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age 73 or older must take an RMD from their retirement account in 2024 to avoid a 25% penalty on required amounts not withdrawn.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

*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.