The decisions you make today could have a big impact on your taxes, savings, and investments next year. Are you ready to act? In this episode of The Agent of Wealth Podcast, host Marc Bautis dives into the essential financial planning tasks to complete year-end. With December 31st deadlines looming, Marc provides actionable advice to ensure you’re maximizing your financial opportunities and staying ahead of potential tax pitfalls.
In this episode, you will learn:
- How to leverage tax-loss harvesting and manage capital gains effectively.
- The benefits of Roth conversions and how to determine if they’re right for you.
- Key considerations for retirement contributions, RMDs, and 401(k) strategies.
- Tips for optimizing charitable giving and flexible spending accounts (FSAs).
- Why annual financial checkups are critical and how year-end planning can set the stage for financial success.
- And more!
Resources:
The 2024 Last-Chance Financial Planning Checklist | Episode 222 – Maximize Your 401(k): Roth vs Pre-Tax Contributions | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. As the year draws to a close, it’s time to address an essential topic: year-end financial planning.
At Bautis Financial, we provide clients with our “2024 Last-Chance Financial Planning Checklist,” which highlights tasks that have a December 31st deadline as well as annual planning considerations. While today’s episode won’t cover the full list (it’s extensive), I’ll walk you through some of the most critical items.
The key takeaway: year-end planning is essential. Many people get caught up in the holiday season or wait until tax season in April, but by then, it’s often too late to optimize your financial position for the previous year. Most impactful tax and financial planning strategies must be implemented by December 31st.
Key Planning Areas to Consider Before Year-End
1. Asset and Debt Management
Harvesting Tax Losses: Review your taxable investment accounts for unrealized losses. By selling investments at a loss, you can offset up to $3,000 of ordinary income on your tax return. Losses beyond this can be carried forward to future years. Additionally, you can offset capital gains from earlier in the year with realized losses.
Related: Turn Investment Losses into Tax Breaks with Tax-Loss Harvesting
Mutual Fund Capital Gains Distributions: Active mutual funds may distribute capital gains at year-end, resulting in a tax liability even if you didn’t sell shares. Consider whether ETFs, particularly passive ones, are more tax-efficient for your portfolio.
Required Minimum Distributions (RMDs): If you’re subject to RMDs — either from your own or inherited retirement accounts — these must be taken by December 31st. Note that while RMDs from multiple IRAs can be aggregated, inherited IRAs must be addressed individually.
Related: Everything You Should Know About RMDs
2. Tax Planning
Roth Conversions: If you expect your income to increase in the future or have depreciated assets in your IRA, a Roth conversion could make sense. For example, converting a $10 asset that has dropped to $1 allows you to pay tax on the lower value, reducing your tax burden.
Related: Financial Planning Checklist: Should I Consider Doing A Roth Conversion?
Tax Bracket Management: Analyze whether you have room in your current tax bracket for a Roth conversion. Pay particular attention to jumps between brackets, such as the 24% to 32% range, to optimize your tax strategy.
Charitable Giving: Contributions must be made by December 31st to qualify for 2024. Popular strategies include qualified charitable distributions (QCDs) from IRAs, gifting appreciated securities, and using donor-advised funds. If you’re near the standard deduction threshold ($14,600 for singles, $29,200 for married couples), consider bunching donations into one year to maximize your tax benefits.
Check Withholdings and Estimated Taxes: Review your tax liability if you’ve had major events this year, such as an inheritance, IRA distributions, or vested stock options.
Related: 9 Reasons You Should Consult With Your CPA Before Year-End
3. Retirement Contributions
401(k) Contributions: Employee contributions must be made by December 31st. Ensure you’re contributing enough to receive your employer’s full match, if available.
Related: Episode 222 – Maximize Your 401(k): Roth vs Pre-Tax Contributions
Business Retirement Plans: If you’re a business owner, establish a Safe Harbor Plan by year-end for it to be effective on January 1st.
4. Saving Strategies
Health Savings Accounts (HSAs): Contribute up to $4,150 (single) or $8,300 (family). HSAs offer triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
529 Plans: Contribute up to $18,000 per beneficiary annually (or up to $90,000 as a five-year lump sum). Unused funds may now be rolled into a beneficiary’s Roth IRA under certain conditions, offering flexibility.
5. Insurance Planning
Flexible Spending Accounts (FSAs): Check if you need to use funds before year-end. Some plans offer grace periods or limited rollover options, but others require you to spend the balance by December 31st.
Maximizing Health Insurance: If you’ve met your annual insurance deductible, consider scheduling additional medical services before the deductible resets in January.
6. Estate Planning
Review beneficiaries on accounts and insurance policies, especially after major life events like marriages, divorces, or births.
Make use of the annual gift tax exclusion ($18,000 per recipient) if gifting is part of your estate plan. Remember, gifts exceeding this limit count against your lifetime exemption, but they don’t incur immediate tax.
Related: 5 Things You May Not Know About Estate Planning
7. Investment Strategy
Reassess your investments to ensure alignment with your financial goals. For example, if you plan to use an account to purchase a home in 2025, you may want to shift to a more conservative strategy to preserve capital.
8. Other Considerations
FAFSA Planning: If you have children nearing college, consider how your income and assets affect financial aid eligibility.
Anticipate Legal and Policy Changes: Stay informed about any new laws or regulations taking effect in 2025 that could impact your financial plan.
Some people prefer tackling financial tasks in smaller chunks throughout the year, while others handle everything at year-end. Either approach works as long as you review your financial plan annually. Remember, December 31st is a critical deadline for many strategies. Proactive planning now ensures you’re in the best financial position heading into the new year.
The checklist is linked in the resources section, but you can also download it below.
If you have any questions or concerns while you work through the checklist, our advisors are happy to go over the items with you and discuss possible scenarios for 2024 and 2025. You can schedule a complimentary consultation using the link below. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show.
Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.