End-of-Year To-Do List

As we approach the end of the year, it's time to review all the annual tasks you should do to maximize your financial wellbeing. Here’s a list of to-dos you should consider reviewing before the year concludes.

I. Retirement & Healthcare Planning:

1. 401(k), IRA, and Roth contributions: Review your retirement accounts to ensure you're maximizing contributions. For 2024, the contribution limits for a 401(k) are $23,000 ($30,500 if you're 50 or older), and $7,000 for IRAs and Roth IRAs ($8,000 if you're 50 or older).

   In addition, consider whether you are eligible for additional vehicles. FOr example, if you have self-employment income, you may be eligible for a Solo 401(k). You can contribute as both an “individual” and “the company” in this vehicle. The max “company” contribution is $69,000.

   Contributing the maximum allowed can help reduce your taxable income nor or during retirement.

2. HSA contributions: If you have a high-deductible health plan, consider maxing out your HSA. The 2023 contribution limits are $4,150 for an individual and $8,300 for a family, with an additional $1,000 catch-up contribution for those 55 and older.

3. Spend your FSA account: FSA funds are typically "use-it-or-lose-it." Check your balance and use any remaining funds for eligible medical expenses. Some plans offer a grace period or allow a small amount to roll over, so verify the specifics of your plan. As a pro tip, Costco has an online page for FSA-eligible purchases.

4. Review your health insurance: If you're expecting a significant life change, such as having a child, it might be worth considering a more generous health plan. Open enrollment period is a good time to make these adjustments.

II. Estate Planning:

1. Annual Gift Exclusion: If you have significant assets that you wish to pass on to the next generation, consider utilizing the annual gift tax exclusion, which is $18,000 per grantor for 2024. Annual gifting is one of the simplest and lowest cost ways to pass on money without triggering estate taxes.

2. 529 Education Savings Plan Contributions: If you welcomed a new child or grandchild this year, consider front-loading a 529 plan with five years' worth of contributions, which is $18,000 × 5 for 2024, or $90,000 per donor. 529 plans established by a grandparent are no longer included in FAFSA, meaning the grandchild could still qualify for financial aid.

   As a benchmark, college at private 4-year universities now costs ~$85,000 per year and ~$40,000 for in-state public college.
   If you expect a child to go to college in 18 years, you could fully fund 4 years of private university with ~$200,000 in a 529 plan today (assuming 5% tuition inflation and 8% investment returns). You would need about half that for public university.

3. Charitable giving: The holiday season is a wonderful time to consider charitable giving. If your saving rate was higher than expected, consider gifting some of that to an appropriate charity. As an added bonus, this gift would be tax deductible.

4. Review your estate documents: Periodically review your trust documents and will to ensure they reflect any recent life changes, such as marriage, divorce, or the birth of a child.

III. Investment Management and Other

1. Tax-loss harvesting: If you're sitting on losses, consider selling those investments to offset capital gains, which can effectively reduce your taxable income. Remember, you can deduct up to $3,000 ($1,500 if married filing separately) of capital losses against other income.

   Separately, if you have already taken losses on some investments, consider rebalancing your portfolio to take profits on high-gain stocks while maintaining no net capital gains.

2. Employee benefits: If your employer provides employee benefits, such as commuter benefits, now is a good time to review those. Did you use them all? Did you run out halfway through the year? Consider adjusting your contribution rate for the coming year if needed.

3. Budget review: Use this time to review your budget. Did you meet your financial goals, or are adjustments needed for next year? Understanding this can help you plan better for the following year.

4. Insurance review: Assess your insurance needs based on current life circumstances. You might need more coverage in areas like life insurance, property, or liability insurance due to changes such as a new home purchase or a growing family.

If you read this list and thought “yep, all good,” then that’s great! If any of these topics made you question whether you need to take action, please be sure to reach out! As a fee-only financial advisor, I'm here to help you navigate these decisions and optimize your financial strategy for the coming year. These tasks can be incredibly beneficial in securing your financial future, and they often require careful planning and reflection.

Contact me today to set up a consultation and ensure you're on the right path toward achieving your financial goals.