5 Planning Steps to Take Before the Year’s End

December is here, which is a good time to take stock of your planning before the end of the calendar year. Here are 5 steps you should take before year-end that will set you and your family up for a more secure future.

Make additional contributions to retirement plans

For 2024, employees under 50 can contribute up to $23,000 to traditional and safe harbor 401k plans in a calendar year. For employees age 50 or over, you can also make catch-up contributions up to an additional $7,500 per year. IRA contributions for 2024 can be made up until April 15, 2025, up to a limit of $7,000 for those under 50 and $8,000 for those 50 or older.

Not only do retirement contributions provide tax benefits and security for your retirement, but they can also be an important resource to fund any long-term care you may need in your later years, as well as security for your loved ones when you pass.

Another way to provide for your children and their future is by setting up a custodial Roth IRA for them. Any minor with earned income is able to contribute to a custodial IRA, an IRA opened by a parent or other adult for the child. The adult remains custodian of the account until the minor reaches the age of majority (either 18 or 21) when the child takes control of the account. Anyone can contribute to the child’s IRA, as long as contributions do not exceed the child’s income for that year. You could have your child contribute some of their income and you could match it with a contribution, as long as the total contributions do not exceed their earned income for the year.

Make personal gifts/contributions to 529 plans

For the year 2024, any gifts up to $18,000 from an individual or up to $36,000 from a couple to another person are exempt from gift tax. Any gifts above those amounts within the same year are to be reported to the IRS through a Gift Tax Return (form 709) and will count against the taxpayer’s lifetime gift and estate tax exemption amount. These gift tax rules apply to a parent’s or anyone else’s contributions to a child’s 529 plan. So, if you or a grandparent are hoping to maximize contributions to a 529 plan, make sure to make those 2024 contributions before year end. Giving regularly up to the annual exemption amount can be a strategic way for those with taxable estates to increase their plan’s tax efficiency.

Make charitable gifts

If giving to causes that you care about is part of your budget and plan, make sure to make any donations to IRS qualified organizations by December 31st to get the tax deduction for your 2024 taxes. In order to get the tax deduction, you will need to itemize your deductions on a schedule A. Your tax professional can help you determine if itemizing deductions or taking the standard deduction makes the most sense for you. Make sure to keep documentation of your giving through any receipts or acknowledgement letters received from recipient organizations.

Make any changes to insurance coverage

The end of the year is also a good time to review all insurance you have in place for you and your family. Open enrollment for many health plans usually takes place at this time of year, so this is a great time to see if your health plan met your needs or if a change would benefit you and your family. You can also review life, homeowners, auto, and any other insurance policies to see if you have the needed coverage at premiums that make sense for you.

If long-term care is on your mind, it may be a good idea to look into a life insurance policy that has long-term care benefits. With this type of policy, you can use your death benefits to pay for long-term care, should you need it. If you do not end up needing long-term care, the proceeds of the life insurance go to your beneficiaries when you pass.

Make sure your estate plan is in place and up to date

With the holiday season upon us, many of us plan to take some time off to spend with family or rejuvenate before the new year. This is a great time to carve out some space to review your existing estate plan to make sure that it is up to date and carries out your wishes. If you haven’t put a plan in place yet, it is a great time to get a head start on a plan so you can take care of your affairs and plan for your loved ones’ future.

If you want to get a jump start on updating or setting up your estate plan, book a free consultation with me. Together, we can make sure your family’s future is more secure!