With the holiday lights and decorations packed neatly (or not) in storage for next season, the party hats and noisemakers swept up with the celebration confetti, and life getting back into its regular rhythm, it’s a good time to reflecting on the past year and important to look at a planning checklist for the next year.
Give yourself some time to go over these items.
1. Financial goals. Did you meet your financial goals for 2023? Do these goals need to be changed or updated? Review your investments to help ensure you are meeting your financial goals, both short- and long-term goals.
2. Year review. Did you have any life changes during the prior year that need to be addressed? This would include selling, transferring, and/or purchasing a major financial asset; a change in marital status; an addition to your family; or receiving a gift or inheritance.
3. Market Meltdown. Are you adequately prepared for the possibility of another downturn or even a recession? If not, what steps should you be taking now?
4. Emergency fund. The last several years have taught many a financial lesson, one being the importance of an emergency fund. Financial experts recommend having three-to-six months of expenses saved in a fund to deal with life’s difficulties.
5. Required Minimum Distributions. The SECURE 2.0 Act raised the age that you must begin taking withdrawals from retirement accounts. Beginning in 2023, that age is 73. If you reached age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for tax year 2024. If you reach age 73 in 2024, your first RMD will be in April 2025. (If you reached age 73 in 2023, you were 72 in 2022 and subject to the age 72 RMD rule in effect for 2022. If you reached age 72 in 2022, your first RMD was due by April 1, 2023, based on your account balance on December 31, 2021, and your second RMD was due by December 31, 2023, based on your account balance on December 31, 2022.) The penalty for failing to take RMD’s was reduced to 25% last year. If you inherited any type of retirement account, check if you need to take a Required Minimum Distribution. If so, whose life is it based on: yours or the decedents? For more info, check out the IRS https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
6. Inherited Plan Benefits. The SECURE Act generally requires that designated beneficiaries of persons who die after December 31, 2019, take inherited plan benefits over a 10-year period. Eligible designated beneficiaries (i.e., surviving spouses, minor children of the plan participant, disabled and chronically ill beneficiaries and beneficiaries who are less than 10 years younger than the plan participant) are not subject to this rule. Conduit trusts and see-through accumulation trusts are required to use the 10-year payout rule unless the trust is for the sole benefit of a disabled or chronically ill beneficiary. Non-see-through accumulation trusts will continue to use the five-year payout period, which was required before the SECURE Act.
7. Max out your 401(k)/IRA contributions, including any catch-up contributions. You have until April 15, 2024, to fund your IRA for 2023. Previously, individuals were not able to contribute to their traditional IRAs in or after the year in which they turn 70.5. However, the Secure Act eliminates this age cap. If you have an employer-sponsored retirement account, you should review where your money is invested and make changes to this account. Consult your investment advisor/tax accountant for any help. If you leave a job and your 401(k) behind, take the time to consolidate accounts. For 2024, you can contribute $7,000 up from $6,500 to a traditional IRA, plus a $1,000 catchup contribution if you are 50 or older. For a 401(k), you can contribute up to $23,000 up from $22,500, plus a $7,500 catchup contribution if you are 50 or older.
8. Research charitable contributions. If you are considering making any year-end charitable contributions, you may want to do the research now. Just as with investing in a for-profit firm’s stocks, it’s still important to ensure that the money you put into a charity will have a good return on your investment (i.e., making sure the money you give will be efficiently put to good use) so your donated resources are not squandered. Check out our Bowen Reports on charitable giving. https://bowenasset.com/category/charitable-giving/
9. Donate. The temporary “above the line” charitable donations deduction for taxpayers claiming the standard deduction has ended. This was the $300 deduction ($600 for married filing jointly).
10. Cash gifts and taxes. If you can afford to be generous, in 2024 you can give up to $18,000 each to any number of individuals with no gift tax or reporting requirements, up $1000 from 2023. Also, there is no tax for the recipient. Unused portions can’t be carried over to the next year. Individuals can make unlimited gifts on behalf of others by paying their tuition costs directlyto the school or their medical expenses directly to the health care provider.
11. Care for the caretakers. In an emergency or the event of incapacity, could those who need to know—adult children, caretakers, or others given power of attorney—quickly find the documents and information such as bank account numbers, house deeds, wills, and tax returns that they need in order to continue taking care of business?
https://bowenasset.com/when-life-goes-sideways-be-prepared-to-help-your-helpers/
12. Check on all beneficiaries on life insurance policies, retirement accounts, and those named on Transfer on Death accounts to make sure these are accurate. These types of investment accounts pass to the beneficiary when the owner dies, despite what the will may state.
13. Cyber-security. Well-publicized data breaches within companies and government entities have highlighted the increasing sophistication of hackers. But the threat extends well beyond these settings. Be vigilant as cyberthreats continue to evolve and make it a priority to take extra steps to protect your personal information and financial security. By following a few guidelines, you can make your information less attractive to potential thieves. One of those guidelines is to change your passwords at a minimum, once a year. For more on this and to mention a password manager, see our recent report on Cyber-security. https://bowenasset.com/use-that-cookie-jar-cybersecurity-and-you/
14. Audit insurance policies. Too little coverage leaves you open to financial devastation, but as life circumstances change, you may not need as much as you previously did. Review all your coverage, including auto, homeowners (rental), life, disability, and umbrella.
15. Finding an accountant. If you need an accountant or are thinking of changing accountants, now is the time to search for a new one. When choosing an accountant, consider these questions: What degrees or licenses does the accountant have? How many years has the accountant been in the business? What fees will be charged? Is the accountant’s expertise relevant to you? Who will prepare your return? Will the accountant represent you if you are audited? https://bowenasset.com/these-taxing-times-are-a-good-time-to-select-a-tax-pro/
16. Look into 529 accounts. A grandparent–owned 529 account, which is free of federal income taxes until the money is withdrawn, is not reported on the Federal Student Aid (FASFA) form. Thus, it does not affect the grandchild’s financial-aid eligibility. However, once it is distributed, it is considered the grandchild’s income and may affect how much the grandchild will receive. Grandparents can also open IRAs for their grandchildren. They can contribute up to 100% of the grandchild’s earned income into the account. Check with your account and financial advisor for the best way to set these up. For more on this, look at our blog post “College Credit: 529 and Coverdell Educational Accounts.”
https://bowenasset.com/college-credit-529-and-coverdell-educational-accounts/
17. Review financial and investment documents. It is easy to get into the habit of keeping every financial or investment document forever, just in case. But if your New Year’s resolution is to get your financial house in order, our blog post “How Long to Keep Important Financial Papers” has suggestions about retaining financial and investment documents.
https://bowenasset.com/how-long-to-keep-important-financial-papers/
For the Tax Year 2024:
o 37% for incomes over $609,350 ($731,200 for married couples filing jointly)
o 35% for incomes over $243,725 ($487,450 for married couples filing jointly)
o 32% for incomes over $191,950 ($383,900 for married couples filing jointly)
o 24% for incomes over $100,525 ($201,050 for married couples filing jointly)
o 22% for incomes over $47,150 ($94,300 for married couples filing jointly)
o 12% for incomes over $11,600 ($23,200 for married couples filing jointly)
o 10% for incomes of $11,600 or less ($23,200 for married couples filing jointly)
Standard deduction for married couples filing jointly for Tax Year 2024 rises to $29,200, up from $1500 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, up $750, and for head of households, the standard deduction will be $219,00 for the tax year 2024, up $1100 from the amount for tax year 2023.
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As always, if you have any questions about this report or any other questions, please reach out to Bowen Asset at info@bowenasset.com or (610) 793-1001.
Disclaimer
While this article may concern an area of investing or investment strategy in which we supply advice to clients, this document is not intended to constitute a complete description of our investment services and is for informational purposes only. It is in no way a solicitation or an offer to sell securities or investment advisory services. Any statements regarding market or other financial information is obtained from sources which we and/or our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All expressions of opinion reflect the judgement of the author on the date of publication and are subject to change.
Past performance should not be taken as an indicator or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. As with any investment strategy or portion thereof, there is potential for profit as well as the possibility of loss. The price, value of and income from investments mentioned in this report (if any) can fall as well as rise. To the extent that any financial projections are contained herein, such projections are dependent on the occurrence of future events, which cannot be predicted or assumed; therefore, the actual results achieved during the projection period, if applicable, may vary materially from the projections.