Money matters: Don’t let the busy holiday season distract you from financial planning
As the holidays draw near, it’s easy to get caught up in the festivities. However, it’s also an important time to reflect on your finances and ensure you’re set up for success in 2025. Proactive planning now can help you take full advantage of current tax laws and avoid surprises down the road.
Year-end tax planning
The Tax Cuts and Jobs Act (TCJA) is set to expire at the end of 2025, making next year its final chapter. This law has impacted taxpayers in numerous ways — raising the standard deduction, lowering tax rates and eliminating certain exemptions. Many who previously itemized deductions found themselves better off with the standard deduction under this framework.
While the results of the 2024 election might pave the way for an extension of TCJA provisions, new legislation will be needed to keep these rules in place. For now, it’s essential to plan with the current framework in mind.
Plan ahead for capital gains: The strong stock market performance in 2024 has created significant opportunities — and potential tax liabilities. Here’s what to keep in mind:
▪ Know your gains: Estimate your capital gains for the year and consider ways to offset them with losses in your portfolio.
▪ Mutual fund distributions: Many mutual funds distribute capital gains near year-end. Review these distributions and consider strategies to minimize their impact.
▪ Tax-loss harvesting: If you have investments that have under-performed, selling them now could help offset taxable gains.
▪ Charitable contributions: Bundling donations and other deductions into a single year may allow you to itemize and maximize your tax benefits.
Make the most of retirement contributions: Retirement accounts offer excellent opportunities to lower taxable income while building long-term wealth.
▪ 401(k) contributions: Max out your contributions before the year-end deadline, especially if your employer offers matching contributions.
▪ IRA contributions: Contributions to traditional or Roth IRAs for 2024 can be made until April 2025, but earlier planning gives you flexibility.
▪ Catch-up contributions: If you’re over 50, take advantage of higher contribution limits to bolster your savings.
▪ Health savings accounts: HSAs are a triple tax advantage tool, offering upfront deductions, tax-deferred growth and tax-free withdrawals for qualified medical expenses.
Stay ahead of required minimum distributions: For those age 73 or older, RMDs are an important consideration. These withdrawals from retirement accounts are mandatory and taxable, whether or not you need the income. Planning ahead can help minimize the tax impact.
Assess your investment portfolio: With the S&P 500 up over 20% in 2024, now is a great time to review your investments. Ask yourself these questions:
▪ Does your portfolio align with your financial goals and risk tolerance?
▪ Should you rebalance to maintain your target asset allocation?
A well-maintained portfolio can help you stay on track through market ups and downs.
Review financial plan
The end of the year is also an excellent time to take stock of your overall financial picture:
▪ Budget: Look at your 2024 spending and savings habits. Are you on track to meet your financial goals?
▪ Net worth statement: Review your assets and liabilities to gauge progress.
▪ 2025 plan: Create a clear, actionable budget for the new year that reflects your priorities.
Don’t overlook details
While tax and investment planning often take center stage, don’t forget these important areas:
▪ Estate planning: Review your will, trusts and power of attorney documents to ensure they’re up to date.
▪ Insurance coverage: Check that your policies provide the protection you need, from life and health to property and liability.
A comprehensive approach matters. Effective financial planning is about more than just numbers. It’s about making informed decisions to protect what you’ve built and pursue what matters most. A comprehensive plan can help you navigate complex issues, capitalize on opportunities, and achieve peace of mind.
Chris Walden, CFP, is a member of the Financial Planning Association of Greater Kansas City and an advisor with Stewardship Capital, a registered investment advisor serving clients from Independence.
Do you have financial topics or questions you’d like answered by a CFP professional? If so, submit your question or topic to KCFPA@gmail.com and your topic/question may be featured in a future article!