Author: Brian Kurrus, CFP®
The end of the year is a great time to review your financial plan and complete changes as you head into the new year. Here are some important year-end items to review.
1. Maximize your 2023 retirement plan contributions to TSP by December 31st. You can max out your TSP with contributions of $22,500 and a $7,500 catch-up for those turning 50 or older this year. You could also adjust your 2024 contributions; Federal employees can contribute up to $23,000 in 2024 with a $7,500 catch-up for those eligible.
Interested in funding an IRA or Roth IRA? You have until the April 2024 tax filing deadline to make eligible contributions.
However, if you have any required RMDs (Required Minimum Distributions) these funds must be withdrawn by December 31st in most circumstances.
2. Rebalance your investment accounts. Review your time horizon, risk tolerance and current allocation. While you want to review and rebalance as needed throughout the year, it’s a great time to consider if your target allocation has changed.
Specifically look at what percentage of your holdings are in stock funds
(C, S & I) versus fixed income funds (G & F) in your TSP. If your allocation has changed from your target allocation, rebalancing is likely in order. If you are invested in Lifecycle funds, they have done the rebalancing for you, but consider what the investment allocation is and if it still makes sense for you.
3. For non-retirement investment accounts, consider tax-loss harvesting. This involves selling positions with capital gain losses to offset capital gains now or in the future. You may choose to invest in different funds or wait for 30 days so wash sale rules no longer apply.
4. Review your cash flow, budget, and emergency savings account. Did you spend more or less than you expected? Do you have 3-6 months of living expenses set aside as an emergency fund? Use bank and credit card statements for a basic overview and then analyze how your spending came in compared to expectations.
5. Planning for college? The end of the year is a great time to contribute and take advantage of any state tax deductions as well as consider rebalancing needs. The 529 plans allow for two strategy changes per year to rebalance investments, making year-end an ideal time to update investment allocations.
6. Have you had any major life events throughout the year? Review beneficiary designations, estate planning documents, insurance needs and income tax withholding to determine if any updates are needed. Spend eligible dollars from FSAs (Flexible Spending Accounts) or you run the risk of losing them. You could also think about paying your January mortgage payment in December to deduct the interest on your 2023 return.
7. Review your charitable contributions. This could include gifting up to $17,000 to a family member or friend without counting against your lifetime exemption amount, gifting appreciated assets with large capital gains or making a Qualified Charitable Distribution of up to $100,000 for those age
70 ½ or more.
8. Consider if Roth conversions make sense. In years with lower income, converting some IRA assets to Roth IRAs may make sense. This is ideally done in years with a lower tax bracket where one may be in a higher bracket when taking distributions in the future. The early years of retirement before RMDs kick in is an ideal timeframe to consider.
In addition to spending time with friends and family, the end of the year is a great time to reflect on what’s happened and exciting things to come in the new year. Carve out some time to review these areas and make sure you stay on the right track with your financial planning!
Brian Kurrus, CFP® specializes in working with families and small business owners; his mission is to provide his clients with a diverse range of wealth management ideas and solutions. His specific areas of focus are estate conservation, business succession strategies, retirement funding, long-term care issues, life insurance, and disability income insurance. Brian is a presenter for NITP.
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