As 2023 ends, it’s time to reflect on your financial journey and make strategic plans for the future. Now is the time to review your investment portfolios, confirm that important deadlines are being met, identify any potential losses that could offset gains, assess the impact of recent tax law changes on your financial situation, and schedule a meeting with your financial advisor. This blog post provides a comprehensive checklist to guide you through the intricate process of end-of-year financial planning.
Tax Planning
With tax planning, the focus is not always on the immediate savings. As tax regulations evolve, it’s imperative to stay informed about potential opportunities and pitfalls ,and their impact on your long-term strategies. Are there opportunities to optimize your investments for tax efficiency? If so, consider tax-loss harvesting, rebalancing your portfolio, and exploring tax-advantaged accounts. It is also important to be aware of end-of-year tax deadlines, as many of these can help reduce your overall tax bill.
Important Deadlines
- Sell securities by December 29th, the final trading day of 2023, to actualize a capital gain or loss.
- Make charitable gifts – the annual gift tax exclusions amount for 2023 gifts to individuals is $17,000.
Retirement Planning
Prioritizing the funds inside your retirement accounts is crucial to establishing a stable and prosperous future. This time of year is the perfect time to maximize contributions to retirement accounts, such as 401(k)s and IRAs, to take advantage of tax-deferred growth. It’s also a good time to meet with your financial advisor to create a strategy aligned with your retirement goals and risk tolerance in order to secure a financially independent retirement.
Important Deadlines
- Consider whether qualified charitable distributions (QCDs) are appropriate for you if you are 70 1/2 years of age or older. Applicable RA owners and beneficiaries have the opportunity to transfer up to $100,000 to charitable organizations directly from their IRAs, free from taxation.
- If you are 73 years or older in 2023, take your Required Minimum Distributions (RMDs) from applicable retirement accounts by December 31st. Missing this deadline can result in as much as a 25% penalty to the RMD amount not taken.
- Individuals who hold traditional IRAs may want to assess the feasibility of converting them into Roth IRAs before the sunset of the lower individual tax rates in 2026.
Estate Planning
With the lifetime estate and gift exemption set to be cut approximately in half after 2025, having an estate plan in place is more important than ever. You must regularly review your wills and/or revocable living trusts to confirm that you have designated the appropriate executors, trustees, and guardians. Being proactive and conducting a regular annual review of these designations helps to adapt to life changes, ensuring a secure future for you and your loved ones.
Wealth Planning
A successful wealth management strategy involves clearly defined goals that take into account your current situation and long-term objectives. Establishing spending budgets and emergency funds are key elements for achieving financial success in the upcoming year. A critical first step is to review your 2023 spending habits, assessing both income and expenses. By gaining a clear understanding of your financial habits, you can identify areas of improvement, make informed decisions for the future, and prepare a safety net for all of life’s changes.
End-of-year financial planning is a meticulous process that demands attention to detail and a proactive mindset. However, this process can help position you for financial success and the realization of your long-term goals. If your current advisor has not been in contact with you to have this strategic year-end conversation, or if you do not currently have an advisor, you may contact us by calling 781-431-2248 or emailing jonathan@pentawm.com.
Disclaimer: The information provided in this blog is intended for general informational purposes only. It is believed to be reliable; however, we cannot guarantee its accuracy or completeness. It is essential to understand that laws, regulations, and circumstances may change, and the content provided in this blog may not always reflect the most up-to-date information. Readers are strongly encouraged to consult with qualified professionals, including attorneys and financial advisors, to ensure that any actions or decisions made align with their individual needs, objectives, and overall estate plan. Investment and Advisory services provided by Penta Wealth Management LLC and Empirical Asset Management LLC (“EAM”), a registered investment advisor. Advisory services are only offered to clients or prospective clients where EAM and its representatives are properly licensed or exempt from licensure.
