As 2024 winds to a close, it is the ideal time to review your financial position. This year-end financial planning checklist from EP Wealth will guide you through the process. Connect with an advisor near you.
10 Items for Your Year-End Financial Planning Checklist
As 2024 draws to a close, it’s time to evaluate your financial position. From the economy to your personal life circumstances, a lot can change in 12 months. An end-of-year review with an EP Wealth financial planner can help you assess your savings, investment, and retirement strategies and make adjustments to keep moving toward your financial goals.
Use this year-end financial planning checklist to highlight your progress and identify areas for improvement.
1. Assess Your Year-to-Date Income
Start by reviewing your year-to-date income. This may help you estimate your tax liability and make necessary adjustments. Don't forget to consider any additional income you may receive for the remainder of the year, especially large sums such as bonuses and commissions.
2. Check In on Your Pre-Tax Savings
With the year coming to an end, evaluate where your retirement plan contributions stand. Depending on your tax situation, you may want to consider contributions to your Traditional or Roth account. Maximize your contributions if you can and determine if contributions need to increase to get you there.
- 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.
- Health Savings Accounts (HSA) contributions through payroll need to be funded before the year closes. Be sure to check in on your contribution levels and make any appropriate changes. Don’t forget to invest your HSA funds!
3. Examine Your Tax Strategy
Life transitions that trigger a substantial change in income also carry tax implications, particularly regarding your tax bracket and withholding status. Your EP Wealth advisor explores tax strategies to manage credits and deductions and possibly defer or accelerate taxable transactions to potentially reduce your tax liability.
Tax loss harvesting is common and may possibly be an effective investing strategy to lower taxes. It involves selling lost assets to offset gains taxes on appreciated assets. You can reinvest the tax savings to keep your portfolio balanced and grow that money. The deadline to take capital losses is December 31.
You’ll also want to 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.
4. Rebalance your portfolio
EP Wealth advisors also assess your investment strategy each year. If some investments are over or underperforming, your portfolio may need to be rebalanced. The goal is to refocus your investments to maintain your target asset allocation based on your risk tolerance.
For example, as you move closer to retirement, it may be time to take a more conservative approach. Or, if you use investments to support your lifestyle, you can work with your advisor to estimate what they are likely to generate next year, making modifications to help meet your income targets.
5. Review your retirement plan
Retirement plans are fluid and should grow and evolve as your needs change. Assess your retirement strategy at least once a year to determine if it still meets your retirement income targets. Have you experienced a significant life event or have a different vision for your retirement lifestyle?
Are you considering downsizing, or do you plan to travel? Are you facing new health challenges that may increase your expenses in the future? EP Wealth advisors take the time to understand your needs and tailor a retirement plan to help you make the most of your time and resources.
6. Update your estate documents
As you look to the future and plan your retirement, you must also take steps to prepare for illness and death. It’s never too early to review or create your will and advanced medical directives and designate financial and medical powers-of-attorney to make decisions on your behalf if you cannot.
Also, update the beneficiaries on your life insurance, retirement plans, and other accounts. If you name an executor to manage your estate and oversee your will, you can hopefully spare your loved ones added uncertainty or stress upon your passing. Pre-planning your funeral and burial typically gives you control over the process and may potentially ease the burden on those you care about the most.
7. Set up an emergency fund
If you don’t already have one, creating an emergency fund is wise to protect against the unexpected. We generally recommend a minimum of three to six months of living expenses. Also, look at your existing insurance plans, including life and disability coverage, to determine if they suit your needs. You might also consider long-term care insurance if you or your spouse require more advanced services and/or residential care one day.
8. Utilize Your Flexible Spending Accounts (FSAs) & Dependent Care FSA
If you have an FSA or Dependent Care FSA account, ensure you use any remaining funds before they expire at the end of the year.
9. Review Planned Gifts
If you are making annual gifts to family and/or friends, ensure you complete these before year-end. The maximum amount that can be gifted for 2024 is $18,000 per individual ($36,000 for married couples).
10. Consider charitable giving
Giving back is a powerful way to support the causes and efforts that matter to you. There are several ways to donate, each with its own tax implications. You can donate appreciated stock, which will likely help you avoid the capital gains you would have paid if you sold them.
You can also set up a trust to make regular donations to your preferred organization, potentially lowering your taxable income. Work with a financial planner at EP Wealth to explore these and other charitable giving options.
A year-end financial review is more than something to cross off your to-do list. It’s a tool to understand where your money goes, how your investments are performing, and where you stand on your path to retirement. Contact an EP Wealth financial planner near you to book an appointment before the year ends.
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