Your Guide to Year-End Financial Planning: A Comprehensive Checklist

Your Guide to Year-End Financial Planning: A Comprehensive Checklist

November 02, 2023

With the fourth quarter upon us, one routine remains consistent: it’s time to start organizing your finances for the new year. After all, it’s been a year of changes that will likely affect your finances in one way or another. The passage of SECURE 2.0 in late December changed many retirement plan rules, interest rates have continued rising, and the Supreme Court struck down the Biden administration's proposed student loan forgiveness program. So, before you head to your annual meeting with your financial advisor, read over these topics and use them as a helpful guide for your conversation.

1) Boost Your Retirement Contributions Workplace accounts

Are you maximizing contributions to your workplace plan? If not, now’s the time to think about increasing your contribution to take full advantage of any employer match benefit. For 2023, the maximum employee deferral for 401(k), 403(b), and 457 accounts is $22,500, and individuals ages 50 and older can defer an additional catch-up of $7,500. For SIMPLE IRAs, the deferral remains $15,500 and the catch-up is $3,500.

Traditional IRA

Maxing out your contributions to a traditional IRA is another option. The SECURE Act repealed the maximum age for contributions, so individuals ages 70 and a half and older who earned income in 2023 can contribute to a traditional IRA. Modified adjusted gross income (MAGI) limits for contributions to traditional and Roth IRAs increased in 2023, so be sure to review MAGI eligibility thresholds. The maximum contribution amount to a traditional or Roth IRA remains $6,500 with a $1,000 catch-up for clients ages 50 and older.


2) Use FSA Dollars and Make HSA Contributions

In 2023, the contribution limit for an FSA Account is $3,050 and the maximum carry over amount is $610. If you have a dependent care FSA, you can contribute up to $5,000. If you have a high deductible health plan (HDHP), now is a good time to explore maximizing your Health Savings Account (HSA) contributions. In 2021, the maximum contribution for an individual HSA is $3,600, and the maximum for a family HDHP is $7,200. If you’re age 50 or older you can contribute an additional $1,000. We’re happy to discuss prorated contributions with you if you had an HDHP for part of 2021.


3) Manage Your Marginal and Capital Gains Tax Matters

If you’re on the threshold of a tax bracket, you may be able to put yourself in the lower one by deferring some income to 2023. Here are a few thresholds to keep in mind:

  • 37 percent marginal tax rate: Taxable incomes exceeding $578,235 (individual), $693,750 (married filing jointly), $578,100 (head of household), and $323,926 (married filing separately)
  • 20 percent capital gains tax rate: Taxable incomes exceeding $492,300 (individual), $553,850 (married filing jointly), $523,050 (head of household), and $276,900 (married filing separately)
  • 3.8 percent surtax on investment income: The lesser of net investment income or the excess of MAGI greater than $200,000 (individual), $250,000 (married filing jointly), $200,000 (head of household), and $125,000 (married filing separately)
  • 0.9 percent additional Medicare tax: W-2 earnings and self-employment income above the same MAGI thresholds as the investment income surtax (For clients with W-2 earnings above the MAGI thresholds, total Medicare taxes will be 2.35 percent; for self-employed clients, total Medicare taxes will be 3.8 percent.)


4) Rebalance Your Portfolio

Reviewing your capital gains and losses may reveal tax planning opportunities, such as harvesting losses to offset capital gains.


5) Make Your Charitable Giving Payoff

Qualified charitable distribution (QCD) rules haven’t changed, so if you’re older than 70 and a half, you can make a QCD of up to $100,000 directly to a charity; if you’re married and filing jointly, you may exclude up to $100,000 donated from each of your and your spouse’s IRA.


6) Form a Plan for Stock Options

If you hold stock options, it’s a good idea to develop a strategy for managing your current and future income. As part of this, be sure to have your tax advisor prepare an alternative minimum tax (ATM) projection. Keep in mind, ATM exemption limits increased in 2021 to $73,600 for single tax filers and $114,600 for married joint filers. If you’re thinking about exercising incentive stock options, you may want to wait until January 2022 if, depending on your ATM projections, there’s any tax benefit to waiting.


7) Prepare for RMDs

Under the SECURE Act, if you reached age 70 and a half after January 1, 2020, you can wait until you turn 72 to start taking RMDs.


8) Adjust Withholding and Prepare for Student Loan Repayment

If you think you may be subject to an estimated tax penalty, consider asking your employers (via Form W-4) to adjust your withholding to cover shortfalls. The IRS tax withholding calculator can help you with your estimates. Student loan payments resumed in October of this year, so if you had previously been working on reducing other debt, you’ll need to adjust your monthly cash flow to include upcoming student loan payments.


9) Assess Your Estate Plans

Year-end is always a good time to review and update your estate plan to make sure it’s still in line with your goals and accounts for any change in circumstances. Depending on your net worth, establishing a defective grantor trust, spousal lifetime access trust, or irrevocable life insurance trust may be an effective strategy to reduce your estate tax exposure. In addition, take the time to update your beneficiary designations and review trustee appointments, power of attorney provisions, and health care directives.


10) Rely on Us as a Resource

It’s not too early to get a jump on planning—and even though your situation is unique to you, this high-level checklist can be a great starting point. Please feel free to contact us to talk through the issues and deadlines that affect you. We’re also happy to collaborate with your CPA, attorney, and other professionals you work with to help ensure you’re prepared for the coming year.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer. Third party links are provided to you as a courtesy and are for informational purposes only. We make no representation as to the completeness or accuracy of information provided at these websites.