As 2024 wraps up, it’s time to focus on proactive financial planning strategies. Use these end-of-year financial planning tips for 2024 to optimize your financial health and set yourself up for a prosperous 2025.
Maximize allowable contributions to retirement accounts
- If you have earned income, you can contribute $7,000 (plus $1,000 catch up for those 50 and older) to a traditional IRA or Roth IRA up until the April tax filing deadline of the following year. Income phaseouts apply so speak with your tax advisor.
- Maximum contributions for employees who participate in 401(K), 403(b), most 457 plans, and the Thrift Savings Plans is $23,000 plus $7,500 catch up for those 50 and older. Some contributions must be made in 2024, and some can be made in 2025, so speak with your CPA.
Complete required minimum distributions
- Required minimum distributions (RMDs) for retirement plan accounts (including designated Roth 401(K) and 403b accounts), IRAs, SEP IRAs, and SIMPLE IRAs, generally must be taken starting at age 72 (73 if you reach age 72 after 12/31/2022). Failure to take your RMD on time may result in a steep excise tax of 25% of your RMD amount and possibly 10% of your RMD amount if the RMD is timely corrected within two years).
- IRAs: Required minimum distributions do not apply to Roth IRAs while the owner is alive. If you have an inherited IRA, RMDs may be required, and you should speak with your CPA.
- Retirement Plans: Retirement plan account owners may delay taking RMDs until retirement unless they are a 5% owner of the business sponsoring the plan. Starting in 2024, RMDs will no longer be required from designated Roth accounts. Lastly, RMD rules do apply to beneficiaries of Roth 401(k) accounts.
Maximize Health Savings Account contributions
- If you have a high-deductible health plan that qualifies for a Health Savings Account (HSA), the contribution limits for 2024 are $4,150 for individuals and $8,300 for families.
- Those over 55 can add an extra $1,000. You have up until the April tax filing deadline to make a contribution. If you are enrolled in Medicare, you cannot contribute to an HSA.
Implement charitable strategies
- In 2024, an individual can gift $18,000 per beneficiary without reporting the gift on a gift tax return.
- You may also want to consider qualified charitable distributions (QCDs) and direct gifts to charity. Qualified charitable distributions allow individuals 70.5 and older to donate up to $105,000 to charity/charities directly from a taxable IRA instead of taking an RMD. Donations to public charities (including to donor advised funds) are usually limited to 60% of adjusted gross income for cash contributions and 30% of adjusted gross income for appreciated assets. Finally, consider bunching charitable contributions you would give over multiple years into one year and itemizing.
- A Roth conversion entails moving money from a traditional IRA to a Roth account. Roth conversions provide tax-free investment earnings, lower taxable income in retirement, and decreased required minimum distributions. The amount converted will be considered a taxable withdrawal from the IRA. We advise paying tax on the conversion from taxable accounts. Roth accounts grow tax-deferred, and withdrawals are tax free provided certain conversion and timing rules are met. The rules vary depending on timing, whether the account is a Roth IRA or a Roth 401(K), and, whether withdrawing contributions, conversions, or earnings. Keep in mind, Roth conversions may increase your Medicare Part B & D payments.
Finalize year-end tax-loss harvesting
- Callan Capital systematically reviews portfolios for opportunities to tax loss harvest year-round. Tax loss harvesting is the selling of securities at a market value below their cost basis to generate a loss that can be used to offset a gain. Review accounts held outside Callan Capital for opportunities to tax-loss harvest.
As we look toward 2025, these End-of-Year Financial Planning Tips for 2024 can help you make the most of year-end financial opportunities. For personalized advice, consult with a financial advisor to tailor strategies to your unique circumstances, ensuring your financial plan aligns with your goals and takes full advantage of tax benefits, savings opportunities, and investment options. Thoughtful year-end planning empowers you to enter the new year with confidence and a strong foundation for future financial success.
Disclaimer:
The information provided is for informational purposes only and should not be considered investment advice. The information contained herein reflects Callan Capital’s views as of the date of distribution. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. Callan Capital does not provide tax, estate planning or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any decision. Callan Capital is not responsible for the consequences of any decisions or actions taken as a result of the information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of Callan Capital. For detailed information about our services and fees, please read our Form ADV Part 2A, and our Form CRS, which can be found at https://www.advisorinfo.sec.gov, or you can call us and request a copy at (866) 912-4888.