November 22, 2024
Allworth financial advisor Lynda Tu provides a practical year-end checklist to help you maximize your retirement contributions, tax savings, and financial strategies before the December 31, 2024, deadlines.
As we approach the end of the year, it’s a perfect time to review your finances and make sure you’re getting the most out of your retirement contributions and tax-saving opportunities. With December 31, 2024, approaching fast, I’ve put together a quick checklist to help you make the most of these final weeks. Let’s make sure your money is working as hard as it can for you!
If you’re able, consider topping up your retirement accounts. Here’s a quick rundown of what you can contribute by year’s end:
If you have a Flexible Spending Account (FSA), remember that these funds are generally “use it or lose it,” meaning any unspent money in your account by the end of the year may be forfeited. Some employers offer a grace period or allow you to carry over a small portion into the next year, but it’s worth checking your balance and planning out any remaining expenses.
FSA funds can be used for a wide range of expenses, including dental work, eye exams, and prescription refills. They’re also eligible for many over-the-counter items like bandages, pain relievers, allergy medications, and even first aid supplies. Check with your plan provider for a complete list of eligible expenses, and take advantage of this opportunity to stock up on essentials before your funds expire.
Health Savings Accounts (HSAs) are powerful savings tools if you’re enrolled in a high-deductible health plan. Contributions to your HSA are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses. For 2024, you can contribute up to $4,150 for individual coverage and $8,300 for family coverage, with an additional $1,000 catch-up contribution if you’re 55 or older. HSAs also have an April 15, 2025, deadline, but early planning never hurts.
If giving back is important to you, donating to charity is a wonderful way to help others while potentially reducing your taxable income. Qualified charitable donations can be deducted on your tax return, and if you’re over 70½, you can make a Qualified Charitable Distribution (QCD) directly from your IRA, which can help satisfy Required Minimum Distributions (RMDs) without increasing your taxable income.
Now’s a good time to check your tax withholding or estimated payments to make sure you’re on track for the year. If you’ve experienced major changes, like a raise, a big investment gain, or a change in your deductions, it might be wise to adjust your withholding or make an estimated payment before the year ends. This can help you avoid an unexpected tax bill (or penalties) come April.
If you’re over age 73, you’re required to take minimum distributions from your traditional IRAs, 401(k)s, and other retirement accounts by December 31. Missing an RMD can result in a hefty penalty, so it’s crucial to get this taken care of before the deadline. Talk to your advisor or custodian to ensure you’ve taken the correct amount based on your account balance.
The end of the year is also a great time to review your portfolio and rebalance if needed. Take a look at your asset allocation to see if it still aligns with your goals and risk tolerance. If some investments have done very well, you might need to rebalance by selling a bit of the winners and adding to other areas. This simple step can help keep your portfolio on track without taking on unnecessary risk.
If you’ve sold investments at a loss this year, you might be able to use those losses to offset any gains, reducing your taxable income. Tax-loss harvesting is a strategy where you sell investments at a loss to offset gains in other areas. Be mindful of the “wash sale” rule, which prevents you from buying back the same or a “substantially identical” investment within 30 days of the sale.
As the year wraps up, taking these steps can help you make the most of your contributions, savings, and tax strategies. Remember, December 31 is a hard deadline for many of these opportunities, so now’s the time to take action. If you’d like help navigating any of these steps or just want to make sure you’re maximizing your financial plan, I’m here to support you.
Let’s end the year strong and set you up for a bright 2025!
After my family left Vietnam, to start from scratch in America, my parents were very conscientious about what they spent money on. However, they always prioritized helping my brother and me, while putting their own needs on the back burner. In their unspoken gestures of sacrifice and giving to others, I discovered my own sense of what it means to serve others. A commitment that I continue to hold close to my heart, as I work to help my clients regain their time, feel well cared for, and ultimately experience the peace of mind they deserve.
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