The end of the year flies by. One day, you\u2019re eating turkey and pecan pie and taking a well-deserved nap. Next thing you know (or so it seems), you\u2019re counting down the New Year\u2019s clock to welcome 2025. <\/p>\n
If you\u2019re not careful, the holiday season will fly by (in a sleigh?) before you can do these 5 intelligent things in your financial plan. <\/p>\n
![\"person](\"https:\/\/bestinterest.blog\/wp-content\/uploads\/2024\/11\/pexels-photo-669734.jpeg\")
<\/figure>\n<\/div>\nConduct a Year-End Financial Review<\/h2>\n
Every year, I run a year-end financial review. A year-end financial review looks back and summarizes seven important areas: <\/p>\n
- \n
- Spending (including Unexpected Expenses)<\/li>\n
- Income<\/li>\n
- Saving<\/li>\n
- Net Worth<\/li>\n
- Investing & Allocation<\/li>\n
- Insurance and Estate Planning<\/li>\n
- Progress on Previous Goals<\/li>\n<\/ul>\n
You can\u2019t manage what you don\u2019t measure, and the year-end financial review acts as the ultimate barometer for your financial year. Here\u2019s an article with more detailed thoughts on a year-end financial review.<\/a><\/p>\n
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<\/figure>\n<\/div>\nTax Planning<\/h2>\n
\u201cTax planning\u201d is the process of organizing your tax situation this year, next year, and in many subsequent years, with the ultimate goal of minimizing your overall tax burden while remaining squarely within<\/em> the tax law. We do not promote tax evasion on The Best Interest. <\/em><\/p>\n
What are some examples of tax planning? <\/p>\n
Do you have capital gains? Can you harvest them in 2024 at a conveniently low tax rate? (that\u2019s a question specific to your unique tax situation) <\/p>\n
Do you have capital losses? In this market?! I\u2019m not sure how<\/em>. But you might. Can you harvest those to offset gains? Although, as I\u2019ve written before, this isn\u2019t as useful a tool as many people think<\/a>. <\/p>\n
Do you plan on giving to charity? In what amounts? Depending on your current and future tax situations, would a donor-advised fund make sense? In a nutshell, a donor-advised fund allows you to make many years of charity contributions all at once, claim a current-year tax deduction for those contributions, and, as long as your charity accepts them, you can do so using appreciated stocks. You don\u2019t pay capital gains tax, and neither does the charity (as a tax-exempt non-profit). It\u2019s a triple-whammy. You do good. You reduce your current year income tax. You wipe away future capital gains tax. <\/p>\n
Are you in a position to conduct Roth conversions? The \u201cRoth\u201d descriptor is red-hot right now, and many people are asking me Roth-related questions. Here are two articles all about Roth conversions:<\/p>\n
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<\/figure>\n<\/div>\nAge-Based Concerns<\/h2>\n
The financial planning world is full of age-based concerns, where different rules and regulations start or stop as you age. I\u2019m sure I\u2019m missing some things from this list below \u2013 please, let me know! <\/strong><\/em><\/p>\n
I recommend you scan this list and see what ages you\u2019re approaching. Be aware of the changes that might come soon. <\/p>\n
- \n
- Age 26<\/strong>: you can remain on parents\u2019 health insurance until 12\/31 of year you turn 26<\/li>\n
- N+5<\/strong>: There are multiple<\/em> \u201c5-Year Rules\u201d that apply to Roth IRAs. The two most common are:\n
- \n
- You can withdraw Roth IRA earnings <\/strong>penalty-free 5 years after your first contribution is made, assuming you\u2019ve reached age 59.5<\/li>\n
- You can withdraw Roth IRA conversions <\/strong>penalty-free 5 years after the conversion is made<\/li>\n<\/ul>\n<\/li>\n
- Age 50<\/strong>: can make \u201ccatch up\u201d contributions to retirement accounts<\/li>\n
- 50<\/strong>: certain public-service employees use the \u201crule of 50\u201d (see \u201crule of 55\u201d below)<\/li>\n
- 55<\/strong>: the \u201crule of 55\u201d for penalty-free 401k\/403b withdrawals (be wary, though, you don\u2019t want to mess this up)<\/li>\n
- 59.5<\/strong>: penalty-free IRA and 401(k)\/403(b) withdrawals<\/li>\n
- 62<\/strong>: can file for Social Security benefits (at lower rates)<\/li>\n
- 63.5<\/strong>: the \u201cbridge to Medicare\u201d \u2013 COBRA benefits can cover 18 months til age 65<\/li>\n
- 65<\/strong>: eligible to sign up for Medicare three months before turning 65<\/li>\n
- 65<\/strong>: withdraw HSA funds penalty-free, even if not<\/em> for medical reasons<\/li>\n
- 66-67<\/strong>: reach \u201cfull retirement age\u201d for Social Security benefits<\/li>\n
- 70<\/strong>: Max Social Security age. If you haven\u2019t yet, file now. There\u2019s zero benefit to waiting longer. <\/li>\n
- 70.5<\/strong>: Eligible to make Qualified\u00a0Charitable Distributions (QCDs) from Traditional, Rollover or Inherited IRAs. This option becomes even more lucrative when used to offset some or all of one\u2019s RMDs starting at age 73.<\/li>\n
- 73<\/strong>: Required Minimum Distributions (RMDs) begin<\/li>\n<\/ul>\n
Max\u2019d Out Contributions? <\/h2>\n
Each year presents a new, finite opportunity to contribute to tax-advantaged investment accounts. If you don\u2019t use your annual opportunity, you lose it. <\/p>\n
Take a look at your IRA. Are you on track to contribute $7000 this year (or $8000 if you\u2019re over age 50)? <\/p>\n
Now look at your 401k. Are you on track for $23,000 of your contributions or $30,500 if you\u2019re over 50? It might be too late to make up for lost time, but you can set yourself up for success in 2025. <\/p>\n
Same goes for other accounts. If you have an HSA, max that puppy out. If you have a 529 for your kids and your state has a tax benefit for contributing (my New York does), max it out.<\/p>\n
You might not be in a position to max out everything. I totally get it. But if you can, you should. <\/p>\n
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<\/figure>\n<\/div>\nTime to Rebalance? <\/h2>\n
If you\u2019re following a time-based rebalancing plan, you\u2019ll likely take action at the end of the year. <\/p>\n
How\u2019s your asset allocation look? How far off your target is it? If your allocation falls beyond your predetermined allocation range, it\u2019s time to rebalance. <\/p>\n
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<\/figure>\n<\/div>\nDon\u2019t be a turkey. <\/p>\n
Follow these 5 smart year-end financial planning ideas to ensure your piece of the pie is well cared for. <\/p>\n
Thank you for reading! If you enjoyed this article, join 8500+ subscribers<\/strong><\/a> who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week. You can read past newsletters<\/strong><\/a> before signing up. <\/p>\n
-Jesse<\/p>\n
Want to learn more about The Best Interest\u2019s<\/strong> back story?<\/em> Read here<\/a>. <\/p>\n
- You can withdraw Roth IRA conversions <\/strong>penalty-free 5 years after the conversion is made<\/li>\n<\/ul>\n<\/li>\n
- N+5<\/strong>: There are multiple<\/em> \u201c5-Year Rules\u201d that apply to Roth IRAs. The two most common are:\n
- Age 26<\/strong>: you can remain on parents\u2019 health insurance until 12\/31 of year you turn 26<\/li>\n
![\"sliced](\"https:\/\/bestinterest.blog\/wp-content\/uploads\/2024\/11\/pexels-photo-1282279.jpeg\")
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