Five Year-End Planning Moves to Consider

As the end of the year approaches, it’s an opportune time to review your financial status and make strategic decisions that can impact your well-being in the coming year. These year-end planning moves can save you money, optimize your taxes, and set a solid foundation for the future.  

Here are five to-dos to consider before the calendar flips.  

Contributing to retirement accounts, such as 401(k)s, traditional IRAs, or Roth IRAs, before the year ends can bring several benefits. First, it allows you to take advantage of tax-deferred or tax-free growth. Maxing out your contributions can reduce your taxable income for the year, potentially lowering your tax bill.  

Your contribution limits for 2024 are as follows:  

• 401(k)/403(b)/Thrift Savings Plan/most 457 plans: $23,000  
  • If you are 50 or older: $30,500

• SIMPLE retirement accounts: $16,000 
  • If you are 50 or older: $19,500 

• Roth or traditional IRAs: $7,000 
• • If you are 50 or older: $8,000  

Funding these accounts to the maximum extent possible sets the stage for a more financially secure retirement. The power of compound interest means that the earlier you invest, the more time your money has to grow. Don’t miss the opportunity to contribute as much as you can before the year ends. 

A thorough review of your investment portfolio is crucial as the year ends, especially if you manage your investments yourself.  

First, assess whether your investments align with your financial goals and risk tolerance. 

Then, consider rebalancing your portfolio to maintain your desired asset allocation. Rebalancing involves selling some overperforming assets and reinvesting in underperforming ones to realign with your original strategy. This move mitigates risk and positions your investments for potential growth in the upcoming year. 

At Credent, our Investment Management Team oversees client portfolios, regularly reviewing, adjusting, and rebalancing when needed, so clients have one less thing to manage.

Tax-loss harvesting involves selling investments that have experienced a loss to offset realized gains. By strategically selling underperforming assets, you can reduce your tax liability on capital gains.  

When using tax-loss harvesting, be mindful of wash-sale rules, which prevent you from repurchasing the same or substantially identical securities within 30 days to claim the tax benefit.  

Tax-loss harvesting can be a tool for optimizing your tax situation and enhancing your overall portfolio returns, but even if this strategy will not work for you, the end of the year is a good time to review all tax planning opportunities. This includes FSAs and HSAs.  

If you have an insurance plan that allows for an FSA or HSA, check the balance and consider maxing out your contribution for the year, similar to your retirement accounts. The limits for 2024 are as follows:

• HSA – $4,150 for individuals; $8,300 for households
  • If you are 55 or older – $5,150 for individuals; $9,300 for households.
• FSA – $3,200 for individuals; $6,400 for households

FSAs often have “use-it-or-lose-it” policies for funds not utilized by the end of the year. Consider using these funds for eligible medical expenses, as they can provide substantial tax advantages.  

Some FSAs might have a grace period or allow a carryover of a limited amount of funds, but it’s essential to understand the specific rules governing your accounts.  

Evaluate your insurance policies, including health, life, and property insurance, to ensure they still meet your needs. Life changes and evolving circumstances may necessitate adjustments to coverage levels or beneficiaries. Additionally, review and update your estate planning documents, such as wills and trusts, to reflect any changes in your life or financial situation.  

Executing these financial moves before the year ends can significantly impact your financial health and set the stage for a more intentional legacy.  

Consult a financial advisor to tailor these strategies to your specific circumstances and goals. By making these proactive financial decisions with a partner, you can pave the way for a more secure and prosperous financial journey in the year ahead.  

Beyond year-end planning, an advisory team will support you all year, responding to current events, market updates, and your changing goals and needs.  

To prepare your finances for next year, reach out to an advisor using the form below.  

Source: “Top Five Year-End Planning Moves to Consider” FMeX. 2023. 13339.pdf (fmexcontent.s3.amazonaws.com) 

Contributing Sources:  

HealthEquity, Inc. (n.d.). Health Savings Account 2024-2025 HSA contribution limits and guidelines. HealthEquity. 

Internal Revenue Service. (2024, January 8). 401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000. IRS. 

Internal Revenue Service. (2024, March 21). IRS: 2024 Flexible Spending Arrangement contribution limit rises by $150. IRS. 

Internal Revenue Service (2024, August 20). Retirement topics – IRA contribution limits. IRS. 

U.S. Centers for Medicare & Medicaid Services. (n.d.). People with coverage through a job: Using a Flexible Spending Account (FSA). HealthCare.gov. 

U.S. Centers for Medicare & Medicaid Services. (n.d.). Understanding HSA-eligible plans: What are HSA-eligible plans? HealthCare.gov.