Month: December 2024

1. Review Your Retirement Accounts

Your retirement accounts are the cornerstone of your long-term financial well-being. Taking time to review them now will help maximize their potential.

• Assess Contributions: Have you maxed out your 401(k) or IRA contributions for 2024? For most people under 50, the limits are $22,500 for 401(k) plans and $6,500 for IRAs, with an additional $7,500 and $1,000 in catch-up contributions for those over 50. If you’re not on track, consider making extra contributions before the deadline.
• Evaluate Investment Performance: Compare your retirement account performance against benchmarks and adjust allocations to ensure they align with your risk tolerance and goals. Are you too heavily invested in certain asset classes? Diversification can help reduce risk.
• Plan for 2025: Be aware of any upcoming changes to contribution limits or retirement plan regulations. Staying informed allows you to adjust your strategy proactively.

2. Check Other Savings Accounts

Savings accounts beyond your retirement funds provide flexibility for life’s unexpected moments.

• Emergency Fund: Ideally, your emergency fund should cover 3-6 months of living expenses. If yours has been depleted, prioritize replenishing it to avoid dipping into long-term savings during a crisis.
• College Savings Plans: If you’re contributing to a 529 plan, review the account’s performance and ensure you’re taking advantage of any state tax benefits. With college costs rising, it’s crucial to stay ahead.

3. Assess Your Debts

Debt can weigh heavily on your financial health, but a structured approach can help you manage and reduce it effectively.

• Understand Your Debt Portfolio: Create a detailed list of all outstanding debts, including balances, interest rates, and minimum payments. High-interest debts, such as credit cards, should be a priority for repayment.
• Explore Refinancing Options: With interest rates potentially shifting, refinancing a mortgage or student loans could save you thousands in interest over time.
• Set Debt Repayment Goals: Use tools like the avalanche or snowball method to plan your strategy for tackling debt in 2025.

4. Update Your Estate Plan

Your estate plan ensures that your financial wishes are honored and your loved ones are taken care of.

• Review Essential Documents: Check your will, trust, power of attorney, and healthcare directives to ensure they reflect your current wishes and circumstances. Update beneficiary designations on retirement accounts, insurance policies, and investment accounts.
• Minimize Tax Implications: Consider gifting strategies or other measures to reduce potential estate taxes. For 2024, the annual gift exclusion is $17,000 per recipient—use it if applicable.
• Prepare for 2025: Estate planning is not a one-time task. Make it a habit to review and update these documents annually or whenever significant life events occur.

5. Evaluate Your Insurance Coverage

Insurance protects you and your family from unexpected financial burdens. A year-end review ensures you have adequate coverage for your needs.

• Health Insurance: Review your plan for 2025 during open enrollment. Check deductibles, premiums, and out-of-pocket maximums to ensure they align with your expected needs.
• Life Insurance: Evaluate your policy. Do you have enough coverage to protect your family in the event of the unexpected? For those with whole life insurance, assess its cash value and performance.
• Disability and Long-Term Care Insurance: As you age, these policies become increasingly important. Speak with your advisor to determine if you need additional coverage.

6. Optimize Your Tax Strategy

Year-end tax planning can save you money and reduce stress come April.

• Maximize Tax-Advantaged Accounts: Contribute the maximum to your HSA or FSA. Remember, FSA funds typically have a “use it or lose it” policy, though some plans allow a carryover.
• Year-End Tax Moves: Consider charitable contributions or tax-loss harvesting to offset gains. If you’re in a lower tax bracket this year, a Roth IRA conversion might make sense.
• Prepare for 2025: Stay ahead of potential changes in tax laws. Small adjustments now can lead to significant savings later.

7. Whole Life Policies and IRAs

Both whole life insurance and IRAs are critical tools in a well-rounded financial plan.

• Whole Life Insurance: If you own a whole life policy, review its performance, cash value growth, and dividends. These policies can serve as a stable part of your financial foundation.
• Individual Retirement Accounts (IRAs): If you’re considering a Roth conversion, assess the tax implications carefully. Rolling over a traditional IRA into a Roth could save you money in the long term, depending on your current tax bracket.

8. Set Goals for 2025

The best way to stay financially healthy is to set clear, actionable goals.

• Define Financial Milestones: These could include paying off a specific amount of debt, reaching a savings target, or achieving a certain investment return.
• Create an Action Plan: Break down your goals into manageable steps. For example, commit to reviewing your budget monthly or setting up automatic savings contributions.
• Schedule a Financial Check-In: Quarterly check-ins with your financial advisor keep you accountable and allow for course corrections as needed.

A year-end financial health checkup is one of the most important steps you can take for your financial well-being. By reviewing key areas such as retirement accounts, savings, debts, estate plans, and insurance, you can set yourself up for success in 2025 and beyond.

Take the first step by scheduling a meeting with your financial advisor today. Together, you can create a personalized plan that ensures you’re ready for whatever the new year brings.

Investment advice offered through Integrated Partners, doing business as Pathwise Financial Group, a registered investment advisor.