Financial Planning Tips for a New Year
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Scroll down for a transcript and chapters start times. This discussion is with Vector advisor Chris Wagner.
Summary
As we approach 2025, it’s a great time to plan for a financially strong year ahead. In this podcast, Vector Advisor, Chris Wagner discusses Required Minimum Distributions (RMDs), Qualified Charitable Distributions (QCDs), and explores Roth conversions. Chris also reminds us to review beneficiary designations to ensure they align with your wishes.
Did you know:
The gift tax exclusion will increase to $19,000 in 2025.
For charitably inclined individuals, a donor-advised fund may offer tax benefits and flexibility.
Higher limits on HSA’s may help maximize health savings.
Episode Chapters
0:03 - Introductions & 2025 Planning
0:16 - Required Minimum Distribution
1:15 - Qualified Charitable Distributions
2:31 - Roth Conversions
3:16 - Beneficiary Designations
3:52 - Gift Planning
4:20 - Donor Advised Fund
5:04 - HSA - Health Savings Account
5:22 - Wrap Up
5:55 – Regulatory
Transcript
(adapted for readability)
As we close the chapter on 2024 and step into 2025, it’s an excellent time to reflect, plan, and set a strong foundation for the financial year ahead. I’m Chris Wagner, a Wealth Advisor at Vector Wealth Management, and I’d like to share a few key financial planning considerations for the coming year.
First, if you turn 73 in 2025, this will be your first year of being required to take a distribution from your pre-tax retirement accounts, such as an IRA, 401(k), or SIMPLE plan. These are called Required Minimum Distributions (RMDs). The IRS mandates that you withdraw a percentage of the funds, pay taxes on the distribution, and then decide whether to spend, save, or reinvest the remaining amount. From 2025 onward, you’ll need to take RMDs annually, with the percentage and amount varying based on your age and account balance. Be sure to consult your advisor to plan the timing, as the distribution must be completed by December 31—or by April 15 of the following year for your first RMD.
If you’re over 70½, you’re also eligible to make Qualified Charitable Distributions (QCDs) from your IRA. This allows you to send funds directly to a charity from your pre-tax account without paying taxes on the amount. For example, if your required RMD is $25,000, you could allocate $12,000 to a charity and keep the remaining $13,000, paying taxes only on the latter amount. If you’re charitably inclined, this is a smart way to reduce your taxable income while supporting causes you care about.
Another planning opportunity is Roth conversions. Under current tax laws, which are set to sunset at the end of 2025 unless extended, you can convert funds from a traditional IRA to a Roth IRA by paying the taxes upfront. This allows the money to grow tax-free, and withdrawals in retirement will also be tax-free. It’s a strategy worth exploring with your advisor to weigh the tax implications and potential benefits.
As we enter the new year, it’s also a good time to review your beneficiary designations to ensure they align with your current wishes. Confirm that your IRA, trust, and other accounts are correctly set to pass to the intended recipients, whether that’s family members or charitable organizations.
In 2025, the annual gift tax exclusion increases to $19,000 per person, up from $18,000 in 2024. If gifting is part of your financial strategy, this is an excellent way to transfer wealth without filing a gift tax return. For those who are charitably inclined but not yet 70½, donor-advised funds can be a useful tool. These accounts allow you to make a tax-deductible contribution in one year and then distribute funds to charities over time, aligning your giving strategy with your financial goals.
Don’t overlook health savings accounts (HSAs) if you’re eligible. In 2025, the contribution limits have increased to $4,300 for individuals and $8,550 for families, with an additional $1,000 catch-up contribution for those over 55. Maximizing your HSA contributions is another way to optimize your tax-advantaged savings.
As the end of 2024 approaches, it’s incredible to think about the opportunities ahead in 2025. From tax strategies to charitable giving and retirement planning, this is an exciting time to refine your financial roadmap. If you have questions or would like to discuss these strategies further, feel free to reach out to me. You can call us at 612-378-7560 or email me at cwagner@vectorwealth.com. Thank you for your time, and here’s to a successful 2025!
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These discussions aim to spark dialogue about enhancing retirement readiness and making more informed financial decisions. At Vector, we delve into the nuances of scenario planning, offer insights and guidance tailored to each client's unique circumstances. If you or someone you know is pondering their financial future or seeking clarity on their retirement plan, we're here to help.
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.
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