We’re nearing the end of 2024. So it’s an especially good time to assess what financial moves you should make before the clock runs out.
Luckily, financial planners spend the final weeks of the year thinking about just such things.
Back in 2023, we asked several experts for their thoughts, and we made a list of six key financial steps to take by Dec. 31. Readers responded, so we reached out to the same experts again this year, along with one or two new ones, to see if their advice had changed. The answer: Not really.
Here are their suggestions, which include bolstering retirement savings, tweaking insurance coverage and seeking savvy tax shelters.
Update beneficiaries on 401(k), life insurance policy
A typical investment account or life insurance policy requires you to name beneficiaries, the loved ones who will get the money upon your demise. For many of us, beneficiary designations function as an estate plan: they’re legally binding and dictate what happens to a large portion of your assets.
Some people don’t get around to naming beneficiaries. Births, deaths and family feuds can change the estate-planning landscape. The end of the year is a good time to take stock.
“I suggest making sure your beneficiaries are up to date on your investment accounts,” said Colin Day, a certified financial planner in St. Louis.
“It might not be the first thing people think of, but you will be surrounded by loved ones during the holiday season,” Day said. “It’s a great reminder that you love and support these people, and you want to make sure your hard-earned dollars will get to them if something were to happen.”
Review estate plan and insurance coverage
More broadly, the year’s end is a good time to review your estate plan, powers of attorney and insurance coverage, said Paul Mendelsohn, a certified public accountant in Livingston, New Jersey.
“Do you have life insurance, long-term disability insurance and long-term care insurance?” Mendelsohn said. If not, should you consider getting them? Long-term care insurance, perhaps the least-known of these three, helps cover the costs of assisted living and nursing homes.
Keep in mind, Mendelsohn said, that if one spouse has an insurance policy through work, “it does not cover the other spouse.”
If you haven’t done so recently, “schedule a meeting with an estate planning attorney to create or update your will, health care directives and other legal documents,” said Niv Persaud, a certified financial planner in Atlanta.
Make charitable donations and gifts
Charitable giving is a big part of the holidays. And the IRS allows you to deduct cash donations to qualified charities, potentially up to 60% of your income.
Donations are tax-deductible only if they go to recognized charities. You’ll need documentation for larger donations, NerdWallet says.
Charitable giving works as a tax shelter only if you itemize your deductions, rather than claim the standard deduction, at tax time. (Most of us don’t itemize.)
“Charitable gifts should be made before the end of the year if one wants the deduction” for 2024, said Seth Benjamin Mullikin, a certified financial planner in Charlotte, North Carolina.
The holiday season is also a great time to make financial gifts to loved ones, Mullikin said. Individuals can gift up to $18,000 per recipient in 2024 without filing a gift tax return.
The gift tax is a federal levy on transfers of money or property to someone who doesn’t give you something of equal value in return, according to NerdWallet.
If you give more than the annual gift tax limit, you must report it to the IRS.
Maximize pretax retirement savings
December is a good time to “make sure you’ve maxed out your retirement planning contributions,” said Catherine Valega, a certified financial planner in Winchester, Massachusetts.
Tax-advantaged retirement accounts allow investors to save a portion of their income before taxes are taken out.
But there’s a limit. For individual retirement accounts, or IRAs, the annual contribution limit is $7,000, or $8,000 for anyone 50 or older.
For employer-sponsored 401(k) plans, the maximum employee contribution is higher: $23,000, or $30,500 for people 50 and over.
“It’s particularly important to take steps now to max out the 401(k),” said Robert Brokamp, a certified financial planner and senior adviser at The Motley Fool. “Because, in most cases, you can’t just send in a check.” Contributions generally go through your employer’s payroll system, and you’ll have to make any adjustments before the last checks of the year go out.
Contribution limits go up in 2025. So, now is also a good time to update your payroll deductions and IRA contributions to reflect the new caps, said Rob Schultz, a certified financial planner in Encino, California.
Even higher “catch-up” limits will be available for people 60 to 63 in 2025.
“I’m guessing most people have no idea about that new capability,” Valega said.
Over 73? Take required minimum distribution on retirement account
A required minimum distribution, or RMD, is an amount you must withdraw from an IRA or 401(k) once you turn 73.
“If you haven’t already, you need to complete your required minimum distributions from your IRA by December 31,” said Devin Pope, a certified financial planner in Salt Lake City.
In exchange for the tax perks, the IRS requires that savers begin withdrawing from retirement plans when they reach a certain age. The RMD is a way for taxing authorities to take their cut from your retirement account.
A financial adviser can tell you how much you need to withdraw by year’s end, or you can consult an RMD table. If you fail to withdraw the funds, you will face a 25% excise tax on the total you didn’t cash out.
More:Half of Americans leave FSA health care money on the table. Here are 10 ways to spend it.
Harvest tax losses
The end of another year is an ideal time for an investment strategy called tax-loss harvesting.
The technique, a tax-time staple for the wealthy, turns an investment loser into a tax winner.
You sell an investment that is down, replace it with something similar and leverage the losses to offset gains you have made by selling other investments.
“Harvest tax losses, if you have them,” Mullikin said.
And that completes the list. See how many items you can check off between now and New Year’s Eve.
