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Your Guide to Year-End Financial Planning

Your Guide to Year-End Financial Planning

As 2023 comes to a close, now is a great time to review your financial plan. With 2024 coming quickly, it’s crucial to reevaluate your financial objectives, consider any life changes impacting your finances, and stay informed about the latest tax and finance developments. Before your yearly financial advisement meeting, here are four areas to consider for your year-end financial planning.

Tax Planning Strategies

The first step in your guide to financial planning, as the year ends, is to nail down your tax planning strategies. First, be sure to understand and utilize any tax deductions and credits available to you. Investigate credits such as child tax credits, education credits, and energy efficiency credits. A financial professional can also help you discover and optimize various deductions and credits.

Additionally, reexamine your finances to see if you can reduce your taxable income in other ways. One way to do so is to defer your income. Deferred income refers to income you have received but not yet earned. This is common if you offer products or services and have received advance payments. Another way to reduce taxable income is by accelerating your donations. Giving multiple years worth of charitable contributions in one year can bring you closer to the threshold. 

Accounts such as FSAs and HSAs can also offer tax relief. Talk to your financial advisor to see if you qualify. They can help you choose the best option for your unique financial situation, understand your balances, your rollover options, and how to maximize your contributions.

It is important to note that tax laws change frequently. Thoroughly research any tax law changes that will affect you over the upcoming year.

Investment Portfolio Review

When conducting your year-end financial review, give your investment portfolio a check-up. Assess risk tolerance and make adjustments accordingly. Strategize your stock options. Is selling in January 2024 more tax-efficient than doing so this year? You can also look for opportunities for tax loss harvesting. This would involve selling underperforming investments to offset gains, potentially reducing your taxable income. The rules surrounding tax-loss harvesting are complex, so it is best to seek professional advice before taking action. Your financial advisor can help you assess the timing for selling your stock as well as your best options for investment overall. 

Retirement Planning

Year-end is a great time to fine-tune your retirement plans! Are you maxing out your retirement contributions? If you are not currently, it is worth considering, especially to leverage employer-match benefits in workplace plans or increase traditional IRA contributions. Contribution limits change annually, so make sure you are up to date with the latest rules.

Additionally, if you inherited an IRA, specific rules apply to you in regards to how much you have to take up annually, or if it’s your IRA and you’ve reached the required minimum distribution age, you also have to take out distributions.

Another consideration is Roth conversions. If your current tax bracket has room, converting traditional IRA savings into a Roth IRA might be beneficial. This strategy involves paying taxes upfront for tax-free growth later. Consult your advisor to see if this suits your long-term tax strategy.

Make sure that you’re balancing what you’re setting aside for retirement as well as taxable savings. You don’t want all your money in one bucket or the other!

Charitable Giving

The end of the year is often referred to as the season of giving – it’s a great time to look at your charitable giving. This can be a great thing to do from a tax perspective as well as to fulfill personal needs.

The first thing to do is look at donor-advised funds, which are a flexible aspect of charitable giving. You can put lump sums of cash and appreciated securities into a donor-advised fund. From there, you’re able to get a full tax deduction from the amount of money that you put into it. You’re able to give these funds out for however long you want to the charities of your choice.

If you’re at the required minimum distribution age, you can start a qualified charitable distribution (QCD). This allows you to take your RMD (required minimum distribution) and give it directly to the charity of your choice.

Generally, a donor-advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution the organization has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.

Are you ready to talk to a financial professional about your year-end financial planning? Contact Blakely Financial today to get started.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM  to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.