Your Year-End Financial Checklist
Key areas to consider to capitalize on tax advantages, reassess goals and prepare for the future
As the year winds down, investors have a prime opportunity to fine-tune their financial strategies and ensure their portfolios are optimized for the new year. A well-structured year-end financial checklist can help investors capitalize on tax advantages, reassess investment goals, and prepare for future opportunities. As we head into the final few weeks of 2024, take time to consider these key areas.
- Tax-Loss Harvesting
The end of the year is an opportune time to review your portfolio for underperforming investments. Tax-loss harvesting involves selling investments that have lost value to offset gains from other investments. By doing so, investors can reduce their taxable income while maintaining their overall asset allocation by reinvesting in similar securities.
- Maximize Tax-Deferred Contributions
For high-net-worth individuals, contributing the maximum allowable amount to tax-advantaged accounts like 401(k)s, IRAs, and Health Savings Accounts (HSAs) is crucial. While these contributions can reduce taxable income, affluent investors should also explore strategies like backdoor Roth IRA conversions if they exceed income limits for direct contributions.
- Review Estate Plans and Gifting Opportunities
The annual gift tax exclusion allows individuals to give up to $17,000 (as of 2024) per recipient without incurring taxes. This strategy is an efficient way to reduce the taxable value of your estate while benefiting family members or charitable causes. Revisit your estate plan to ensure it reflects your current wishes and takes advantage of the latest tax laws.
- Evaluate Charitable Contributions
Charitable giving not only supports meaningful causes but also offers significant tax benefits. Consider donating appreciated securities instead of cash to avoid capital gains taxes while claiming a charitable deduction. Alternatively, affluent investors aged 70½ or older can make Qualified Charitable Distributions (QCDs) directly from their IRAs, satisfying Required Minimum Distribution (RMD) requirements.
- Plan for Required Minimum Distributions (RMDs)
If you’re 73 or older (under current regulations), RMDs from tax-deferred retirement accounts must be taken before December 31 to avoid a 25% penalty on the amount not withdrawn. High-income retirees should consider strategic withdrawals to minimize the tax impact over time.
- Rebalance Your Portfolio
Significant market movements throughout the year may have caused your portfolio to drift from its target allocation. Year-end is an ideal time to rebalance, ensuring your investments align with your risk tolerance and financial goals. The economy can help determine when is best to rebalance. In a down year you may want to do this before the end of the year to generate losses in a taxable account, but you might do it after January 1 of the following year if it’s an up year.
- Review Tax Implications of Stock Options and Bonuses
Many affluent investors receive stock options or year-end bonuses, which can have substantial tax implications. Collaborate with a tax advisor to strategize the timing and method of exercising options or receiving bonuses to manage tax liabilities effectively.
- Consult Your Advisory Team
Complex financial needs often require input from a team of professionals, including financial advisors, tax experts and estate planners. Schedule a year-end review to ensure all aspects of your financial life are aligned and optimized.
- Prepare for 2024 Opportunities
Looking ahead, consider strategies like contributing to 529 college savings plans, exploring alternative investments, or updating your financial goals to align with anticipated economic conditions.
The close of the year is a critical time for affluent investors to reassess and optimize their financial plans. By proactively addressing key areas like taxes, investments, and estate planning, you can enter 2024 with confidence and clarity.
Take the time now to ensure your financial house is in order and don’t hesitate to engage your advisory team for tailored guidance. An organized and proactive approach can make all the difference in preserving and growing wealth for generations to come.
Any opinions are those of Southern Springs Capital Group and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
As Financial Advisors of Raymond James, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Southern Springs Capital Group is not a registered broker/dealer and is independent of Raymond James Financial Services.
David Jackson, MBA, CFP®, C(K)P™, is the Managing Partner at the Southern Springs Capital Group. For more information on Southern Springs Capital Group, visit www.southernspringscapital.com. Our offices are located at 2555 Meridian Boulevard in Franklin. We can be reached at 615-905-4585.
