Your 2024 Year-End Planning Guide

As the year winds down, the hustle and bustle of the season can leave little room for financial reflection. But taking some time to review your finances now can help you close out the year on a strong note—and get your new year off to a great start.

 Here are some key items to consider before December 31 rolls around:

 Unstick Your Cash…and Put It to Work

 We all try to make the best decisions we can around money, but we’re not perfect. Despite our best efforts, we can miss things from time to time.

 Consider the “flypaper effect.” Jason Zweig, of The Wall Street Journal, uses the term to describe how money has a tendency to stick where it lands, even when we had other ideas for where it should end up. For many, this can happen when rolling over their employer-sponsored 401(k) retirement account into a personal IRA. According to research from Vanguard, nearly a third of savers who transferred their 401(k) balances into IRAs in 2015 still had those funds sitting in cash seven years later. This inertia can be costly. Vanguard estimates that cash-heavy IRAs cost Americans $172 billion annually in missed growth opportunities.

 As the end of the year approaches, take some time to review all your accounts to make sure all your savings have landed where you wanted them.

 It’s also okay—and in fact, often wise—to keep some money in cash, such as an emergency fund. But even these accounts are worth a review. If cash in your emergency fund is just sitting in a basic, zero-interest checking account, consider placing it in a money market, high-yield savings or similar FDIC-backed account. There, the money should remain safe and readily accessible, while still offering a bit of interest income—especially while interest rates are still relatively high.

 Stay Updated on Retirement Account Rules

 Typically, any required minimum distributions (RMDs) from your own or an inherited retirement account are due by year-end—so there’s no time to waste if you’ve not yet made any RMDs due. However, there are new rules for 2024 that could delay, or even eliminate the need to make an RMD. As always, we recommend consulting with a tax specialist before taking any tax-planning action.

 Roth 401(k) changes: Starting in 2024, RMDs are no longer mandatory for Roth 401(k) accounts. This was already true of Roth IRAs. If you don’t need income from your Roth 401(k) this year, leave it alone and let your savings continue to grow tax-free for as long as you like.

• New spousal IRA benefits: If a younger spouse with an IRA passes away, the surviving spouse can now delay RMDs until the deceased would have turned 73. This allows for more years of tax-deferred growth, which can make a big difference in retirement savings over time.
• RMD age increasing: For younger investors looking ahead, the age for RMDs will rise to 75 in 2033, again providing more time for tax-deferred growth as well as more flexibility in withdrawal strategies.

 Maximize Your Gifts to Charity with Higher QCD Limits

 December is a peak time for charitable giving. It’s the holidays, after all, and giving offers a meaningful way to support causes you care about while potentially reducing your 2024 tax bill.

 If you’re over 70½ with RMDs due, one way to participate in tax-wise year-end giving is to replace some or all of your RMDs with qualified charitable distributions (QCDs) from your IRA directly to charity. This year, you may give up to $105,000 in QCDs, according to the IRS. This in turn, can lower or eliminate your RMDs, which would otherwise have been taxed at ordinary income rates. Lowering your reportable income may also help you avoid being pushed into a higher income tax bracket or subject to other tax deduction phaseouts.

 Important Date Reminders

 Some best practices are perennial, including keeping an eye on important dates. Naturally, there are a number of deadlines associated with year-end. For those who are itemizing deductions, it’s the deadline for 2024 tax-deductible charitable contributions. It’s also the last day you can fund your 401(k). You can contribute up to $23,000 in a 401(k) this year, and next year that limit increases to $23,500. Catch-up contributions for 401(k)s for individuals aged 50 and older is $7,500 for 2024. It will remain that way in 2025, but there will also be a higher catch-up contribution limit of $11,250 for those aged 60 through 63.

 IRAs and health savings accounts allow you to make 2024 contributions up until April 15, 2025. You’ve got a little bit of time, but the sooner you invest, the quicker you can put your money to work and take advantage of the power of compounding returns.

 Rest and Recharge

 While financial planning is essential, don’t overlook the importance of self-care. Amid the year-end flurry, a good night’s sleep might be one of the best investments you can make in your overall well-being, especially during the holidays. In fact, research suggests that better sleep health can reduce loneliness, spark stronger social connections and foster positive emotional experiences.

 And if it’s not better sleep, please take some time for yourself, whether it’s curling up with a good book, having dinner with friends or taking a long walk with the dog. After all, one of the most important reasons we put so much effort into financial well-being is so we can build a more fulfilling life for ourselves and the ones we love.

 Wondering how else you can wind down 2024 and prepare for a fruitful 2025? Reach out and let’s talk.