancies, promptly dispute them in writing to the credit reporting agency.
Revisit Your Budget. With costs still high and life changes occurring over the past year, now is a great time to revisit your budget and make any necessary adjustments.
Leaving a Legacy, Not a Headache
Updating your beneficiary designations. Failing to update the beneficiary designations on your retirement accounts and insurance policies (i.e., life insurance and annuities) can be one of the biggest mistakes in financial and estate planning. Reviewing these designations is especially important if a major life event occurred in the past year. Keeping them up to date ensures your legacy wishes are honored and helps avoid unnecessary complications for your loved ones.
Keeping your estate plan current. Every family benefits from having an estate plan. It is not just about planning for what happens after you are gone but also about protecting you and your family and ensuring your wishes are respected during your lifetime. Take time to review your will, powers of attorney, advanced medical directive, and any trusts. If you had significant life events occur this year – such as a new family member, the loss of a loved one, or the purchase or sale of valuable assets – it is especially important to ensure your estate plan aligns with your wishes. Consulting with a financial advisor and an estate planning attorney can help you formulate a plan that supports both you and your loved ones.
Gifting to loved ones and charities. If you enjoy giving to charity, there are tax-efficient ways to do so. You can donate highly appreciated stock with a low cost basis or make a Qualified Charitable Distribution (QCD) from your traditional IRA if you are over 70½. If you take the standard deduction, consider bunching donations or contributing to a Donor Advised Fund (DAF) every few years. This may allow you to itemize your deductions in specific years. For noncharitable gifts, you can give up to $18,000 per recipient ($36,000 for married couples) in 2024 without incurring gift tax.
Changes to your family, heirs, or buying/selling of valuable assets this year. If any of these apply, you should consider reviewing your estate plan to ensure it aligns with your wishes.
Consider a Roth IRA for your kids. Opening a Roth IRA for a child can provide a valuable head start for their retirement. You can set up a custodial Roth IRA, which allows them to contribute if they have earned income from a job or business. Plus, the assets in the child’s retirement account are not reported on the Free Application for Federal Student Aid (FAFSA), meaning those funds will not impact their eligibility for student aid – an added bonus when planning for both retirement and education.
Coverage That Gives You Peace of Mind
Health insurance plan’s annual deductible. If you have met your health insurance’s annual deductible, consider incurring any additional medical expenses before the end of the year, as your deductible will reset for the next year. This can help you maximize your benefits and potentially save on out-of-pocket costs.
Spend remaining Flexible Spending Account (FSA) funds. If you have a balance in your FSA, consider spending the funds before the end of the year or make sure you stay below the rollover threshold going into next year. For 2024, some companies allow up to $640 of unused FSA funds to roll over into 2025, while other companies offer a grace period until March 15th to spend unused FSA funds. Check with your employer to understand your specific rules. Many companies also have a ‘run-out’ period, allowing you to submit receipts for expenses up to 90 days after the plan year ends. If you have a Dependent Care FSA, be sure to verify the deadlines for unused funds as well.
Ensure you have adequate coverage. Perform an annual review of your insurance to ensure you have sufficient coverage for risks such as health, life, disability, long-term care, homeowners, and personal liability. Take the time to understand your policies and, if necessary, reassess whether your coverage needs to be adjusted. Weigh the potential benefits, costs, and risks of modifying or canceling existing coverage.
Other Considerations
Plan ahead for major life events. Weddings, divorces, births, deaths, career changes, and relocations can significantly impact your spending, budget, and investment strategy. Planning for these life events in advance can help ensure your financial plan stays on track and aligns with your goals. Keep these changes in mind as you prepare for the future.
Be Mindful of Age Milestones. As you get older, certain age milestones offer valuable financial opportunities. Be aware of these key ages to avoid missing out or making costly mistakes:
Age 50 and over: You are eligible to make ‘catch-up contributions’ to your retirement accounts. For 401(k)s, 403(b)s, and 457 accounts, that amount is $7,500 for 2024. For traditional and Roth IRAs, the catch-up contribution is $1,000.
Age 55 and over: If you lose or leave your job at 55 or older, you can begin taking penalty-free distributions from your 401(k), 403(a), or 403(b) plan. You’ll still owe taxes on the withdrawals. Additionally, you can make catch-up contributions of up to $1,000 to a Health Savings Account (HSA).
Age 59½ and over: You can take distributions from a traditional IRA without the 10% early withdrawal penalty.
Age 62: You become eligible for Social Security benefits. To find your Full Retirement Age based on your birth year, refer to the Social Security Administration’s website.
Age 65: You qualify for Medicare benefits.
Age 70: You are eligible for the maximum Social Security benefit.
Age 73 and over: You must begin taking the required minimum distribution (RMDs) from your pre-tax retirement accounts. Note that as of January 1st, 2023, the RMD age has changed. If you were born in 1950 or earlier, your RMD age remains 72. If you were born between 1951 and 1959, it is 73. For those born in 1960 or later, the RMD age is 75.
If you liked this post, please share it and let us know if you have any comments or questions!
About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions.