Year-End Financial Planning Considerations

Top 10 Year-End Financial Planning Considerations for 2024

As 2024 draws to a close, now is the perfect time to take stock of your finances. A year-end review helps you assess your financial health, address gaps, and prepare for a secure future. Here are our Top 10 Financial Planning Tips for 2024 to help ensure you are on track as the year ends:

1. Confirm Required Minimum Distributions (RMDs)

The SECURE 2.0 Act introduced significant changes, including increasing the RMD age to 73--if you reached age 72 after Dec. 31, 2022. Avoid penalties by ensuring RMDs from all relevant retirement accounts—traditional IRAs, 401(k)s, and inherited accounts—are complete. Remember, the penalty for missing an RMD is up to 25%, so be sure these are complete!

2. Maximize Year-End Contributions

Retirement Accounts: The 2024 contribution limits are $23,000 for 401(k)/403(b) plans, with an additional $7,500 catch-up for those aged 50+.
529 Plans: Contribute to qualify for state tax deductions where applicable (e.g., NJ & NY, subject to income limits).
Gifts: The annual gift exclusion is $18,000 per recipient in 2024. Make these gifts by December 31st to take full advantage. This is a great way to transfer funds into your children’s 529, UTMA or another account type without generating any tax liability!

3. Consider Backdoor Roth & Mega Backdoor Roth IRA Strategies

Backdoor Roth: If your income is too high to make a Roth contribution in 2024 (e.g., $240,000 for married filing joint and $161,000 for single filers) you may want to consider this planning technique. Open a traditional IRA & contribute up to $7,000 ($8,000 if age 50 or older) and then complete a rollover of your contribution to a Roth IRA. NOTE – this works best if you DO NOT currently have any assets in an IRA account.
Mega Backdoor Roth: This strategy can direct more than $40,000 into a Roth IRA/401(k) in one year and can be extremely useful for high income earners who want to make larger contributions into a tax-free account. Put very simply, this strategy entails 2 steps: (1) making after-tax contributions to your 401(k) or other employer-sponsored retirement plans, and (2) then doing a conversion to either a Roth IRA or Roth 401(k). NOTE – not all plans allow these steps and this should be reviewed with your advisor.

4. Tax-Loss Harvesting

Offset realized capital gains by selling investments with unrealized losses. Be mindful of state-specific rules (e.g., New Jersey doesn’t allow you to carry forward unused losses). Watch out for the wash-sale rule, which prohibits repurchasing the same or a substantially identical security within 30 days of the sale.

5. Year-End Roth Conversions

If 2024 is a low-income year, consider converting pre-tax retirement savings into Roth accounts to lock in lower tax rates. Keep an eye on how this affects Medicare IRMAA thresholds and premium tax credits for health insurance.

6. Charitable Planning

Appreciated Assets: Donate appreciated stocks instead of cash to avoid capital gains taxes while claiming a deduction equal to the fair market value of the stock or fund being donated. Note – you will need to donate an investment that you have held for at least 1 year.
Donor-Advised Funds (DAFs): Consider front-loading multiple years’ charitable contributions in a DAF during high-income years for immediate tax benefits.
Qualified Charitable Distributions (QCDs): Those who are currently subject to Required Minimum Distributions (RMDs) from their retirement accounts can directly transfer up to $100,000 from an IRA to charity, satisfying RMD requirements and avoiding taxable income.

7. Leverage Tax Credits

Electric Vehicles: New and used EVs still qualify for federal tax credits (up to $7,500 and $4,000, respectively). Use FuelEconomy.gov to confirm eligibility. (This credit may be going away under the Trump administration.)
Home Energy Improvements: Claim credits for installing energy-efficient upgrades, such as solar panels, heat pumps, or energy-efficient windows and doors. Updated credits may provide more savings in 2024.

8. Estate Planning Review

Ensure your estate plan is current and reflects your wishes.

Update wills, trusts, and powers of attorney.
Verify beneficiary designations on retirement and insurance accounts.
Consider leveraging the current $13.61 million estate tax exemption before it potentially drops in 2026.
Check out our recent blog with other important planning considerations – “Don’t Leave Your Family with a Mess!”

9. Review and Adjust Your Financial Plan

Revisit your plan to align it with your 2024 spending, savings, and goals. Key updates may include:

Adjusting for new income, expenses, or life changes.
Incorporating a strategy for student loan repayment as federal loan forbearance has ended.
Ensuring you’re saving adequately for long-term goals like retirement or a home purchase.
Ensure your investment assets are positioned appropriately – rebalancing may be a good idea given recent equity returns.

10. Other Important Considerations

Spend Flexible Spending Account (FSA) Funds: Use them by the deadline or risk losing the balance.
Plan for Family Employment: Employing children in a family business offers tax benefits.
Prepare for Tax Act Changes: Keep an eye on expiring provisions of the 2017 Tax Act in 2026.

Conclusion

A comprehensive year-end financial review is vital for ensuring stability and achieving long-term goals. By addressing these ten areas, you will help set yourself up for success in 2025 and beyond. Financial planning is an ongoing process, so regular reviews are key to adapting to changes and seizing opportunities.

Take charge now—and make 2024 your most financially savvy year yet!

NCM Capital Management

Disclosures: This is not an offer or solicitation for the purchase or sale of any security or asset. While the information presented herein is believed to be reliable, no representation or warranty is made concerning its accuracy. The views expressed are those of NCM Capital Management, LLC and are subject to change at any time based on market and other conditions and NCM does not undertake to update or supplement its newsletter or any of the information contained therein. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable. There is no guarantee that the investment strategies discussed above will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Investment advisory services are offered through NCM Capital Management, LLC, an SEC-registered wealth advisory firm domiciled in New Jersey. This communication is not to be construed or interpreted as a solicitation or offer to sell investment advisory services. For additional information about NCM Capital Management, LLC, you may request a copy of our disclosure statement as set forth on Form ADV. Readers are encouraged to consult with their own professional advisers, including investment advisers and tax/legal advisors. NCM Capital Management, LLC does not provide legal or tax advice. NCM Capital Management, LLC can assist in determining a suitable investing approach for individuals, which may or may not resemble the strategies outlined herein.