Your Year-End Financial Planning Checklist

Your Year-End Financial Planning Checklist

You’ve budgeted and saved all year, tracked your goals, and kept your finances organized. With just weeks to go before the end of 2024, it’s time for one last push to take advantage of any time-sensitive actions to save on taxes, avoid penalties, make good use of your healthcare benefits, and share your holiday spirit with loved ones and charities.

Savant’s estate planning and investment research professionals share some smart moves to take before year-end. Let’s begin with some financial planning tips to consider now:

For Those Still Working

Maximize your 401(k) contributions. In 2024, employees who participate in 401(k),403(b), or most 457 plans can contribute up to $23,000. If you’re age 50 or older, you can invest an additional $7,500 as a “catch-up.” Many employers offer matching contributions up to a certain limit, so if you aren’t participating, you could be leaving money on the table!

Maximize your IRA contributions. For the 2024 tax year, the contribution limit for traditional and Roth IRAs is $7,000, with a catch-up contribution limit of $1,000 for those age 50 or older. However, you may not qualify to contribute to a Roth IRA or make a deductible IRA contribution if your modified adjusted gross income, or MAGI, is above the IRS limit. You can contribute to your IRA for the 2024 tax year until April 15, 2025, so if you’re close to the MAGI limit, you may want to wait until you have a clear picture of your year-end tax situation.

Consider a Roth conversion. Roth conversions come in handy in years when you think your tax bracket will be lower or when the markets are down, making it more advantageous
to pay the taxes now instead of waiting until retirement. Ask your Savant advisor whether making a Roth conversion is a good option for you.

Maximize your Health Savings Account (HSA) contribution. If you have a qualifying high-deductible health insurance policy, you can contribute up to $4,150 for self-only coverage and $8,300 for family coverage (any employer contributions offset these amounts) to an HSA. If you are age 55 or older, there’s a catch-up contribution limit of $1,000. HSAs offer significant tax benefits and can move with you if you change jobs.

Use your flexible spending account (FSA). Remember, these funds are “use it or lose it,” but some plans offer a grace period or allow you to carry over a portion of the funds to next year for medical, dental, and vision care expenses.

Review your health insurance. Employers generally offer open enrollment for healthcare and other benefits this time of year, so check your policies for any changes. If you are self-employed, open enrollment for the Affordable Care Act Marketplace runs from Nov. 1, 2024 through Jan. 15, 2025 in most states.

Review your income tax withholding. Reviewing your tax withholding each year can help ensure you aren’t paying too much or too little tax. Taxpayers whose adjusted gross income for the previous taxable year exceeded $150,000 must pay in the lesser of 90% of the current year’s tax or 110% of the prior year’s tax by the tax deadline to avoid an underpayment penalty. Make adjustments to your W-4 or estimated quarterly taxes accordingly.

If You Are Retired

Review your Medicare coverage. Open enrollment runs from Oct. 15 to Dec.7, 2024 with new coverage beginning Jan. 1, 2025.

Take your Required Minimum Distribution (RMD) if applicable. Those who turn 73 between 2023 and 2032 must take RMDs from their tax-deferred IRAs. The required beginning date for RMDs is April 1 of the calendar year following your 73rd birthday. When you take your RMD, there will likely be tax consequences, so consider consulting your advisor or tax professional to understand your options.

Charitable Giving

Make charitable donations. Donating to your favorite charities not only supports causes you care about but may also provide tax benefits. Ensure your donations are made by Dec. 31, 2024 to count for this tax year.

Consider donor-advised funds: If you want to make a charitable donation but haven’t decided on the charity or charities, a donor-advised fund (DAF) can be an excellent option. You can contribute to a DAF now to receive an immediate tax deduction and distribute grants to charities later.

Donate appreciated assets: Donating appreciated securities, such as stocks, can provide a double tax benefit. You can avoid paying capital gains tax on the appreciation and claim a charitable deduction for the full fair market value.

Make a qualified charitable distribution (QCD) from your IRA. If you are 70 1/2 or older, you can donate up to $105,000 each year to one or more charities directly from your taxable IRA, which can help satisfy your RMD. And, the amount donated is excluded from your taxable income.

Final Thoughts

If you’ve experienced any changes in your goals, marital status, or other events in your life, don’t forget to notify your financial advisor. Your advisor can help tailor these and other recommendations to your unique situation.

Source: IRS.gov