A new year brings new possibilities and a new set of opportunities to keep your financial house in order. These 9 important topics, ranging from tax preparation to Medicare, are all part of a comprehensive financial plan to help keep you on track to your goals. Though you may already be working with your Advisor on the items listed below, it's always good to review the list, especially if your situation has recently changed. EP Wealth Advisors is available to help - current clients can reach out to their Advisor anytime, and if you're not a client but would like to talk to an advisor, click here.
1. Prepare for filing your tax return
Get organized and gather last year’s forms and records such as:
- W2 forms
- 1099 Forms – The most common ones are:
- 1099 – R
- 1099 – DIV
- 1099 – INT
- 1099 – B
- 1099 – MISC
- K1 Forms from any pass-through businesses
- 1098 Forms for any Mortgages or Student Loan Interest
- Property tax statements
- Gather all charitable giving that was done in 2023 including cash donations, Donor Advised Fund (DAF) contributions, Qualified Charitable Distributions (QCDs), and any non-cash contributions made (such as donations to Goodwill). Please note that if you processed any QCDs, those are not typically recorded on your 1099-R. You will need to provide your tax preparer the amounts processed as a QCD.
- Medical Expenses for the year, including out-of-pocket expenses for doctor and hospital visits, expenses for prescription drugs, Medicare premiums, and long-term care insurance premiums (up to a certain amount based on your age). Be sure to ask your tax preparer for a complete list of eligible medical expenses.
- If you processed any Roth conversions for the tax year, be sure to notify your tax preparer. Typically, a 1099-R is received for a Roth conversion, however, it does not specifically state that the distribution amount was for a Roth conversion.
- Estimated tax payments paid for both Federal and State (if applicable). Be sure to speak with your tax professional for a complete list based on your specific tax situation.
2. Complete Retirement account contributions for 2023
- The deadline for completing any Traditional/Nondeductible IRA and Roth IRA contributions is April 15, 2024.
- For SEP IRAs, Solo 401(k), and defined benefit contributions, the tax filing deadline of April 15, 2024 (plus extensions).
- The 2023 maximum contribution for IRA and Roth IRAs is $6,500 plus an additional $1,000 catch-up contribution if over the age of 50.
- For SEP IRAs and Solo 401(k) employer non-elective contributions, the maximum contribution cannot exceed the lesser of 25% of compensation or $66,000 plus an additional $7,500 catch-up contribution if over the age of 50.
- It is important to speak with your tax professional to ensure that you are under the income phase-out limits for IRA and Roth IRA contributions, as well as understanding what the maximum SEP and Solo 401(k) contributions are for your specific tax situation.
3. Review last year's spending
Now that 2023 has wrapped up, it is the perfect time to review last year's spending to better understand where your money is going.
- If you find that you have any excess cash at the end of the year, consider investing it to align with your investment portfolio.
- We recommend updating or creating a budget for the new year that covers essential spending, discretionary spending and savings.
- If your expenses have changed, be sure to revisit your emergency fund. A rule of thumb is to have 3-6 months’ worth of expenses saved.
4. Plan your major purchases
While lifestyle spending covers everyday expenses, you may also be planning for major purchases in the next few years, such as, a new car purchase or home remodel. Turn your visions into reality by proactively planning for those goals now.
5. Plan for your charitable giving
Charitable giving provides you and your family with an opportunity to make a difference. An important part of financial planning is making sure you're doing it in the most tax efficient way possible.
- Create a charitable giving plan for you and your family and incorporate year-round giving into your financial plan.
- Consider donating appreciated assets to your preferred philanthropic causes or your Donor Advised Fund (DAF) for tax efficiency. Qualified Charitable Distributions (QCDs) may also fit into your plan if you are over the age of 70 ½ in 2024. The maximum annual QCD limit for 2024 is $105,000 per individual.
6. Medicare advantage open enrollment
If you are enrolled in a Medicare Advantage plan (also known as Medicare Part C), open enrollment is January 1-March 31. During this time, you have an opportunity to make changes to your coverage.
- It is important to review your coverage to ensure your plan meets your healthcare needs. Changes made during this period typically take effect on the first day of the month following the month the change is made. EP Wealth Advisors has partnered with Chapter to provide Medicare advice that aligns with our fiduciary philosophy. At no additional cost to clients, you can schedule a review with a Chapter Medicare expert. This review takes about 30 minutes. Please reach out to your advisor if you’d like to schedule a Medicare review.
7. Update Pre-Tax savings for the new year
- For an employer-sponsored retirement plan such as a 401(k) or 403(b), the 2024 maximum contribution is $23,000 plus an additional $7,500 catch-up contribution if over the age of 50.
- If you are contributing to a Traditional/Non-deductible IRA or Roth IRA, the 2024 maximum contribution is $7,000 plus an additional $1,000 catch-up contribution if over the age of 50.
- Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) - the 2024 maximum contribution for an HSA is $4,150 for individual plans and $8,300 for a family plan plus an additional $1,000 catch-up contribution if over the age of 55. For an FSA, the maximum contribution has increased to $3,200.
8. Require minimum distribution reminder
If you're over 72, (73 if the account owner reached age 72 in 2023 or later) remember to take your Required Minimum Distributions (RMDs) from retirement accounts to avoid penalties. You can take these throughout the year or as a lump sum at the end of the year.
9. Stay on top of tax withholdings and estimated taxes
Ensure you've made sufficient tax payments, whether from payroll/retirement account withholdings or by making estimated payments throughout the year to prevent underpayment penalties.
EP Wealth wishes you a prosperous and financially rewarding year ahead! If you have any questions or need personalized assistance with your financial planning, our team is here to help.
Want to discuss these topics further? Call or contact us at EP Wealth and start the conversation.
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