As 2024 nears its inevitable end, now is the perfect time to focus on organizing your finances and setting the stage for a prosperous 2025. 

At 1st Choice Financial Services, our team of Central PA retirement advisors specializes in utilizing proactive year-end financial planning strategies to help ensure you’re on track to pursue your goals in 2025 while optimizing tax strategies and planning for retirement. 

Whether you’re focusing on building your retirement nest egg or are seeking ways to reduce your tax liabilities, our comprehensive year-end financial checklist is intended to guide you through various financial planning alternatives you can use before the end of the year. 

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Year-End Financial Planning Checklist

1. Review Your Retirement Plan
   • If you plan on retiring in the next five to ten years, now is the time to ensure your savings align with your goals and timelines. Evaluate your contributions to 401(k)s, IRAs, and other retirement savings accounts. 
   • Consider maximizing contributions to take full advantage of tax-deferred growth:
     • If you’re 50 or older, make catch-up contributions to your retirement accounts.
     • Planning when to start Social Security benefits can significantly impact your net income during retirement. Work with a Central PA retirement planner experienced in Social Security optimization to develop your personal strategy.

2. Reassess Your Income Plan
   • Review your current sources of income and project your cash flow for the coming year.
   • Consider if an annuity is appropriate for you because it can provide a stable income stream, especially in retirement. If you have or are considering annuities, evaluate how they fit into your broader income strategy.
   • For those with company pension plan benefits, confirm payout options and ensure they are aligned with your other sources of income.
   • Consider other income streams, such as passive, income-producing real estate investments, that will help fund your retirement.

3. Conduct a Comprehensive Tax Review
   • Tax planning is crucial before the year ends. Taking steps now can reduce your tax liability on April 15, 2025.
   • Offset gains by selling underperforming investments to realize losses used for tax loss harvesting.
   • Consider donating to qualified organizations to lower your taxable income. This can be done through direct contributions or other charitable giving vehicles such as a Charitable Remainder Trust (CRT) or a Donor Advised Fund (DAF). Talk with a Central PA retirement advisor to see what produces the best results for your situation. 
   • Consider a Roth IRA conversion if your current tax bracket is lower than expected in your early retirement years. This involves converting funds from a traditional IRA to a Roth IRA for long-term tax-free growth and distributions. In the year you convert funds from a traditional IRA to a Roth IRA, the converted amount is treated as taxable income for the year of the conversion. 
     • This means you will owe income taxes on the conversion amount because it was not taxed in the traditional IRA. Both types of IRAs produce tax-free growth, but only the Roth IRA produces tax-free distributions. The tax rate during the conversion year depends on your total taxable income, including the converted amount and other income sources for that year.
     • Here’s an example: Suppose you’re in the 22% tax bracket and decide to convert $200,000 from a traditional IRA to a Roth IRA. That $200,000 will be added to your income for the current tax year, resulting in $44,000 in taxes at the 22% rate. While this upfront tax bill is significant, it could be a smart move if your tax rate increases in retirement. 

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4. Revisit Your Estate Plan
   • Review and update beneficiaries on retirement accounts, life insurance policies, and wills.
   • Ensure you have proper Power of Attorney and Healthcare Directive(s). These documents should be updated yearly to reflect your current wishes.
   • If applicable, revisit trust documents to ensure they are aligned with your current goals and tax laws.

5. Review Your Insurance Policies
   • Insurance is a cornerstone of financial security. Make sure you have the right types and amounts of coverage in place.
   • Evaluate your life insurance policy to ensure it provides adequate protection for your loved ones. 
   • If you need additional healthcare coverage later in life, consider strategies you can implement now to help meet your needs in the future. Explore whether this coverage fits into your financial plan to address potential healthcare costs later in life.

6. Evaluate Your Investment Allocations
   • Because markets fluctuate, your investment strategy should readily adapt to your current goals and risk tolerance.
     • Rebalance your portfolio to maintain your preferred target asset allocations.
     • Ensure your investments are spread across various sectors of the economy and asset classes to minimize your risk of large losses.
     • Review your retirement accounts regularly to ensure they are properly allocated based on age, goals, time horizon, and risk tolerance.

7. Plan for Healthcare Expenses
   • If applicable, maximize contributions to your Health Savings Account (HSA).
   • If you’re already enrolled in Medicare, review your coverages during open enrollment to ensure you have optimized your coverages.

8. Organize Financial Documents
   • Gather tax returns, investment statements, insurance policies, and estate planning documents.
   • Use a secure platform to store electronic copies of important records.

9. Set Financial Goals for 2025
   • Reflect on your progress in 2024 and set realistic, measurable goals for the coming year:
     • Short-Term Goals: Examples include saving for a vacation, paying off more expensive debt, or building an emergency fund.
     • Long-Term Goals: Focus on retirement milestones, legacy planning, or charitable giving strategies.

Your 2025 Future Starts Today

As 2024 winds down, your planning steps can lay the foundation for a stronger 2025. From reviewing your financial goals to optimizing your tax strategy, this year-end checklist isn’t just about tying up loose ends—it’s about setting the stage for growth, stability, and pursuing goals during the year ahead.

At 1st Choice Financial Services in Central, PA, we’re here to help you make the most of these final weeks of the year. Whether preparing for retirement, planning for major life events, or simply looking for a financial partner to keep your investments on track, our team is ready to provide the guidance you need.

Let’s close 2024 with intention and step into 2025 with a clear plan. Contact us today to schedule a review and take the first step toward a brighter financial future.

Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, 1st Choice Financial Services, Inc., and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security, or any security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Foundations deems reliable any statistical data or information obtained from or prepared by third party sources that is included in any commentary, but in no way guarantees its accuracy or completeness.

Tax loss harvesting is a strategy that may help minimize the amount of current taxes you have to pay on your investments by choosing to sell an investment at a loss.  It is only appropriate for certain taxpayers in certain scenarios.  Please review your retirement savings, tax and legacy planning strategies with your legal/tax advisor before attempting a tax loss harvesting strategy.

A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies.