7 Money Moves You Should Hurry To Make Before the Year Is Over
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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The last thing you may want to think about now and into the holidays are your upcoming taxes or next year’s finances, but doing so allows you to make some important decisions and moves before year’s end.
With less than a month left to go, these seven money moves are ones that will have the greatest impact not only on your tax burden, but your financial foundation for 2025.
Brian Kearns, CPA, CFP, founder of Haddam Road Advisors and a member of the Illinois CPA Society’s Personal Financial Planning Member Forum Group, explained what you should hurry to do.
Revisit Work Retirement Contributions
Now’s the time to see if you’re on track for maximizing your retirement account contributions for the year. Payroll contributions to tax-deferred retirement accounts — like your employer’s 401(k) or 403(b) — reduce your taxable income, thus lowering your tax bill, Kearns explained. The contribution limit in 2024 is $23,000, or $30,500 if you’re age 50 or older.
“If you can afford to, increasing your contributions is generally a smart tax move, especially if your employer matches contributions,” he said.
Max Out an IRA
Depending on your income, you may be eligible to make tax-deductible contributions to a traditional individual retirement account (IRA) outside of, or in addition to, an employer-sponsored account, Kearns explained.
The 2024 contribution limit to a traditional IRA is $7,000, and an additional $1,000 catch-up contribution is allowed if you’re age 50 or over.
“Alternatively, you may want to invest in a future tax break instead,” he said.
For the 2024 tax year, individuals with an adjusted gross income (AGI) of $146,000 or less — $230,000 for married couples filing a joint tax return — regardless of whether they participate in an employer retirement plan, can contribute up to $7,000 (or $8,000 if age 50 or older) to a Roth IRA, Kearns explained.
“Since contributions to Roth IRAs are made with after-tax money, investments grow tax-free indefinitely. Non-working spouses can also contribute to a Roth IRA as long as the working spouse has earned enough income during the tax year to cover both contributions,” he said.
Consider a Roth Conversion
If you’ve been putting all or most of your retirement savings into a tax-deferred traditional IRA or 401(k), converting all or a portion of those funds to a Roth IRA could help lower your future tax bills, Kearns shared.
While you’ll have to pay taxes on any money you convert in the year of the conversion, the converted funds will then grow tax-free moving forward and qualified withdrawals are tax-free as well.
“This could be a prudent move if you anticipate being in a higher tax bracket in the future. Better yet, Roth IRAs aren’t subject to required minimum distributions (RMDs). Also keep in mind that the funds from inherited Roth IRAs, although subject to RMDs, are also distributed tax-free,” he said.
Don’t Forget Your Required Minimum Withdrawals
If you already turned, or will turn, age 73 this year, it’s time to start taking your annual RMDs from your tax-deferred retirement accounts, Kearns said.
While you can technically wait to do so until April 1, 2025, Kearns said, you’d then need to take two RMDs during 2025, which could push you into a higher tax bracket. You might not want that, as “The penalty for not taking your RMD is a steep 25% of the sum you should’ve withdrawn,”
Harvest Investment Losses
If you have investments such as stocks, bonds, mutual funds, etc. in a taxable brokerage account that have declined in value, consider selling them, Kearns recommended.
“Selling these investments will realize the losses, thus offsetting any realized capital gains,” he said. Capital losses offset capital gains without limitation, he explained, and an additional $3,000 of realized losses can reduce other taxable income. Losses in excess of $3,000 will be carried forward to the next tax year.
Give Your Health Savings Account (HSA) a Check-Up
If eligible, a tax-smart way of setting aside money for qualified medical expenses and lowering your taxable income is to contribute the maximum amount allowed (or the maximum you can manage) to an HSA, Kearns pointed out.
HSAs offer several advantages, like not having to pay federal tax on the contributed funds or investment earnings if the money is used for qualified medical expenses, he explained. For 2024, the contribution limit is $4,150 for individuals or $8,300 for families; an additional $1,000 catch-up contribution is allowed if you’re 55 or older.
“This is the only triple tax-free option available to taxpayers — tax-free contributions, tax-free growth and tax-free disbursements for qualified healthcare expenses,” Kearns said.
Meet With a CPA or CFP
If any of this feels overwhelming or you’re not even sure you know how to take these steps, it can be a good idea to meet with a CPA, not only just at the end of the year, but to help you manage your finances all year long.
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