As the leaves change and the days grow shorter, it’s the perfect time to take a fresh look at your financial goals and refresh financial plans before the year closes.
Today, let’s consider the following 4 financial actions:
#1—Revisit Your Retirement Plan Contributions (see example)
#2—Identify Recent Life Changes and Tax Implications
#3—Prepare for Year-End Charitable Donations
#4—Utilize Household Improvement and Energy Tax Credits
Deep Dive: For a detailed look at U.S. and global economic trends, read Capital Group’s Economic Indicators.
#1—Revisit Retirement Plan Contributions
Maximizing contributions to your company’s retirement plan can have a significant impact on your future quality of life.
Plus, if your employer offers matching contributions, that’s essentially free money!
And let’s not forget the power of compound interest—it can play a major role in shaping your retirement lifestyle.
Simple Example:
Imagine you’re planning to retire in five years.
After reading this, you decide to increase your retirement plan contributions by $300 per month.
Over five years, with an annual return of 7% compounded annually, that extra $300 a month could grow to almost $21,000 (i.e., a new roof, two luxury two-week European vacations, or 210 dining-out meals for a couple, according to Gemini AI).
And, the above numbers don’t include your employer’s contributions.
Here’s the compound interest calculator we used.
Another Consideration: Many employers offer Roth 401(k)s and IRAs, in addition to traditional retirement plans. If you’re currently contributing to a traditional plan and have access to a Roth option, let’s discuss whether switching might be beneficial for you.
Finally, don’t forget to max out your health savings account (HSA) if you have a high-deductible health plan. HSAs are tax-deductible, ultimately reducing your taxable income and possibly placing you in a lower tax bracket. Remember, qualified withdrawals are tax-free.
#2—Identify Life Changes and Tax Implications
If you’ve recently experienced the following, please contact us as soon as possible.
Employment Changes—New job or raise? Let’s revisit your retirement income plan to address potential changes in benefits, income or life insurance.
Family Dynamics—Divorce, marriage, adoption, parent needing caregiving or a child with special needs? With changes, you’ll likely need to re-optimize your financial and estate strategies.
Health Concerns—Serious illness or nearing 65? Let’s discuss Medicare and your spending options.
Large Expenses or Inheritance—Planning a big purchase, sale or received an inheritance? Let’s prepare for the tax implications.
Many of the above events can trigger a need to revisit your tax withholdings to help ensure you’re on target for 2024.
Here’s a detailed chart (on our website) reflecting the 2024 tax rate schedule, standard deductions, retirement plan contribution limits and more.
Key Resource: Download our Prolonging Retirement Income Checklist. It’s packed with important questions to ponder.
#3—Prepare for Year-End Charitable Donations
It’s best to start planning your year-end charitable donations early, particularly if you’re planning to donate stocks or other appreciated assets.
Considerations Include:
Matching Gifts: Maximize your charitable giving with matching gifts from your employer. Consider suggesting a cause you’re passionate about. Reach out to your HR department to inquire about this option.
Volunteer Your Time: In addition to financial donations, volunteering can make a significant impact. Many employers offer paid time off for volunteer activities. Have you used your hours?
[Related Article]: Help others, help yourself? Why volunteering can be good for you.
Donate Appreciated Assets: Giving appreciated assets like stocks or bonds to a charity can provide a significant tax benefit. You can deduct the fair market value of the asset, avoiding capital gains tax.
Donor-Advised Funds: These funds allow you to make a tax-deductible donation now and distribute the funds to charities over time.
Qualified Charitable Distributions (QCDs): If you’re over 70½, you can make a direct contribution from your IRA to a qualified charity, reducing your required minimum distribution (RMD).
#4—Utilize Household Improvement & Energy Tax Credits
There’s an abundance of improvements you can make to your primary residence and receive potential tax credits, including energy-efficient doors, windows, insulation, roofs, furnaces, water heaters and more.
Here’s a detailed list by the IRS describing what qualifies: Energy Efficient Home Improvement Credit.
Also, Massachusetts offers several energy rebates and incentives as well as New Hampshire; and be sure to check with your respective energy providers for their unique incentive programs.
Tip: Before you pay to recycle an old dehumidifier, refrigerator or similar, check to see if your energy provider offers free pick-up and a rebate. Many do.
Before You Go
Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.
Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.