Whether updating your beneficiaries, enrolling in a new healthcare plan, or simply sitting down with your financial advisor to see if you’re on track, the end of the year is a great time to make sure you’re up to date with your retirement plan.
In this blog, we will walk you through an end-of-the-year checklist to help you take control of your finances, help optimize your tax situation, and help set yourself up for a prosperous 2024. Here’s what you need to know.
Check Your Financial Health
Your financial health is the cornerstone of your financial well-being. Reviewing your finances to stay on track to meet your goals is essential. Start by examining your sources of income. This may include social security, rental income, dividends, and other income streams. Be sure to account for all sources and if there have been any changes during the year.
Taking the time to review your investment portfolio is also vital. Check if your stocks, bonds, mutual funds, real estate, and other assets perform well. Consider whether they align with your risk tolerance and financial goals if they aren’t. Rebalance your portfolio if necessary to maintain your desired asset allocation.
Once you’ve finished your financial assessment, establish clear goals for the upcoming year. These goals can include increasing your emergency fund, boosting retirement contributions, or saving for healthcare in retirement. Setting specific and achievable goals will help you stay focused and motivated. By thoroughly evaluating your financial health, you better understand your current financial standing and areas that require attention.
Take Advantage of Charitable Tax Benefits
The end of the year is an excellent time to make charitable contributions. Not only does this help those in need, but it can also help provide you with valuable tax benefits. To help maximize your tax deduction, you can make donations to qualified tax-exempt organizations.
Qualified Charitable Distributions are a tax-efficient way for individuals aged 70½ or older to donate funds from their Retirement Accounts (IRAs) directly to eligible charitable organizations. They can exclude from gross income up to $100,000 of these QCDs. For a married couple, if both spouses are age 70½ or over when the distributions are made and both have IRAs, each spouse can exclude up to $100,000 for a total of up to $200,000 per year.
It’s a good idea for investors considering QCDs to be aware of the IRS rules and requirements associated with this strategy. These rules can change over time, so consulting with a Fiduciary advisor can help you stay compliant and maximize the benefits of Qualified Charitable Distributions.
Complete Roth Conversions
Roth conversions involve transferring funds from a traditional IRA or 401(k) into a Roth IRA. While you’ll pay taxes on the converted amount, the benefit lies in tax-free withdrawals during retirement. Here’s why Roth conversions can be a smart financial move:
- Tax-Free Withdrawals: By converting funds into a Roth IRA, you prepay the taxes on that amount. When you withdraw funds from your Roth IRA during retirement, you won’t owe any taxes on those withdrawals. This can be incredibly advantageous, especially if you expect your future tax rate to be higher.
- Tax Diversification: Diversification isn’t just for your investment portfolio; it’s also essential in your retirement savings. By having a mix of pre-tax (traditional IRA or 401(k)) and after-tax (Roth IRA) retirement accounts, you gain flexibility in managing your tax liability during retirement. You can strategically withdraw funds from different accounts based on your yearly tax situation.
- Reducing Future Tax Liabilities: Converting some of your retirement savings to a Roth IRA can be a tax-efficient strategy. Over time, this could help reduce your overall tax liabilities in retirement.
Considering your current and expected financial circumstances, the decision to convert to a Roth IRA should align with your long-term financial goals and tax planning strategy. Working alongside a financial advisor can help you determine the best strategy for your situation.
Max Out Retirement Contributions for 2023
Financial freedom hinges on one key practice: diligent retirement savings. To help maximize your financial future, take advantage of the opportunity presented by retirement account contribution limits for the upcoming year.
- 401(k) Plans: The contribution limit for 401(k) plans is projected to increase to $23,000 in 2024, up from $22,500 in 2023. For those aged 50 and older, an additional catch-up contribution of $7,500 will remain the same. It’s important to note that these new amounts apply to 403(b) and most 457 plans.
- IRA Contribution Limits: Individual Retirement Accounts (IRAs) are another popular retirement savings option. The contribution limits are to remain relatively stable for IRAs. For 2024, individuals under 50 can contribute up to $7,000, up from $6,500 in 2023. Catch-up contributions for adults 50 and older will remain at $1,000.
- Roth IRA Contribution Limits: In 2024, more Americans will become eligible for Roth IRA contributions. The adjusted gross income (AGI) range for single filers will expand to between $146,000 and $161,000, up from $138,000 to $153,000 in 2023. For married couples filing jointly, the Roth IRA contribution phaseout range will rise to between $230,000 and $240,000 in 2024, an increase from $218,000 to $228,000.
It’s worth noting that contribution limits may change from year to year, so staying informed about the current limits and adjusting your retirement savings strategy accordingly is essential. Consult with a financial advisor to develop a tailored retirement plan that aligns with your goals and situation. Remember, the sooner you maximize your contributions, the better you’ll be able to enjoy a more secure retirement.
Work with a Financial Advisor
A financial advisor can be a valuable resource in helping you achieve your financial goals. Whether creating a comprehensive financial plan, optimizing your investments, or addressing specific concerns, the Fiduciaries at Johnson Wealth and Income Management can help you by providing guidance tailored to your unique situation.
Our mission is to help empower you with the knowledge and guidance needed to make informed financial choices, ultimately leading you toward a more secure and fulfilling retirement. We help simplify the processes, helping to allow your money to adapt to economic changes and your evolving personal situation.
Last Thoughts
Earning financial freedom is a journey that requires careful planning and consistent effort. By completing this end-of-the-year checklist, you’ll be taking important steps toward securing your financial future.
You can help make significant strides towards achieving your retirement goals with the right strategies in place. Remember, it’s never too late to start, and the end of the year is an excellent time to take action for a prosperous financial future.
Contact us today to schedule your complimentary retirement strategy session.
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