As 2024 winds down, it’s the perfect time to make smart financial decisions that can save you money and set you up for long-term success. By focusing on tax advantages, strategic investing, and ensuring you’ve maximized available contributions, you can end the year with a solid plan in place.
Here are some of the year-end financial strategies I have been discussing with my clients. Even if not all of these apply to you, you might find inspiration to revisit your financial goals or share these tips with others.
If you have never considered any of these strategies before, make sure to subscribe to my weekly newsletter as I talk about strategies for educators to minimize taxes, plan for retirement, and understand their student loans:
1. Max Out Your Health Savings Account (HSA)
A Health Savings Account (HSA) is one of the most powerful savings tools available, offering triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. For 2024, the HSA contribution limits are:
$4,150 for individuals
$8,300 for families
Who Qualifies?
To contribute to an HSA, you must be covered by a high-deductible health plan (HDHP). Even if your school district or employer doesn’t offer payroll deductions, you can contribute directly to an HSA and claim the tax deduction on your tax return.
Why It Matters:
Funds in an HSA don’t expire, meaning they roll over from year to year. You can invest HSA funds in mutual funds or ETFs to allow them to grow over time, effectively turning your HSA into a supplemental retirement account.
Pro Tip: If you have extra cash and haven’t maxed out your HSA yet, now is the time to do so before the December 31 deadline.
2. Consider Roth Conversions
If you have pre-tax retirement accounts like a Traditional IRA or 401(k), a Roth conversion can be a smart move, especially if you’re in a lower tax bracket this year. A Roth conversion involves transferring funds from a pre-tax account into a Roth IRA, paying taxes now in exchange for tax-free growth and withdrawals in the future.
When Should You Convert?
You’re in the 12% or 22% tax bracket and expect higher income in retirement.
You want to reduce required minimum distributions (RMDs) later in life.
You’d like to avoid potential Medicare premium increases (IRMAA) caused by higher taxable income in retirement.
Caution: Always run a tax projection or consult a financial planner and/or a CPA to determine the tax impact of a Roth conversion. Converting too much in a single year could bump you into a higher tax bracket.
3. Harvest Tax Gains or Losses
If you have a taxable brokerage account, now is a good time to review your portfolio for tax-harvesting opportunities.
Tax-Loss Harvesting:
Sell investments at a loss to offset capital gains or up to $3,000 of ordinary income. This strategy lowers your taxable income for the year while maintaining your overall investment strategy by reinvesting in similar assets (avoiding a "wash sale").
Example: If you hold shares of a large-cap S&P 500 ETF that are down, sell the position and reinvest in a total market ETF for similar exposure.
Tax-Gain Harvesting:
If you’re in the 12% tax bracket or lower, you can sell long-term capital gains (assets held for more than a year) and pay 0% tax on those gains. This is a great way to lock in profits while staying in a favorable tax situation.
Pro Tip: Be mindful of how gains or losses affect your Adjusted Gross Income (AGI), as this could impact your eligibility for tax credits or other benefits like ACA subsidies.
4. Use Up Your Flex Spending Account (FSA)
If you have an FSA, don’t forget that these accounts are typically “use it or lose it.” Funds must be used for qualified expenses like medical costs or dependent care. However, many employers offer a grace period extending until March 15, 2025, for 2024 funds.
How to Use It:
Schedule doctor visits or buy eligible medical supplies like prescription glasses or contact lenses.
Review dependent care expenses to ensure you’ve fully utilized those funds.
Unused FSA funds don’t roll over, so make sure you’ve planned ahead to avoid losing money.
5. Maximize Roth IRA Contributions
For 2024, Roth IRA contribution limits are:
$7,000 if you’re under 50
$8,000 if you’re 50 or older
Why Contribute Now?
While you have until April 15, 2025, to contribute for the 2024 tax year, investing early allows your money more time to grow tax-free. Roth IRAs also provide flexibility since contributions (not earnings) can be withdrawn penalty-free for any reason.
Income Limits:
Your eligibility to contribute directly to a Roth IRA depends on your income. Check the IRS website to see if you qualify.
If your income exceeds these limits, consider a backdoor Roth IRA strategy.
Why These Strategies Matter
These strategies aren’t just about saving money now, they’re about choosing to think long-term. By focusing on tax-efficient saving and investing, you’re setting yourself up for success in the years ahead.
Whether it’s ensuring you’re prepared for unexpected medical costs, reducing your taxable income, or maximizing your retirement accounts, these end-of-year moves are an opportunity to strengthen your financial foundation.
Next Steps: Take Action Before the Deadline OR Start Thinking about 2025
Year-end financial planning is all about being proactive. The clock is ticking, and the sooner you act, the more you can save or optimize your financial situation. Whether it’s maxing out contributions, reviewing your portfolio, or planning a Roth conversion, now is the time to make those moves.
While it may be too late to start thinking about some of these strategies for 2024, you can know that these options are available. It is a great time to consider what 2025 will look like and where different opportunities can be found in your personal situation.
Having a qualified Financial Planner on your team can help you know which of these opportunities you should be considering and get a game plan created for you and your family!
David Gourley, CSLP® is the Founder and lead Financial Planner at K-12 Planning, an independent financial planning firm specializing in finance for teachers. He served for eight years as a high school mathematics teacher before transitioning into the financial services industry. He started K-12 Planning in 2024 and his passion for serving as a fiduciary for teachers and a student loan planning expert runs deep, as his wife and several other family members have served as educators for years.
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