Insights

5 Financial Strategies to Close Out 2024

November 8, 2024

As the year comes to a close, it’s common practice to reflect on the financial decisions you did or didn’t make throughout the year. As your advisors, we want to make sure you have done everything to ensure that your dollars are working for you. Whether you’ve achieved significant milestones or faced unexpected challenges, the end of the year marks a new opportunity to assess your financial situation and make adjustments. Taking a proactive approach to your financial planning can help identify areas for improvement, optimize your portfolio, and potentially reduce your tax liability. 

We’ve gathered 5 financial strategies to close out 2024.

1. Love and Legacy: Gift to family and friends to reduce your future estate taxes and create a lasting legacy.

For 2024, the annual gift tax exclusion allows you to gift up to $18,000 per individual ($36,000 per married couple) to as many individuals as you’d like without reducing your federal lifetime tax exemption.

This amount increases to $19,000 in 2025, providing even more opportunities for tax-free giving.

If you’re planning for your children’s education expenses, consider “superfunding” their 529 college savings account. This involves making a large contribution to the account using 5-year gift tax averaging, which allows you to gift up to $90,000 ($18,000 x 5) in a single year.

Benefit: This strategy can help you take advantage of early compounding and reduce the amount of taxes owed on your estate.

2. Tax-free and clear: How you can create tax-free distributions from your assets even while over certain income limits.

If you’re single and earn over $161,000 or married filing jointly and earn over $240,000 in 2024, you are excluded from making direct contributions to a Roth IRA.

An advantage of a Roth IRA is that you can make tax-free withdrawals in retirement, making them an attractive long-term planning option.

If you are impacted by these income restrictions and have assets in a Traditional IRA, you may want to consider discussing a Roth Conversion. This strategy involves converting IRA assets to Roth IRA assets, which will generate taxable income in the year of conversion. It’s essential to weigh the tax implications with your LourdMurray team before acting.

Additionally, if you’re experiencing a less-than-typical income year or have recently retired, now might be an ideal time to complete a Roth Conversion. We’re happy to help you determine whether this strategy aligns with your individual financial goals and circumstances.

3. Tax-smart stock options: Let us help you make the most of your compensation package.

Without careful planning, stock options can lead to a substantial tax liability that may even exceed the benefits of exercising them. It’s essential to approach stock options strategically to minimize tax implications and maximize their value.

Consult with your LourdMurray team and CPA to review your stock options. We can help you decide whether exercising your options makes sense, taking into account your individual circumstances and financial goals.

4. Give with purpose: Optimize your charitable contributions and achieve your philanthropic goals.

Donating highly appreciated assets from your investment portfolio to charity, rather than writing a check, can help you give more purposely.

Selling these assets and donating the net cash will make you subject to capital gains tax. By donating stocks directly to a public charity with a Donor-Advised Fund (DAF) program, you can avoid capital gains tax, claim an immediate income tax deduction, and enjoy the flexibility to direct your gift to the philanthropic cause of your choosing.

Benefit: Your contribution will grow tax-free until you’re ready to distribute it, allowing you to make a lasting impact on the causes you care about while optimizing your tax strategy.

If you’re 70 ½ or older, you can also take advantage of a Qualified Charitable Distribution (QCD) from your retirement accounts, allowing you to contribute up to $105,000 directly to a charity. This amount will increase to $110,000 in 2025.

Lastly, if you’re responsible for a private foundation, be sure to meet the 5% annual distribution requirement to ensure compliance and maximize your charitable impact.

5. Don’t let benefits slip away: Act now to maximize your employment benefits.

November marks the start of open enrollment for many employee benefits and healthcare plans, including Covered California and The Affordable Care Act. This is a crucial period to review and adjust your coverage to ensure you’re getting the best benefits for your needs and budget.

Don’t miss the opportunity to save on taxes through a Flexible Spending Account (FSA) if offered by your employer. If you already have one, be sure to exhaust your balance before the end of the year to avoid losing it (some plans allow up to $640 carry-forward to the following year).

If you have a high-deductible health insurance plan ($1,500+ for individuals and $3,000+ for families) with qualifying out-of-pocket maximums, consider funding a Health Savings Account (HSA). For 2024, the contribution limits are $4,150 for individuals and $8,300 for families, increasing to $4,300 and $8,550 in 2025.

Remember that health insurance deductibles reset on January 1st. To make informed decisions about your medical care, calculate your remaining deductible balance to determine whether it’s wise to accelerate or postpone non-essential treatments. This strategic planning can help you optimize your healthcare expenses and make the most of your insurance coverage.

If you’re turning 65 and not covered by a workplace health insurance plan, it’s essential to enroll in Medicare to avoid penalties. You can enroll three months before and after your 65^th birthday. The annual open enrollment period for Medicare is from October 15 to December 7, during which you can make changes to your existing plan.

Take advantage of this opportunity to review and adjust your healthcare coverage to ensure you’re getting the best benefits for your needs and budget.

You have us as your trusted partner in achieving your financial goals. Every individual’s financial journey is unique, and we’re here to help you navigate yours. We will help bring all aspects of your financial life together to make sure you are on the way to achieving whatever is important to you. If you believe you may be leaving something on the table, let’s talk about it.

LourdMurray is a team of investment professionals registered with HighTower Securities, LLC, member FINRA and SIPC & HighTower Advisors, LLC a registered investment advisor with the SEC. All securities are offered through HighTower Securities, LLC and advisory services are offered through HighTower Advisors, LLC.

Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.