Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some
continued education for some credentials I maintain and it occurred to me that
we all could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
Edward Jones;
Year End Checklist
for Your Financial Strategy
Daniel Ladd, CFP® • Senior Analyst, Client Needs Research
Katherine Tierney, CFA, CFP® •
Senior Strategist, Client Needs Research
As
in years past, the markets have seen their share of ups and downs in 2024, with
inflation and interest rate concerns making headlines. And while the markets
performed well through the first half of 2024, there is still some uncertainty
as the year winds down. One lesson from 2024 is that it’s important to focus on
what you can control. This year-end checklist highlights actions you can take
to help keep your financial strategy on track.
If
you are considering any of the following actions or have questions, we
recommend speaking with your financial advisor. These actions should work with
what’s most important to you, so your financial advisor can provide more
direction and clarity. In addition, since many of the following items involve
taxes, be sure to discuss them with your tax professional.
Additional
considerations for investors with more complex needs
If
you have a higher income or net worth, speak with your financial advisor about
additional considerations and strategies that can help you accomplish your financial
objectives. We recommend reading the high-net-worth
year-end checklist to
familiarize yourself with the additional considerations that may apply.
1.
Year-end review
Self-assessment
— Because your
goals drive your strategies, it’s important to first assess whether your
situation or goals have changed. As 2024 ends, evaluate how you feel about your
financial progress. Did you meet your yearly goals or make progress toward your
long-term goals? Did your goals change throughout the year? Did a major event
shift your financial outlook? Talk with your financial advisor to ensure your
goals, time horizon and any major life changes are up-to-date in your financial
strategy.
Assess
and estimate your tax situation — Understanding
your tax situation is an integral component of year-end planning. Work with
your tax professional and financial advisor to estimate your taxes and identify
year-end opportunities to help reduce your tax bill and meet your goals. Doing
so may also help you with the following actions.
2.
Year-end tax considerations
Required
minimum distributions (RMDs) — Generally, anyone age
73 or older must take an RMD from their retirement account in
2024 to avoid a 25% penalty on required amounts not withdrawn. Note that RMDs
do not apply to Roth accounts for the original account owner, including Roth
401(k)s.
Flexible
spending accounts (FSAs) — FSAs
are “use it or lose it” accounts, meaning you lose any unspent funds at
year-end. If you have been contributing to an FSA and have funds remaining,
understand your employer plan’s deadlines for incurring expenses and submitting
claims. Do your best to use those funds before the deadlines so you’re not
forfeiting them to your employer.
Tax-loss
harvesting — Recognizing
capital losses could allow you to offset capital gains recognized throughout the year,
including long-term capital gain distributions from mutual funds. Any excess
capital losses are used to reduce ordinary income by up to $3,000, with any
remaining excess losses carried into future years to offset capital gains
recognized in 2025 or later. This can be a great opportunity if you find
yourself needing to rebalance your portfolio. (See “Monitor your long-term
strategy” below.)
3. Continue to make progress toward your goals
Health
savings account (HSA) contributions — Consider increasing contributions to your HSA for
yourself and your family:
·
Eligible
contributions provide an income tax deduction.
·
Earnings
will generally grow tax free.
·
Distributions
will ultimately be tax free if used for qualified medical expenses.
These
“triple-tax” benefits make an HSA an incredibly valuable addition to your
financial tool kit, especially because unused balances carry over from year to
year (unlike with an FSA).
Retirement
plan contributions — Consider
increasing contributions to your retirement plan and/or IRA. Doing so can help you make further
progress on your retirement savings and potentially save on taxes now or in
retirement. If your employer plan allows, consider setting up your
contributions to increase automatically each year.
Roth
conversions — If
your marginal tax bracket is lower than usual or you expect to be in a higher
bracket in retirement, consider converting funds from a pretax retirement
account to a Roth account. Keep in mind that a Roth conversion is a taxable event. You’ll want to
consult your tax professional and financial advisor to see whether this is
right for you based on your current and future tax and retirement situations.
529
plan contributions — Distributed
amounts from a 529 account used for qualified education
expenses are federally tax free. Contributing to this plan may also provide you
with a state tax benefit. If the beneficiary ends up not using the entire 529
account balance, you have multiple options for these funds. Your financial
advisor can review them with you.
4.
Maximize your impact
Qualified
charitable distributions (QCDs) — If
you are 70½ or older, you may qualify to exclude up to $105,000 from your
adjusted gross income (AGI) by donating to a qualified charity directly from
your IRA. QCDs satisfy (in part or in whole) your current annual IRA RMD (if
applicable). This generally results in a lower taxable income regardless of
whether you itemize your deductions.
Charitable
donations — Your
donations may qualify for a tax deduction if you itemize your deductions.
A donor-advised fund can be a great way to help you
itemize your deductions while amplifying your charitable giving impact.
Annual
gifts — In
2024, you can make an $18,000 gift per person without using your federal estate
and gift tax exemption. If you and your spouse are eligible to gift-split,
together you can gift up to $36,000 per person per year. You can also make
payments for tuition and medical expenses directly to providers on someone’s
behalf without relying on the annual exclusion or lifetime exemption.
5.
Monitor your long-term strategy
While
the following actions don’t have specific deadlines, we recommend you do them
annually. These considerations are meant to further monitor your progress
toward your long-term goals.
Your
journey toward financial stability — Making progress can be challenging when you’re
juggling multiple goals. We recommend following a series of milestones to help
balance building an emergency fund, paying off debt and saving for retirement.
Be sure to reassess where you are in the process, evaluate whether you’ve been
staying on track and consider how to get yourself back on track or continue
your progress in your financial journey. For more information, ask your
financial advisor for our three milestones on the road to
financial stability.
Portfolio
balance and diversification — Your
portfolio was set up to match your objectives and goals. But life,
circumstances and markets change — and these changes can affect your progress
toward your goals. In addition, proper diversification across your stocks and bonds is
crucial. Your financial advisor can help ensure your portfolio is still aligned
with your objectives, time horizon and comfort with risk. If you find that you
need to rebalance or diversify, you could employ the above items, such as
additional contributions, tax-loss harvesting and RMDs, to help address this.
Expecting
the unexpected — During
uncertain economic conditions, it can be hard to foresee what may happen next.
The same can be said for life itself. An integral part of your financial
strategy should be to prepare for unexpected twists and turns. Have you set
aside a fund of three to six months’ worth of total expenses in case of an
emergency? Are you adequately covered with insurance? Your strategy is not
complete without considering homeowners/renters, auto, health, disability, life
and long-term care insurance and/or an umbrella policy.
Review
your incapacity plan — One
way to ensure your wishes and decisions are followed if you become
incapacitated is to make sure you have the appropriate documents in place and
they are up-to-date. A financial power of attorney allows someone to make
financial decisions on your behalf, while a health care power of attorney lets
you designate someone to make medical decisions on your behalf. A medical directive
allows you to express your wishes about medical care should you become
incapacitated. Be sure to consult your attorney, financial advisor and even a
health care provider to make sure you’ve addressed all your needs.
Review
your beneficiaries, asset titling and estate plan — Do your beneficiaries and asset
titling still align with your estate plan? Will your assets pass according to your
wishes? Generally, beneficiary designations on retirement accounts, brokerage
accounts and certain types of joint accounts will supersede your will or
trusts. It’s important to follow your attorney’s recommendations on how to
title your assets appropriately and keep up-to-date primary and contingent
beneficiary designations.
Important
deadlines to note
|
Financial action |
Maximum contribution/donation |
Federal deadline |
|
Required minimum distributions (RMDs) |
N/A |
12/31/2024 (Exceptions exist for the first year an RMD is required.) |
|
Use flexible spending account (FSA) balances |
Health
care FSA: $3,200 Limited-purpose
FSA: $3,200 Dependent
care FSA: $5,000 (per household) |
12/31/2024 (Some plans allow extensions for up to 2.5 months for incurring
expenses.) |
|
Employer retirement plan contributions |
401(k)/403(b)/457(b):
$23,000, with $7,500 catch-up for those age 50+ SIMPLE:
$16,000, with $3,500 catch-up if age 50+* SEP:
Limited to the lesser of: ·
25%
of compensation, or ·
$69,000 |
12/31/2024 |
|
Roth conversions |
N/A |
12/31/2024 |
|
Qualified charitable distributions (QCDs) |
$105,000 per person |
12/31/2024 |
|
Charitable donations |
N/A (Subject to AGI limitations) |
12/31/2024 |
|
Annual gifting |
$18,000 per spouse per donee |
12/31/2024 |
|
IRA contributions |
$7,000 per person, plus $1,000 catch-up if age 50+ |
Tax return deadline, not including extensions |
|
Health savings account (HSA) contributions |
·
$4,150
for individual coverage ·
$8,300
for family coverage ·
$1,000
catch-up if age 55+ |
Tax return deadline, not including extensions |
*Certain
plans can contribute 110% of contribution limits. Consult your plan
administrator.
Many
of these actions must be completed by certain dates. Please note, it may take
time to process requests and changes, so plan to act sooner rather than later.
(As with any of these informative articles,
anyone who needs someone to talk to about
this
very subject contact me and I can direct you to a knowledgeable advisor).
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