Year-End Financial Planning: 6 Money Moves You Can’t Afford to Miss

Introduction: As the year draws to a close, it’s essential to take stock of your financial situation and make strategic moves to set yourself up for success in the coming year. Fidelity Viewpoints highlights six crucial money deadlines that, if missed, could prove costly. Let’s dive into these year-end financial considerations and explore how they can help you make the most of your money.

  1. Use Your FSA Funds Before They Expire:
    • If you have funds left in your Flexible Spending Account (FSA), make sure to spend them before the year-end.
    • There are different types of FSAs, and while some employers allow rollovers, it’s generally use-it-or-lose-it.
    • Consider your health care FSA, limited purpose FSA, and dependent care FSA, and check with your employer about any rollover options.
  2. Roth Conversions by December 29:
    • The end of the year is the deadline for completing a Roth conversion for the 2023 tax year.
    • Converting to a Roth may be advantageous when stock prices are down, as the tax bill is based on the amount converted.
    • Explore the option of in-kind conversions, allowing you to transfer assets without selling, though taxes will still apply.
  3. Maximize Contributions to Tax-Advantaged Accounts:
    • Ensure contributions to tax-advantaged accounts like IRAs and HSAs are made by the year-end.
    • Be aware of the contribution limits, which vary depending on the account type and your age.
    • Utilize year-end bonuses to boost your workplace retirement plan contributions.
  4. Strategic Charitable Contributions:
    • Itemize your taxes to deduct charitable donations from your taxable income.
    • Understand the rules for cash donations, appreciated securities, cryptocurrency, and restricted stock.
    • Consider bunching donations to optimize deductions, especially if you don’t itemize every year.
  5. Don’t Forget RMDs if You’re 73 or Older:
    • Required Minimum Distributions (RMDs) must be taken from qualified retirement plans once you turn 73.
    • The first RMD deadline is April 1 in the year after turning 73, with subsequent RMDs due by December 31.
    • Missing RMD deadlines incurs a 50% penalty on withdrawals not taken.
  6. Tax-Loss Harvesting Before December 31:
    • Offset investment gains and reduce taxes by harvesting investment losses.
    • Use losses to offset up to $3,000 of ordinary income annually on a joint tax return.
    • Unused losses can be carried forward to future tax years, providing long-term tax benefits.

Conclusion: As 2024 approaches, these six money moves can make a significant impact on your financial well-being. Whether it’s maximizing contributions, strategic charitable giving, or planning for required distributions, taking action before the year-end deadlines is key. If you’re unsure about the best approach for your situation, consider consulting with a tax advisor and financial professional. Remember, it’s never too late to start planning for a more secure financial future.