End-of-Year Financial Planning: Make these 4 Moves Now
As the year draws to a close, it's the perfect time to take control of your financial planning. We understand that managing financial tasks might seem overwhelming, but the empowerment gained from proactive decision-making is invaluable. This guide will help you pinpoint four smart and actionable strategies to enhance your financial well-being before December 31st.
1. Maximize Retirement Contributions
Utilizing the retirement contribution limits for 2025 can be a strategic move to decrease taxable income and enhance your future wealth. For 401(k) accounts, the contribution limit is $23,500, with an additional $7,500 catch-up allowance for those over 50. Traditional and Roth IRA contributions max out at $7,000, plus an extra $1,000 for those over 50. By maximizing these opportunities, you can bolster your retirement savings while benefiting from immediate tax advantages.
2. Explore Roth IRA Conversions
Roth IRA conversions allow you to transfer funds from a traditional IRA into a Roth IRA, potentially benefiting from tax-free withdrawals in retirement. If you find yourself in a lower tax bracket this year, it could be an opportune moment for conversion. However, remember that this strategy may not suit everyone, and it is crucial to evaluate it annually based on your personal financial situation.
3. Fund Your Health Savings Account (HSA)
Consider taking full advantage of your HSA by reaching the 2025 limits: $4,300 for individuals and $8,550 for families. HSAs offer triple tax benefits: contributions reduce taxable income, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. These accounts serve as powerful tools for both short-term medical needs and long-term savings goals.
4. Strategize Your Charitable Giving
Strategizing your charitable donations can bring both personal satisfaction and financial benefits. Techniques like donation bunching or using a donor-advised fund can maximize tax efficiency. For those over age 70½, a Qualified Charitable Distribution (QCD) from an IRA is worth considering—it not only supports your chosen causes but can satisfy required minimum distribution (RMD) obligations once you turn 73.
Investing time now in these strategies can significantly impact your financial outcomes for the year ahead. Keep in mind that not all strategies will work for everyone; consulting a financial professional or CPA is recommended to tailor these moves to your situation. Evaluate your options and perhaps schedule a financial check-in to ensure you're on track before the new year.