Year-End Financial Planning

As we enter the fourth quarter, it’s time to review your investment accounts to ensure that the recommended steps are taken by year-end to facilitate strategies such as tax reduction as well as financial and estate planning. The following are recommendations for you to keep in mind. 

Investment Portfolio

• Market performance over the year affects asset allocation without proper rebalancing. Some asset classes outperform the market while others lag, resulting in a portfolio misaligned to goals and risk tolerance. So, make sure rebalancing occurs to keep your allocation consistent with goals as well as providing sufficient diversification. Review your Employer-Sponsored Plan (e.g. 401k, 403b) as well, since those are often overlooked.
• Review positions for potential tax loss harvesting to offset realized gains - but be mindful of wash sale rules. Keep in mind that capital losses can be carried forward to future years indefinitely.

Retirement Planning

• If your goal is to contribute the maximum allowable, review to make sure your annual withholdings are on track; if 50 years old or above, take advantage of “catch-up” contributions. Add a calendar reminder for early 2025 to adjust contributions if limits increase.
• Maximize IRA and/or Roth contributions, solo 401(k) or other non-employer retirement plans, as applicable, by 12/31/2024. Remember that IRA contributions can be extended into the following year (April 15, 2025).
• Review beneficiary designations to ensure they are up to date.
• Consider a Roth conversion, particularly over the next two years (2024 and 2025) prior to a potential tax rate hike in 2026.
• Review applicable needs and seek strategy guidance for Required Minimum Distributions (RMDs) from Traditional IRAs and Inherited IRA distributions.

Charitable Contributions/Gifts and Education Funding 

• Whenever possible, gift highly appreciated stock shares to qualified charities instead of cash.
• “Bunch” or consolidate gifting to qualified charitable entities into one year to allow for deduction amount to exceed the standard deduction.
• Remember that the annual exclusion amount ($18,000 in 2024) can be given to unlimited individuals without tax repercussions to donor or recipient. The exclusion amount can be doubled for married couples; make note to file Gift Tax Return Form 709 when gift-splitting.
• Remember to fund 529 Plans by year-end if a state tax credit or deduction can be obtained.

Estate Planning

• Ensure the following documents are current: Will, appropriate trusts, Durable Power of Attorney, Health Care Power of Attorney, Living Will.
• Review account titling (ownership registration) to ensure estate plan functions as intended.
• The Tax Cut and Jobs Act of 2017 is set to expire on January 1, 2026. Depending on net worth, action might be required to prepare for the potential of the lifetime exclusion amount being reduced by half:
  • If net worth is between $6.805MM to $13.610MM for single filers and $13.610MM to $27.220MM for married couples, amounts do not exceed the current estate annual exemption. However, these levels will surpass the sunset limits, so start formulating plans to help shield excess assets from estate taxation.
  • If net worth is over $13.610MM for single filers and over $27.220MM for married couples, net worth currently exceeds current lifetime exemption amounts. In this scenario, consult with an estate attorney well before the end of 2025 for strategies  to transfer wealth over the next two years     

 Financial Plan

• Plan for foreseeable large expenditures and work with your advisor to determine where best to obtain funds.
• Pay down debt.
• Review budget and prepare to increase savings if possible.

The experts in The National Bank of Indianapolis’ Wealth Management Division can assist with investment management, including all the above planning strategies and priorities as well as numerous other factors that apply to your specific situation. Please call us for a consultation.