Year-end financial planning checklist: Key moves

Many people focus on holiday celebrations and gift-giving as the year draws closer. However, it’s also an important time to make some financial moves that can benefit you in the coming year. One key step is to review your tax situation. Use the IRS’s Withholding Estimator to ensure you have set aside enough money to pay your tax bill in April. If you’re falling short, notify your payroll department to increase your withholding through the end of the year. Self-employed individuals or those not working should consider making an estimated tax payment to avoid potential penalties. Another smart move is to boost your contributions to a pre-tax retirement account before December 31. This can reduce your tax bill and increase your savings. For those with an adjusted gross income of $38,250 or less ($76,500 if married), a retirement contribution might qualify for the Saver’s Credit, worth up to $2,000 for individuals and $4,000 for couples. Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) also deserve attention. Contributing to an HSA can provide significant tax advantages, with the 2024 limit being $4,150 per individual and $8,300 per family. Check your FSA balances and use any remaining funds before the year-end deadline to avoid losing the money.

Year-end financial steps to consider

Those with pre-tax retirement accounts like 401(k)s or Traditional IRAs who are 73 or older must take required minimum distributions (RMDs)—failing to do so results in a hefty penalty. If you have multiple IRAs, one RMD can be calculated and taken from any one of the accounts. Individuals aged 70½ or older can directly transfer up to $105,000 ($210,000 if married) from their IRA to eligible charities through a Qualified Charitable Distribution (QCD). This amount is not included in taxable income and can also satisfy RMDs. With significant market movements, your investment allocations might be out of balance. Rebalancing involves adjusting your portfolio to match your desired asset allocation. This does not trigger taxable events within retirement accounts, but it might be in taxable accounts. Consider selling losing positions to offset gains from winners in taxable investment accounts. If your losses exceed your gains, you can deduct up to $3,000 of losses against ordinary income, with the excess carried forward to future years. These steps now can help position your finances for a strong start in 2025. These end-of-year strategies are key to financial health, from managing taxes efficiently to maximizing retirement savings and health accounts.