2024 Year-End Financial Checklist

As with most things in life, when it comes to financial planning, it’s essential to focus on what we can control.  We cannot directly control inflation, interest rates, stock market performance, or tax policies. Focusing our time, energy, and resources on these uncontrollable factors will leave us frustrated. The following 2024 year-end checklist is a consolidation of the action items you can control, and therefore, what you should focus on.

Maximize Tax Deductions and Contributions

• Retirement: Max out 2024 retirement contributions, reducing your annual taxable income and locking in tax-deferred growth.  If you’re under 50 years old, the 2024 401(k) contribution limit is $23,000.  If you’re over the age of 50, you can contribute an additional $7,500.

• Charitable Giving: Finalize all your charitable contributions for the 2024 tax year sooner rather than later to avoid complications regarding the tax year the deduction will count for. You can only deduct charitable contributions if you itemize your tax deductions.

• Health Savings Accounts (HSA): Contributions to your HSA are excluded from your taxable income. You can contribute up to $4,150 for individual coverage or $8,300 for family coverage. If you're enrolled in a qualified High Deductible Health Plan (HDHP) and don’t have an HSA, consider opening one in 2025 if you're eligible. Contributions are tax-deductible, earnings grow tax-free, and withdrawals made for eligible medical expenses are also tax-free.

Estate Planning Considerations

• Gifts: Complete your 2024 annual gifts, up to $18,000 per recipient.

• Update Documents:  Any marriages, divorces, births, deaths in 2024 may warrant an update to beneficiaries or executors. Update your key estate planning documents (Wills, Trust, Powers of Attorney, healthcare documents) to ensure they reflect both updates in legislation and your current wishes.

Investment Portfolio Strategies

• Tax-loss Harvesting: This strategy involves selling investments in your portfolio with a loss and either rebuying similar positions or using the proceeds to fund withdrawals for the year. There are many variables to consider, so it’s worth consulting with investment and tax professionals to finalize an optimal strategy.

• Rebalancing: Most asset allocations drift from their targets throughout the year, but recent years have seen many portfolios overweight in US equities. It’s important to tax-efficiently adjust your investments to ensure they’re still aligned with your risk tolerance and goals.

• Take Your Required Minimum Distributions: If you’re 73 or older, you are subject to Required Minimum Distribution (RMD) rules enforced by the IRS.  Ensure the mandated minimum amount has been withdrawn from all qualified retirement plan accounts by December 31. 

Cash Flow Planning

• 2025 Forecast: Evaluate your cash flow (income, taxes, expenses, savings) for 2025 to ensure you’re on the right track to achieve your personal and financial goals. Review your 2024 spending and see if there are areas of concern or confusion.

• Use Your Healthcare Flexible Spending Account (FSA) Funds: The IRS rule essentially states, “use it or lose it.”  Any funds not spent by 12/31/2024 will be forfeited. It’s a perfect time to schedule the dentist appointment you’ve been avoiding!

• Planning for Large Expenses: We can’t avoid unforeseen expenses like a surprise root canal, broken AC, or car repair.  That is what cash reserves (emergency funds) are for.  Consider the next 1-3 years, focusing specifically on 2025.  Are there any significant expenses or financial commitments you have planned? Incorporate these figures into your planning.