As 2024 comes to a close, investors should consider these year-end planning tips:

Maximize Retirement Contributions

Maximizing retirement contributions can reduce your tax bill and boost your retirement savings.

• 401(k): In 2024, employees can contribute up to $22,500 to a 401(k), with an extra $7,500 allowed for those aged 50 and over. Most 401(k) plans default to pre-tax contributions, offering an immediate tax deduction. Some also allow Roth contributions, which require paying income tax upfront but provide tax-free growth in the future.
• Traditional IRA: If you don’t have a 401(k), you can make a tax-deductible contribution of up to $6,500 to a traditional IRA, with no income limits. Those aged 50 and over can contribute an additional $1,000.
• Roth IRA: Consider contributing to a Roth IRA for tax-free growth, provided you meet the income limits. Singles or heads of household with incomes up to $146,000, and married couples filing jointly with incomes up to $218,000, qualify to make Roth IRA contributions.

Be sure to consult your tax advisor to determine what’s best for your situation.

Rebalance Your Portfolio

As markets shift, your mix of investments may stray from your target allocation, making some areas overweight and others underweight.

Year-end is a good time to review how each part of your portfolio performed and identify any areas out of balance.

Many investors fall into the trap of selling underperforming assets and holding onto high-performing ones, but this approach can be the opposite of sound investment practice. Instead, rebalancing encourages selling high and buying low, helping you stick to your intended risk profile, manage volatility, and stay on track toward compounded growth.

Donate Appreciated Stock to a Donor-Advised Fund

If you plan to make charitable donations, consider donating appreciated stock to a donor-advised fund (DAF) to maximize tax benefits.

When you donate cash to a charity, you receive an income tax deduction for the gift amount. For example, if you earn $100,000 and give $10,000 in cash, you can deduct $10,000 from your income (assuming you itemize deductions).

By donating appreciated stock, however, you receive the same deduction and avoid paying capital gains tax on the stock’s appreciation.

For instance, say you bought 100 shares of XYZ Company 20 years ago at $15 each, totaling $1,500. Now, if the stock is worth $100 per share, the investment is valued at $10,000 with an $8,500 gain. Selling it would trigger a $1,275 capital gains tax (assuming a 15% rate). But if you donate the shares to a DAF, you avoid the capital gains tax and can deduct the full $10,000. Once in the DAF, you can sell the stock tax-free and direct the proceeds to your chosen charities.

In Summary

Taking advantage of these strategies can strengthen your financial plan as you move into the new year. Consult a financial advisor to ensure you’re on track and making the most of these opportunities.

Disclaimer: This article is for educational purposes only and should not be considered tax, legal, or financial advice. Please consult with a qualified tax professional or financial advisor to address your specific needs and circumstances before making any financial decisions.