As the year draws to a close, it’s the perfect time to take stock of your financial health and position yourself for success in the coming year. Here are the top three financial moves you should consider making before December 31st to optimize your finances, reduce tax liabilities, and set yourself up for a prosperous future.
1. Maximize Your Retirement Contributions
Take advantage of tax-advantaged retirement accounts, such as 401(k)s, IRAs, or self-employed plans like SEP-IRAs or Solo 401(k)s. For 2024, the contribution limits are:
- 401(k): Up to $23,000 (or $30,500 if you’re 50 or older).
- IRA (Traditional or Roth): Up to $7,000 (or $8,000 if you’re 50 or older).
Contributing as much as possible to these accounts reduces your taxable income and helps grow your nest egg for retirement. If you're unsure about how much room you have left to contribute, check with your HR department or financial institution to confirm your contributions year-to-date.
2. Harvest Tax Losses or Gains
Tax-loss harvesting is a strategy where you sell investments that have decreased in value to offset gains in other areas of your portfolio. This can help you reduce your tax liability on capital gains and potentially even ordinary income (up to $3,000 annually).
Similarly, consider realizing gains if you're in a lower tax bracket this year, as the long-term capital gains rate could be 0% for certain income levels. Either way, coordinate these decisions with your CERTIFIED FINANCIAL PLANNER™ professional or tax advisor to ensure they align with your overall financial goals.
3. Use Flexible Spending Account (FSA) Funds
If you have a Flexible Spending Account (FSA), remember that these accounts often have a "use it or lose it" rule. Some plans offer a grace period or allow you to roll over a small amount, but many require you to spend the funds by the end of the year.
Eligible expenses include medical copays, prescription medications, dental treatments, and even certain over-the-counter products. Review your balance and make a plan to use those funds wisely to avoid forfeiting any money.
Bonus Tip: Review Your Financial Plan
The end of the year is a great time to revisit your financial plan and evaluate your progress toward your short- and long-term goals. Are you on track to pay down debt, save for retirement, or achieve other milestones? A meeting with your financial advisor can help you strategize and make adjustments as needed. Making these year-end moves can feel overwhelming, but you don’t have to navigate them alone. Let’s work together to finish the year strong and prepare for the opportunities ahead!
Disclaimer: The information provided in this blog post is for informational and educational purposes only and should not be construed as financial, legal or tax advice. While efforts are made to ensure accuracy, we do not guarantee the completeness or reliability of the information. Before making any financial decisions or changes, it is advisable to consult with a qualified professional who can assess your individual circumstances and provide tailored advice.
Risemint Capital Advisors is a fee-only fiduciary firm that specializes in wealth management and comprehensive financial planning. The firm is dedicated to satisfying clients' needs and fostering long-term relationships. Risemint's process involves creating a customized financial plan based on individual circumstances and goals, which is regularly updated and maintained. The firm combines active and passive investing to maximize the utility of investments over the medium and long term.
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