Preparing for Year-End: Financial Moves to Make Before 2025

As 2024 comes to a close, it’s the perfect time to review your financial goals and make any necessary adjustments to ensure you are maximizing opportunities before the new year. By taking a few proactive steps now, you can potentially lower your tax bill, boost your savings, and position yourself for a stronger financial future in 2025.

Here are some essential financial moves to consider before the year ends:

1. Maximize Retirement Contributions

If you haven’t already done so, now is the time to make sure you’re taking full advantage of retirement account contribution limits. For 2024, the contribution limit for 401(k) plans is $23,000, with an additional $7,500 in catch-up contributions available for those aged 50 and older.

For IRAs and Roth IRAs, the contribution limit is $7,000, with an additional $1,000 catch-up contribution for those aged 50 and older. Maxing out these accounts before December 31st can significantly reduce your taxable income and give your retirement savings a year-end boost.

2. Review Tax-Loss Harvesting Opportunities

Tax-loss harvesting allows you to sell investments that have lost value in order to offset capital gains and potentially reduce your tax liability. This strategy can be particularly beneficial in a volatile market where some assets may not have performed as expected.

Before making any moves, it’s important to remember the wash-sale rule, which prevents you from repurchasing the same or a substantially identical security within 30 days. Consult with your advisor to ensure you are maximizing this strategy while staying compliant.

3. Consider Charitable Giving

The end of the year is a great time to consider charitable donations, which can also provide you with a tax deduction if you itemize. For those looking to make a more significant impact, donor-advised funds allow you to donate appreciated assets, like stocks, which can help you avoid capital gains taxes.

If you're 70½ or older, you may want to explore Qualified Charitable Distributions (QCDs). A QCD allows you to donate directly from your IRA to a qualified charity, which can satisfy your Required Minimum Distribution (RMD) and provide tax advantages.

4. Take Advantage of Health Savings Accounts (HSAs)

If you have a high-deductible health plan, make sure you’re maximizing your contributions to a Health Savings Account (HSA). For 2024, the contribution limit is $4,150 for individuals and $8,300 for families, with a $1,000 catch-up contribution for those 55 and older.

HSAs offer a triple tax advantage—your contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. It’s a great tool for both current healthcare costs and future retirement expenses.

5. Review Required Minimum Distributions (RMDs)

If you’re 73 or older, be sure to review your Required Minimum Distributions (RMDs) before the end of the year. Failure to take your RMD by the December 31st deadline can result in a steep 25% penalty on the amount that should have been withdrawn.

If you’re concerned about the tax impact of your RMD, consider strategies such as spreading withdrawals across multiple accounts or using a QCD, as mentioned earlier.

6. Revisit Your Asset Allocation and Rebalance if Necessary

Market fluctuations or changes in your personal circumstances can affect the balance of your investment portfolio. As we near year-end, it’s a good idea to review your asset allocation to ensure it still aligns with your long-term financial goals and risk tolerance.

Rebalancing your portfolio can help you maintain your desired level of risk, while also capitalizing on gains or adjusting for underperforming assets. This is also a good time to review any significant changes in your life—such as a new job, marriage, or retirement—and adjust your strategy accordingly.

7. Evaluate Flexible Spending Accounts (FSAs)

If you have a Flexible Spending Account (FSA) for healthcare or dependent care expenses, remember that most FSAs operate under a "use it or lose it" rule, meaning you must spend the funds by the end of the year or risk forfeiting them.

Some plans offer a grace period or allow a small carryover into the next year, but it's still wise to review your balance and spend down any remaining funds on eligible expenses before December 31st.

8. Plan for 2025 Goals

As you prepare to wrap up 2024, it’s also a great time to start thinking ahead to 2025. What financial goals do you want to achieve in the new year? Whether it’s reducing debt, increasing savings, or planning for a major life event like retirement or buying a home, setting clear goals now can help you start the year off right.

Consider meeting with Jackie and me to review your progress and set a personalized plan for 2025. A year-end check-in can provide valuable insights and help ensure you’re on track to meet your financial objectives.

Conclusion

By taking these year-end actions, you can optimize your financial situation and set yourself up for success in 2025. Whether it’s maximizing retirement contributions, rebalancing your portfolio, or preparing for tax season, a little planning now can make a big difference later.

If you’d like to discuss any of these strategies or schedule a year-end review, feel free to reach out to us. We’re here to help you make the most of the opportunities available to you before the year closes.