As we enter the month of October, the end of the year is quickly approaching. The fourth quarter usually brings with it holiday expenses, tax considerations, and year-end financial planning opportunities. So, this is the time of the year to take advantage of financial strategies before tax books close on 2024. Here are a few things to think about before year end...
1.Review and adjust your budget for year-end expenses. Estimate how much you plan to spend on holiday gifts, parties and travel. Hopefully you took my advice from a previous article and had established a "Holiday Spending Account" that is dedicated to be spent this year without any guilt or need to go into credit card debt.
2. Prepare for Year End Tax Planning. We still have 3 more months to get in a little last-minute end of year tax planning. If you're not on track to maxing out your 401(k) or 403(b) contributions, consider bumping up the percentage into year end. Also, does it make sense to convert some of your IRA money into a Roth? Pay the tax now, but set yourself up for tax free income, later? Lastly, do you have any investments that are down (not inside of retirement accounts) that you may be able to sell to get the tax loss to help offset capital gains elsewhere?
3.Required Minimum Distributions. For those of you that have reached age 73 or older, you are required to take distributions from your IRA's or other qualified retirement plans. The withdrawals are calculated using the previous year end balance and a life expectancy number, based on your current age. Make sure you're on track to hitting that target. If you are currently making charitable donations, consider doing a QCD (qualified charitable deduction) by having your IRA custodian make a payment, directly, to your charity of choice and you won't receive a 1099 for the gift and it will count towards your total required minimum distribution.
This time of the year can be a little extra stressful. So, get a jump on things now and address these end of year strategies, before you're in the thick of it.