5 End-of-Year Financial Planning Strategies

With the end of the year right around the corner, now is an excellent time to evaluate your financial strategy and plan for next year. Whether you’re looking to optimize your tax planning strategy, prepare for future expenses, or make the most of your retirement accounts, there is still time to take action.

Let’s explore a few strategies that I have been assisting clients with as part of their year-end planning.

1. Consider Tax Loss Selling or Gain Harvesting

Do you have investments that are in the red this year? You may be able to offset gains elsewhere in your portfolio by selling underperforming assets, allowing you to reduce your taxable income and minimize tax liability.

However, if you’re in a lower tax bracket this year, it could be an ideal time to harvest gains. By intentionally selling winning investments and paying taxes at a lower rate, you could increase your portfolio’s cost basis—and long-term savings.

2. Leverage Roth IRA Conversions

If you are looking to maximize your retirement savings, Roth IRA conversions can be a valuable strategy—especially in lower income earning years. Converting funds from a traditional IRA to a Roth IRA means you’ll pay taxes on the amount that same year. However, once the funds are in the Roth IRA, they will continue to grow tax-free and can be withdrawn in retirement without penalty.

Here are a few scenarios where Roth conversions may be advantageous:

• You anticipate being in a higher tax bracket in retirement.
• You have cash on hand to cover the taxes triggered by the conversion.
• You want to eliminate required minimum distributions (RMDs) on those funds down the road.

Remember that this is not a substitute for individualized tax advice, so be sure to consult with a wealth advisor or tax professional before making any significant financial decisions.

3. Fund 529 Accounts

If saving for education is one of your financial goals, contributing to a 529 college savings plan now may offer additional benefits. Many states offer tax deductions or credits for contributions to these types of accounts, making it a win for your wallet today and your loved ones’ futures tomorrow.

Keep in mind that 529 contributions must be made prior to December 31st in order to qualify for tax benefits this year. Grandparents and other family members can also contribute, providing an excellent gifting opportunity during the holidays.

4. Max Out Your 401(k) Contributions

If you’re fortunate enough to have extra cash on hand at the end of the year, maximizing your 401(k) contributions may be in your best interest, both now and in the future.

Contributing up to the limit will not only benefit your retirement savings, but can also help lower your taxable income. For 2024, the contribution limit is $23,000 (or $30,500 if you’re over 50). Please note that certain eligibility criteria and phase-out ranges apply, so check with your wealth advisor or tax professional to determine what makes sense for your financial situation.¹

5. Make Key Capital Purchases

If you own a business or are saving for a significant upcoming expense, making strategic capital purchases before the end of the year may offer certain tax benefits.

For instance, business equipment purchases may qualify for Section 179 deductions, which may help reduce taxable income. Personal expenses such as home improvement costs or new appliances may also allow you to qualify for certain energy-efficient tax credits.

Whatever the purchase may be, it’s important to ensure that it aligns with your overall financial goals and you are not spending just to secure additional deductions.

One Size Doesn’t Fit All

Not all of these strategies will apply to everyone. A thoughtful, personalized financial plan takes into account your unique circumstances and goals. Working with an advisor gives you access to a professional sounding board to help you navigate complex financial decisions and stay on track toward your objectives.

Whether you need assistance with retirement planning, tax strategy, or your overall financial wellness heading into the new year, I am happy to help. Feel free to reach out to schedule a consultation or end-of-year planning session today.

¹IRS.gov, November 1, 2024.