With just a few weeks left until the end of the year, you still have time to optimize your financial health, minimize tax liabilities, and make year-end planning moves to help secure your long-term financial well-being. We’ve compiled a short list of ideas from Savant’s financial advisors to help you get started!

Assess Your Financial Situation and Set Clear Goals

Ken Eshleman, CFP®, a financial advisor in Savant’s Lancaster, PA, office, recommends getting started by assessing your financial situation and setting clear goals for the future. “Knowing where you stand is the first step in making informed financial decisions,” says Ken. “Make a list of all your financial accounts to include bank, investment, retirement accounts, and any debt obligations. Once you have a clear understanding of your financial situation, it’s time to set specific and achievable financial goals for the coming year. Those could include paying off debt, increasing retirement contributions, or charitable giving. Having well-defined objectives commensurate with your budgetary projections will provide a roadmap,” he adds.

Max Out Retirement / HSA Contributions

If you can do it, make the maximum contribution to your 401(k) or 403(b) plan at work, says Allison Alexander, CFP®, CPA, CDFA®, a Savant advisor in Rockford, IL. “For employees who participate in 401(k) and 403(b) plans, the maximum contribution is $22,500 in 2023, and individuals 50 and over can also make a catch-up contribution of up to $7,500 this year,” Allison says. “In addition, the annual limit on IRA contributions is $6,500, and individuals aged 50 and over can add a catch-up contribution of up to $1,000.” Contributing to a tax-deferred retirement plan lowers your taxable income for the year, potentially reducing your tax bill.

Edward McDougal, CFP®, an advisor in Savant’s Lincolnshire, IL, office, offers a related tip: “If you have two 401(k)s – for example, if you work two jobs or began a new job this year, make sure you have not over-contributed between the two 401(k)s. People may not realize that contribution limits are per person, not per account,” he says.

Allison also recommends considering maxing out your Health Savings Account if you participate in a qualifying high-deductible health insurance plan. This year, individuals can contribute up to $3,850 for themselves, or up to $7,750 if they have family coverage. The HSA catch-up contribution is limited to an additional $1,000 for those who are 55 or older in 2023.

Consider Roth Conversions

Generally, you shouldn’t pay Uncle Sam any sooner than you have to, but sometimes it makes great sense to consider, says Scott Laue, JD, CFP®, a Savant advisor also located in Rockford. Scott recommends considering a Roth conversion if: 1) you’re having a low-income year, 2) the stock markets are challenged and you expect brighter days ahead, or 3) you believe your situation might suggest a higher future tax environment. “Pay close attention to bracket creep on a number of items, such as the tax rate on qualified dividends and realized capital gains, Social Security income inclusion amounts, impact on Medicare premiums two years down the road, general tax bracket management, and the future impact on IRA required minimum distributions,” says Scott, who adds that while one size doesn’t fit all, it’s a good idea to review tax planning opportunities with a financial advisor to identify meaningful long-term financial benefits.

Make a Qualified Charitable Distribution (QCD)

If you are age 73 or older and are already taking Required Minimum Distributions (RMDs) from your IRAs, Savant advisor Ed Cruickshank, CFP® in our Lincolnshire, IL, office recommends you consider donating your RMD to charity if you don’t need the income for your day-to-day living expenses. “Making a Qualified Charitable Distribution (QCD) not only enables you to make a donation to one or more charities of your choice, but it also helps you bypass the tax implications of these distributions,” says Ed. “It’s a win-win because you are reducing your taxable income and giving to charity at the same time.”

Harvest Tax Losses and Gains

Tax-loss harvesting involves selling investments that have lost value to offset capital gains and reduce your overall tax liability. Ken Eshleman says investors should consider capitalizing on both losses and gains in their taxable investment portfolios. “After the investment is sold and the loss ‘harvested,’ the proceeds should be immediately reinvested per your overall asset allocation,” Ken says. Conversely, realizing capital gains in a tax-efficient manner can also be beneficial if aligned correctly with your overall tax situation.

While these are just a few ideas to consider before the end of the year, your advisor may suggest others, such as evaluating your investment portfolio to ensure it reflects your risk tolerance and goals, updating beneficiary designations, reviewing your insurance coverage, or updating your estate plan. A bit of effort before the end of 2023 could help you enjoy a happy and more prosperous new year!

This is intended for educational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant.

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