As the year comes to a close, it’s the perfect time to assess your financial situation and make strategic decisions to position yourself for success in the coming year. Here’s a checklist of investment and planning moves to consider before December 31.

1. Maximize Retirement Contributions

If you have access to a 401(k), IRA, or other retirement savings account, double-check that you’re contributing as much as possible within the annual limits.

For 2024, the contribution limit for 401(k) plans is $23,000 for those under 50, with an additional $7,500 catch-up contribution for those 50 or older. Traditional and Roth IRA contribution limits are $7,000, with an extra $1,000 catch-up allowed for those 50-plus.

Why it matters: Maximizing contributions helps secure your financial future and can lower your taxable income, depending on the type of account.

2. Evaluate Tax-Loss Harvesting Opportunities

Review your taxable investment accounts to see if any investments have lost value. Selling these assets can offset gains elsewhere in your portfolio, potentially reducing your overall tax bill.

Keep in mind regulations such as the “wash-sale rule,” which prevents you from repurchasing a substantially similar asset within 30 days.

Why it matters: Tax-loss harvesting can be a smart way to minimize capital gains taxes and rebalance your portfolio at the same time.

Want more year-end tax strategies? See our article “6 Year-End Tax Planning Ideas.”

3. Review Required Minimum Distributions (RMDs)

If you’re required to take minimum distributions from retirement accounts like your 401(k) or traditional IRA, you’ll want to do so by the end of the year.

If you turned 73 this year, you may have until April 1 of next year to take your first RMD—but subsequent RMDs must be taken by December 31 each year.

Missing this deadline can result in a steep penalty of 50% of the RMD amount.

Why it matters: Meeting RMD deadlines avoids costly penalties and helps keep your retirement strategy intact.

4. Review Your Charitable Giving Strategy

If you plan to donate to charities, doing so before year-end could provide significant tax benefits. Consider whether a donor-advised fund, qualified charitable distribution (QCD) from an IRA (if you’re over 70½), or appreciated assets might offer more value than cash donations.

Why it matters: Charitable giving can reduce taxable income and amplify your impact, allowing you to support causes you care about while optimizing your tax situation.

5. Adjust Your Withholdings and Estimated Taxes

Double-check that your tax withholdings or estimated payments are on track if you’ve had major financial changes this year—such as a raise, bonus, or investment windfall. Use IRS Form 1040-ES to calculate any potential shortfalls.

Why it matters: Proper tax planning can prevent surprises during tax season and ensure you’re not under- or overpaying.

6. Revisit Your Estate Plan

The end of the year is a great time to review your estate planning documents, including wills, trusts, and beneficiary designations. Confirm that they reflect your wishes, especially if you’ve had a major life change, such as a marriage, divorce, or the birth of a child or grandchild.

Why it matters: Updating your estate plan helps ensure that your assets are distributed as intended and that your loved ones are taken care of without unnecessary legal complications.

7. Check Your Emergency Fund and Cash Reserves

A solid financial plan includes having cash on hand to cover unexpected expenses. If you’ve tapped into your emergency fund this year, consider rebuilding it. We generally recommend setting aside three to six months’ worth of living expenses.

Why it matters: A healthy emergency fund provides peace of mind and financial stability, particularly during uncertain times.

8. Reassess Insurance Coverage

Life changes—such as buying a home, retiring, or the kids growing up and leaving the home—often call for updates to your insurance coverage. Review policies for health, life, disability, homeowners, and auto insurance to ensure they still meet your needs.

Why it matters: Proper insurance coverage helps safeguard against unexpected financial setbacks and protects the people and things that matter most to you.

9. Rebalance Your Investment Portfolio

Year-end is a prime time to ensure your investment portfolio aligns with your goals and risk tolerance. Over the year, market performance can throw your portfolio off balance. For example, if stocks performed well, your portfolio may be too heavily weighted in equities.

Why it matters: Rebalancing helps maintain your desired level of risk so that your investments remain aligned with your long-term financial objectives.

10. Plan for 2025

While it’s tempting to focus only on wrapping up the current year, take time to set financial goals for the next. Whether paying down debt, saving for a big purchase, or investing more aggressively, a clear plan will help you start the new year strong.

Why it matters: Proactive planning helps lay the foundation for achieving your financial goals and staying ahead of potential challenges.

A Final Tip: Seek Professional Guidance

Financial planning is complex, and year-end decisions can have far-reaching implications. Working with a fee-only, fiduciary financial advisor can help you navigate these decisions confidently. An advisor can tailor strategies to your situation, helping you make the most of opportunities while avoiding potential pitfalls.

The end of the year is a busy time, but a little financial preparation now can set the stage for a more prosperous tomorrow. Take the time to check these items off your list—you’ll thank yourself later.

Schedule a complimentary consultation with one of our fiduciary, fee-only financial planners to discuss your personal situation.

This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.