Year-End Financial Moves to Make Before the Clock Strikes Midnight
The end of the year always seems to arrive faster than expected. Between holiday festivities and wrapping up loose ends, it’s easy to overlook important financial tasks. However, taking the time to review and adjust your financial plan before December 31 can help set you up for success in the new year—and beyond.
Here are some smart, practical steps to consider before the year comes to a close.
1. Maximize Retirement Contributions
If you haven’t maxed out your contributions to retirement accounts, now’s the time to catch up. For 2024, you can contribute up to $22,500 to your 401(k) if you’re under 50, and $30,000 if you’re 50 or older (thanks to catch-up contributions). For traditional and Roth IRAs, the limits are $6,500 and $7,500, respectively, depending on your age.
Not only does this help you prepare for retirement, but contributing to traditional accounts can also reduce your taxable income—a win-win.
2. Review Charitable Giving Opportunities
The holiday season inspires generosity, and charitable giving can also be a savvy financial move. Contributions made by December 31 to qualified charities may be tax-deductible, depending on your filing status.
If you’re 70½ or older, consider making a Qualified Charitable Distribution (QCD) directly from your IRA to fulfill your Required Minimum Distribution (RMD) while supporting the causes you care about. It’s a meaningful way to give back while reducing your taxable income.
3. Harvest Tax Losses
The end of the year is a great time to review your taxable investment accounts for unrealized losses. Tax-loss harvesting allows you to offset gains by selling underperforming assets, potentially reducing your taxable income.
However, be mindful of the wash-sale rule, which prohibits repurchasing the same or a “substantially identical” security within 30 days. If you’re unsure how to execute this strategy, consult your financial advisor or tax professional.
4. Spend Flexible Savings Account (FSA) Funds
If you have an FSA, remember that the funds in this account typically don’t roll over into the next year. While some plans allow you to carry over a small portion or extend the deadline, it’s best to spend these funds by year-end to avoid losing them.
Qualified expenses might include medical appointments, prescription medications, or even over-the-counter items like first aid kits and sunscreen.
5. Review and Rebalance Your Portfolio
Market fluctuations throughout the year can cause your portfolio’s asset allocation to drift from your original plan. The end of the year is a perfect time to review your investment mix and rebalance as needed.
Rebalancing ensures your portfolio remains aligned with your risk tolerance and long-term goals. It also gives you an opportunity to evaluate whether you’re on track to meet your financial objectives.
6. Plan for RMDs
If you’re over age 73 (or 72 if you were born before 1950), don’t forget to take your Required Minimum Distributions (RMDs) from your retirement accounts. Failing to do so can result in hefty penalties—50% of the amount not withdrawn.
If you’re unsure how to calculate or distribute your RMDs, work with your financial advisor to avoid any costly mistakes.
7. Review Your Estate Plan
The end of the year is a natural time to revisit your estate plan. Life changes like marriage, divorce, or the birth of a child may require updates to your will, trusts, or beneficiary designations.
Estate planning isn’t just about documents—it’s about ensuring your assets are distributed according to your wishes while minimizing stress for your loved ones. Taking time to review and update your plan now can give you peace of mind heading into the new year.
8. Check Your Tax Withholding
No one likes surprises come tax season. The end of the year is a good time to review your withholding and estimated tax payments to ensure you’re on track. If you’ve had significant changes in income, deductions, or credits this year, adjusting your withholding now can help you avoid penalties or a large tax bill.
9. Consider Gifting Strategies
The IRS allows you to gift up to $17,000 per recipient annually without incurring gift tax. If you have a larger estate or want to transfer wealth to loved ones, this can be a simple way to reduce your taxable estate while supporting family members.
If you’re feeling extra generous, this is also an opportunity to contribute to a loved one’s education or health expenses (which may qualify for unlimited gifting exclusions).
10. Set Financial Goals for the New Year
As you review your year-end finances, start thinking about what you’d like to achieve in the year ahead. Whether it’s increasing retirement contributions, saving for a major expense, or tackling debt, setting clear financial goals can help you stay focused and motivated.
Write down your goals, break them into actionable steps, and discuss them with your financial advisor to create a plan that works for you.
Make the Most of the Year-End
The end of the year is a busy time, but it’s also an opportunity to set the stage for a financially secure future. By taking a proactive approach, you can minimize taxes, maximize savings, and ensure your finances are in top shape heading into the new year.
If you’d like guidance on any of these year-end strategies, we’re here to help. Let’s work together to ensure you finish the year strong and set yourself up for success in 2025.
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Did you know? Vector Wealth partners with clients across the United States. Whether you’re seeking a second opinion or exploring what a financial advisory relationship with Vector Wealth could look like, explore our website for more information. We’d be delighted to discuss your financial goals and help you navigate your current situation.
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