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Maximize Retirement Contributions

Take advantage of tax-advantaged savings by maximizing retirement contributions. The 2024 limits are $23,000 for 401(k)s (or $30,500 if you’re 50 or older). If you’re self-employed, you can contribute up to $69,000—or $76,500 if you’re 50-plus—through plans like a Solo 401(k) or SEP IRA, subject to income and plan limits.

Roth IRAs and Conversions

A low-income year can present a great opportunity to fund a Roth IRA or convert funds from a traditional IRA to a Roth IRA. The latter strategy allows you to pay taxes on the converted amount now, locking in future tax-free withdrawals. Be sure to discuss this with your financial professional to determine if it’s the right fit for your situation.

Required Minimum Distributions (RMDs)

If you’re 73 or older, you are required to take minimum distributions from your retirement accounts each year. These withdrawals, known as RMDs, must typically be made by December 31st to avoid a steep penalty. However, there is a special rule for your first RMD. If you turned 73 this year, you have until April 1 of 2025 to take your first RMD.

While deferring your first RMD until April 1 may seem appealing, keep in mind that doing so will require you to take two RMDs in the same tax year—the deferred first RMD and the current year’s RMD—potentially increasing your taxable income. For those who don’t need the extra income, consider using strategies like Qualified Charitable Distributions (QCDs) to satisfy your RMD while minimizing your tax impact.

Qualified Charitable Distributions (QCDs)

If you’re over 70.5 years old, a QCD may be a tax-smart way to support your favorite causes. You can direct up to $105,000 tax-free from your IRA to a charity, satisfying your required minimum distribution (RMD) without increasing your taxable income. Timing is critical—complete your QCD before meeting your RMD for the year.

Tax-Free Gifting

The annual gift tax exclusion allows individuals to gift up to $18,000 per recipient in 2024 without having to file a gift tax return. Additionally, you can take advantage of the lifetime gift and estate tax exemption—currently $13.61 million for individuals or $27.22 million for married couples—when planning transfers to heirs.

Charitable Contributions

If you’re planning to make charitable donations, think strategically to get the most benefit. One approach is “bunching” donations—combining multiple years of giving into a single year to exceed the standard deduction and allow for itemization. Donating appreciated securities held for more than one year is another powerful tactic. You can deduct their full market value (up to 30% of your adjusted gross income) while avoiding capital gains taxes.

For those seeking flexibility, consider opening a donor-advised fund. This allows you to contribute a lump sum in one tax year, take an immediate deduction, and distribute the funds to charities over time.

Tax Loss Harvesting

If your portfolio includes investments that have lost value, year-end is the perfect time to harvest those losses. Selling losing positions can offset realized capital gains for 2024. If losses exceed gains, you can offset up to $3,000 of ordinary income. This strategy helps reduce your tax liability while keeping your portfolio aligned with your goals.

Income Deferral

Deferring income into next year and accelerating deductions into this year can lower your taxable income for 2024. This approach is especially effective if you expect your income to drop in 2025. Charitable contributions and medical expenses are common deductions that can be accelerated.

Work with Your Team

These strategies can help you make the most of your year-end financial planning, but not every approach is right for everyone. Schedule a meeting with your financial advisor to review your situation and any potential strategies. Taking the time now to address these year-end considerations can lead to meaningful savings and set the stage for a strong financial future.