As the year winds down, it’s easy to get swept up in holiday festivities, but there’s one more list to check before the ball drops — your financial plan. Here are some key points to consider as you prepare for the New Year.
1. Tax Efficiency: Like Cleaning Out the Fridge Before the Feast
Before the holiday dinner, you toss the expired condiments and mystery containers. Similarly, your portfolio could use a cleanup before year-end. Consider “harvesting” your losses to offset capital gains — a strategy called tax-loss harvesting. By selling underperforming investments, you can offset gains on those that performed well. It’s not as tasty as cranberry sauce but just as satisfying.
2. Charitable Giving: The ‘Good Deeds’ for Tax Savings
The holiday season is for giving, and charitable donations can reduce your taxable income if you itemize deductions. Donating appreciated stocks instead of cash provides the same deduction, but you avoid capital gains taxes. Think of it as “re-gifting” — in a way that makes everyone happy, even the IRS.
3. Retirement Contributions: Adding Logs to the Fire
Your retirement accounts are like a cozy winter fire. The more you add now, the warmer you’ll be later. For 2024, you can contribute up to $23,000 (under 50) or $30,500 (50+) to your 401(k). For IRAs, the limits are $6,500 (under 50) and $7,500 (50+). More contributions could mean a warmer retirement — and less taxable income now.
4. Rebalancing Your Portfolio: Decking the Halls Without Overdoing It
If you only decorate one side of your tree, it looks unbalanced. The same goes for your portfolio. Rebalancing ensures your investments align with your risk tolerance and goals. So, if your “stock ornament” section is weighing down the branches, it may be time to shift a few assets back to bonds.
5. Estate Planning: Making a List and Checking It More Than Twice
Estate planning may not feel festive but think of it as a gift to your loved ones. Update your will, trust, and beneficiary designations to reflect your current wishes. This is a gift that keeps on giving — with much less wrapping involved.
A little planning now can lead to a smoother financial future. Enjoy the festivities knowing you’re ready for a bright New Year. Happy Holidays and Happy Investing!
