End the Year Strong: 10 Tips to Save on Taxes, Grow Your Retirement Savings, and Keep More Money in Your Pocket
As we head into the home stretch of 2024, now is the time to take action to improve your finances. Whether it’s reducing your taxes, increasing your retirement savings, or just becoming more aware, these ten tips can help you finish the year strong and set yourself up for success in 2025…
Review Your Retirement Contributions: You have until December 31st to contribute to your workplace retirement accounts like 401(k)s and 403(b)s. Confirm how much you have contributed year-to-date. For 2024, the limit is $23,000 if you’re under 50, and $30,500 if you’re over 50 ($7,500 catch up). Not maxing it out? That’s ok, just make sure you are contributing enough to get the entire company match (free money!!). Or set a goal to increase your contributions by 1-2% starting in January 2025.
Looking to lower your tax bill today? Pre-tax contributions are deducted from your taxable income.
Do you typically get a tax refund? Consider a Roth 401k or Roth 403b and start to create a tax-free bucket within your plan.
Plan for 2025 Retirement Changes: Next year, contribution limits will rise to $23,500, with higher catch-up limits for those aged 60-63, who can contribute up to $34,750 (catch up for this group is $11,250 next year…) Check the new income limits for Roth IRAs, deductible IRAs, etc.
Traditional & Roth IRAs: The deadline for 2023 IRA contributions isn’t until April 15, 2024. If you qualify, you can contribute up to $7,000 ($8,000 if over 50). A Traditional IRA might offer a tax deduction while Roth IRAs offer tax-free growth and withdrawals in retirement.
If your income was lower than usual in 2024, or if all of your assets are in tax-deferred accounts, consider converting traditional IRA funds to a Roth IRA. Roth conversions are taxable now, but they can save you money in the long run by eliminating taxes on future growth and withdrawals. Reminder — Roth IRAs are not subject to RMDs, and heirs can inherit Roth accounts tax-free.
Inherited IRAs: If you inherited an IRA in 2024, you may need to take required minimum distributions (RMDs) by December 31st. The rules are complex, so if you’re unsure, reach out to me to avoid penalties.
Minimize Taxes: You should always be looking for ways to lower your tax bill, if not, hire someone to do that for you…Few strategies you can implement:
Tax Loss Harvesting: Review your investment accounts and see if there is an opportunity to do tax-loss harvesting. Sell those underperforming assets and offset gains.
If you're planning to work with a new CPA, now is the time to reach out to them.
Charitable Contributions: Giving Tuesday has come and gone but it’s not too late to donate! If you take the standard deduction on your tax return, you are not able to deduct charitable contributions. However, MA residents can now deduct charitable contributions on their state income tax returns. Save the confirmation emails you receive in a folder. Start building a habit of giving…
Rebalancing your Portfolio: With the S&P 500 on pace for back to back years of 20%+ growth, it may be time to rebalance. If you expect to need cash within the next 12 months, now could be a great time to take some risk off the table. Large US stocks continue to outperform, likely the majority of your accounts are in these stocks. If you own mutual funds within your investment account, think about selling those and buying ETFs to be more tax-efficient…
Review Cash Strategy: High-yield savings account rates are dropping below 4%. Remember - we prepped for this…For short-term needs, cash investments still work, but for longer timelines, consider stocks or tax-free municipal bonds. Allocating your funds wisely can help you make the most of your cash. High income earners should be taking advantage of municipal bonds (tax-free).
Check Health Insurance Plans: Do you even know what type of health insurance plan you are in? If you are in a “high deductible health plan” (HDHP), you should utilize a health savings account. These are one of the most powerful and underutilized accounts (not many people are in a HDHP).
Benefits:
○ Contributions are pre-tax and reduce your taxable income.
○ Contributions grow tax-free in your HSA.
○ You can withdraw contributions and earnings tax-free at any point to pay for qualified expenses.
If you are enrolled in a HMO or PPO plan, see if your plan offers a reimbursement program for health related costs like a gym membership. I just got a check for $150 the other day…
Track Progress: Momentum matters. Are you monitoring your savings and investments? Without a clear plan, it’s easy to be reactive. My goal is to help you take action. What are you trying to accomplish? Where are you making progress? Invest towards your objectives. We tend to only think about, “how are things performing in today's market?” But what really matters to you are your goals and your objectives. Focus on that, and not the daily swings of the stock market.
The end of the year is a great time to reflect and take action. Even if you implement or check on a few of these, you can save money in taxes or make progress towards your goals.
Not sure where to start? I’m here to help…
Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
All rates disclosed above are not 100% accurate and have probably changed.
All investing includes risks, including fluctuating prices and loss of principal.