Before delving into finances, let’s kick things off with a Thanksgiving riddle (see answer below):
I’m round and golden, a symbol of the feast,
On Thanksgiving Day, I’m served with the turkey, at least.
With stuffing inside, I’m a savory delight,
What am I, on this special night?
Celebrating the Season with Gratitude
Today’s Discussion Includes:
- Important year-end action items for your consideration.
- A handy and visually pleasing Key Financial Data spreadsheet that includes 2023 tax brackets, retirement contribution limits, Medicare and Social Security thresholds and more.
- Bonds and your investment portfolio.
Key Year-End Action Items
The end of the year is fast approaching. (Can someone please hit the pause button?!)
Therefore, remember to address the following financial items by December 31:
Retirement Plan Contributions: Help reduce your 2023 tax obligations and strengthen your retirement readiness by maximizing your retirement plan contributions.
This year, individuals 50 and younger may contribute up to $22,500, while those 50 and older can contribute up to $30,000.
Charitable Contributions: You can make a tax-deductible charitable donation for the tax year 2023 until December 31, 2023. To qualify, you’ll need to itemize your deductions using Form 1040, Schedule A. This option is applicable when your itemized deductions exceed the standard deduction.
In the 2023 tax year, the standard deductions are:
- Married couples filing jointly: $27,700
- Single taxpayers and married individuals filing separately: $13,850
- Heads of households: $20,800
Also, many employers have matching gift programs, typically matching a certain percentage of your charitable donation. This is a great way to double your impact for organizations you cherish.
Check out our useful and easy-on-the-eyes Key Financial Data spreadsheet. It includes 2023 tax brackets, standard deductions, retirement plans and IRA contribution limits, Medicare deductibles and premiums, Social Security taxable income brackets and more. Feel free to share this handy resource with your friends; knowledge is a great gift.
Qualified Charitable Distributions (QCDs)
For those age 70½ and older, you can donate funds from your IRA or Roth IRA directly to eligible charitable organizations.
When you make a QCD, the distributed funds are excluded from your taxable income.
This means you don’t have to pay income tax on the amount donated directly to a qualified charity, and the distribution could satisfy your Required Minimum Distribution (RMD) for the year.
To ensure a QCD counts toward your RMD for 2023, the funds must be withdrawn from your IRA before your RMD deadline, typically December 31 of each year.
Resource: Fidelity discusses the ins and outs of QCDs in this article, Donating to a Charity Using a Qualified Charitable Distribution (QCD).
Tax-Loss Harvesting
During year-end, we review each client’s taxable accounts one-by-one seeking tax-loss harvesting opportunities, i.e., turning lemons into lemonade by selling investments that lost value to offset capital gains from other investments, helping to lower your tax obligation.
Therefore, it’s critical to alert us to investments you hold elsewhere so we can work in concert with these assets, ultimately optimizing your tax situation.
Your Investment Portfolio and Bonds
We’ve been closely monitoring the bond market and the Fed’s potential rate cuts expected late next year.
Most recently, interest rates have been unchanged during the Fed’s last two meetings (following 11 consecutive increases since March 2022) due to signs of a slowing economy.
However, if the economy slows too much, the Fed will likely cut interest rates to stimulate economic activity.
Buying Bonds
When the Fed cuts rates, bond prices generally increase. To take advantage of this (potential) increase, we’re positioned to buy more intermediate bonds in preparation for the expected rate cuts.
Said differently: When the Fed decides to lower interest rates, the market typically responds by making bonds more attractive to investors. This increased demand for bonds tends to drive their prices higher, which can be advantageous for those who already hold these bonds.
The longer we wait for more clarity on the Fed’s actions, the more we may consider adding additional funds to intermediate bonds. In short, we’re positioning ourselves to help you benefit from the anticipated increase in bond prices if/when the Fed initiates its rate cuts.
Celebrating the Season with Gratitude
During this season of gratitude, Julie and I want to extend our warmest thanks to you for your continued trust and partnership.
Your confidence in our services is a source of inspiration, and we’re grateful for the opportunity to assist you in achieving your financial goals.
Concerns or Questions
Please reach out with any questions or concerns.
Happy Thanksgiving,
–David Bunker, Financial Advisor & Fiduciary
Riddle Answer: Pumpkin Pie
Before You Go
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Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.