Tariff Trepidation
One focal point following the presidential election is a potential increase on tariffs for goods produced outside the United States.
As the year winds down, the hustle and bustle of the season can leave little room for financial reflection. But taking some time to review your finances now can help you close out the year on a strong note, and get your new year off to a great start.
Here are some key items to consider before December 31st rolls around.
We all try to make the best decisions we can around money, but we are not perfect. Despite our best efforts, we can miss things from time to time.
Consider the “flypaper effect.” Jason Zweig, of The Wall Street Journal, uses the term to describe how money has a tendency to stick where it lands, even when we had other ideas for where it should end up. For many, this can happen when rolling over their employer-sponsored 401(k) retirement account into a personal IRA. According to research from Vanguard, nearly a third of savers who transferred their 401(k) balances into IRAs in 2015 still had those funds sitting in cash seven years later. This inertia can be costly. Vanguard estimates that cash-heavy IRAs cost Americans $172 billion annually in missed growth opportunities.
As the end of the year approaches, take some time to review all your accounts to make sure all your savings have landed where you wanted them.
It is also okay (and in fact, often wise) to keep some money in cash, such as an emergency fund. But even these accounts are worth a review. If cash in your emergency fund is just sitting in a basic, zero-interest checking account, consider placing it in a money market, high-yield savings or similar FDIC-backed account. There, the money should remain safe and readily accessible, while still offering a bit of interest income, especially while interest rates are still relatively high.
Typically, any required minimum distributions (RMDs) from your own or an inherited retirement account are due by year-end, so there is no time to waste if you have not yet made any RMDs due. However, there are new rules for 2024 that could delay, or even eliminate the need to make an RMD. As always, we recommend consulting with a tax specialist before taking any tax-planning action.
December is a peak time for charitable giving. It is the holidays, after all, and giving offers a meaningful way to support causes you care about while potentially reducing your 2024 tax bill.
If you are over 70½ with RMDs due, one way to participate in tax-wise year-end giving is to replace some or all of your RMDs with qualified charitable distributions (QCDs) from your IRA directly to charity. This year, you may give up to $105,000 in QCDs, according to the IRS. This in turn, can lower or eliminate your RMDs, which would otherwise have been taxed at ordinary income rates. Lowering your reportable income may also help you avoid being pushed into a higher income tax bracket or subject to other tax deduction phaseouts.
Some best practices are perennial, including keeping an eye on important dates. Naturally, there are a number of deadlines associated with year-end. For those who are itemizing deductions, it is the deadline for 2024 tax-deductible charitable contributions. It is also the last day you can fund your 401(k). You can contribute up to $23,000 in a 401(k) this year, and next year that limit increases to $23,500. Catch-up contributions for 401(k)s for individuals aged 50 and older is $7,500 for 2024. It will remain that way in 2025, but there will also be a higher catch-up contribution limit of $11,250 for those aged 60 through 63.
IRAs and health savings accounts allow you to make 2024 contributions up until April 15, 2025. You have a little bit of time, but the sooner you invest, the quicker you can put your money to work and take advantage of the power of compounding returns.
While financial planning is essential, do not overlook the importance of self-care. Amid the year-end flurry, a good night’s sleep might be one of the best investments you can make in your overall well-being, especially during the holidays. In fact, research suggests that better sleep health can reduce loneliness, spark stronger social connections and foster positive emotional experiences.
And if it is not better sleep, please take some time for yourself, whether it is unwinding with a good book, having dinner with friends or taking a long walk with the dog. After all, one of the most important reasons we put so much effort into financial well-being is so we can build a more fulfilling life for ourselves and the ones we love.
This post was written and first distributed by The Writing Company.
DISCLAIMERS
This material is intended for general public use. By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. This is not an offer to buy or sell a security.
Shore Point Advisors is an investment adviser located in Brielle, New Jersey. Shore Point Advisors is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Shore Point Advisors only transacts business in states in which it is properly registered or is excluded or exempted from registration. Insurance products and services are offered through JCL Financial, LLC (“JCL”). Shore Point Advisors and JCL are affiliated entities.
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