Edward Jones: Consider these year-end financial moves
As we enter the holiday season, your life may well become busier. Still, you might want to take the time to consider some financial moves before we turn the calendar to 2025.
Here are a few suggestions:
Review your investment portfolio
As you look at your portfolio, ask these questions: Has its performance met my expectations this year? Does it still reflect my goals, risk tolerance and time horizon? Do I need to rebalance? You might find that working with a financial professional can help you answer these and other questions you may have about your investments.
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.
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Health Savings Account (HSA) contributions
Consider increasing contributions to your HSA for yourself and your family: 1) Eligible contributions provide an income tax deduction. 2) Earnings have the potential to grow tax free. 3) 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 toolkit, especially because unused balances carry over from year to year (unlike with an FSA).
Use your FSA dollars
Unlike an HSA, a flexible spending account (FSA) works on a “use-it-or-lose-it” basis, meaning you lose any unspent funds at the end of the year. So, if you still have funds left in your account, try to use them up in 2024. (Employers may grant a 2½ month extension, so check with your human resources area to see if this is the case where you work.)
Contribute to a 529 plan
If you haven’t opened a 529 education savings plan for your children, think about doing so this year. With a 529 plan, your earnings can grow tax deferred, and your withdrawals are federally tax free when used for qualified education expenses — tuition, fees, books and so on. And if you invest in your own state’s 529 plan, you might be able to deduct your contributions from your state income tax or receive a state tax credit.
Build your emergency fund.
It’s generally a good idea to keep up to six months’ worth of living expenses in an emergency fund, with the money held in a liquid, low-risk account. Without such a fund in place, you might be forced to dip into your retirement funds to pay for short-term needs, such as a major car or home repair.
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.
Take your RMDs.
If you’re 73 or older, you will likely need to take withdrawals — called required minimum distributions, or RMDs — from some of your retirement accounts, such as your traditional IRA. If you don’t take these withdrawals each year, you could be subject to penalties.
These aren’t the only moves you can make, but they may prove helpful not only for 2024 but in the years to come.
Year-End Checklist
Visit this link to view the 2024 Edward Jones year-end checklist. This handy guide will help you keep your financial strategy on track as the year winds down.
https://www.edwardjones.com/sites/default/files/acquiadam/2022-11/RES-14236-A.pdf
