Stableford Capital Insights

Year-End Financial Planning: What You Should Be Doing Now

Do you want to feel in control of your money as you head into the new year? Then it’s time to begin your year-end financial planning. Doing this before the year comes to a close and you are surrounded by the holidays allows you enough time to take inventory of your current financial situation, and to take the necessary steps to save on your 2023 personal tax return and set your investments up for success in 2024.December 31 can come quickly, and there are several critical financial deadlines to meet before then. Whether you’re currently working and saving for the future, approaching retirement, or embarking on a post-retirement venture, there are several things you can do to help prepare yourself and your finances.

Big Picture Financial Planning to Reduce Taxable Income

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The first step of preparing for next year’s finances: understand your current financial situation. This is the easiest part of the process since it doesn’t involve any changes. You are simply getting a clear picture of where your money is going. Once you have this established, there are several steps and changes you can make to reduce your taxable income before the end of the year.If you regularly contribute to your 401(k) or workplace retirement plan, be sure to maximize your contributions by December 31. This will boost your tax savings while reducing your earned income by up to $22,500, the maximum you can contribute to a 401(k) for 2023 – a $2000 increase from 2022 contribution limits. If you are 50 or older, you can contribute an additional $7,500 for a maximum contribution of $30,000.A health savings account (HSA) with a high-deductible health plan can also be a savings vehicle. You can contribute up to $3,850 for an individual and $7,750 for a family, plus an additional $1,000 if you are 55 or older. For tax year 2023, you can make contributions up until April 15, 2024.HSAs can be excellent financial planning tools, as contributions are tax-deductible, which reduces your current taxable income, and withdrawals are tax-free if they’re used to pay for qualifying medical expenses. Plus, even if you change employers or health insurance, any unused money rolls over.

Get a Jump Start on Tax Preparation

Reviewing your taxes and potential deductions is a big part of year-end tax planning. Consider tax-loss harvesting, which can reduce taxes on investment gains through the sale of stocks, bonds, and funds that have lost value.

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If you didn’t have any capital gains in 2023, you could use realized capital losses to offset up to $3,000 a year in ordinary income, taxed at the same rate as short-term capital gains and nonqualified dividends.If you are retired, review your required minimum distributions (RMD) to avoid potential penalties and higher tax brackets. Once you reach age 73, you’re required to withdraw a certain amount from your retirement accounts each year. Tip: you don’t need to wait until December to take your distribution; your RMDs can be taken out on a customized schedule.Don’t forget to keep track of charitable giving, too. Donations from a taxable account can reduce your tax bill if you itemize. Doing so not only entitles you to a tax deduction, but also allows you to help eliminate the capital gains tax. Note that you’ll need an itemized receipt for non-cash charitable contributions over $250. You can also donate your RMD – it will be a tax-free distribution instead of having to pay ordinary income tax.Bonus tip: If you charge your donation to a credit card before December 31, it will count for the current year even though you might not pay the credit card bill until early in the following year.

Is it Time for a Financial Plan Revamp?

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The end of the year is also an ideal time to review and update your estate plan. According to a recent survey, Only 33% of American adults currently have estate planning documents, including a will or living trust. Naming a health care proxy, establishing a living will and appointing a financial and medical power of attorney allows these designated individuals to fulfill your wishes.Whether you are currently working and planning for the future or quickly approaching retirement, financial planning is an essential part of a year-end task. Q4 is a great time to review your current asset allocations, investment opportunities and taxes to set you up for a prosperous new year.This is where an experienced financial advisor can help guide you to meet your specific goals. Using an integrated advisory approach, Stableford looks at your entire financial picture, including your taxes, investments and retirement savings. Contact Stableford today by calling 480.493.2300 or contact us online.This article was updated in December 2023 for relevancy.

Nikki Sutcliffe
Nikki Sutcliffe is Stableford Capital’s Director of Advisory Services. Prior to joining Stableford, Nikki worked at Charles Schwab for five years where she was an investment advisor and most recently as a financial planner. She started her career as a portfolio manager at Girard Partners and worked there for seven years while helping to grow the firm. Nikki graduated from Penn State University with a B.S. in Finance and earned her CERTIFIED FINANCIAL PLANNER™ designation in 2013.