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Top 10 Year-End Financial Planning Tips

Top 10 Year-End Financial Planning Tips

November 28, 2023


2023 is almost over and that means it’s time to review where you stand, year-to-date, with your financial goals and plan for 2023. The following year-end financial planning checklist highlights important points to consider when reviewing at year-end with your advisor.

Max Out and Plan Your Retirement Contributions

Are you taking full advantage of your employer plan retirement accounts? If not, consider increasing contributions to max out your employer matches. Boosting contributions to an IRA could offer you tax advantages as well. 

Fund a 529 Education Plan & Take Advantage of Grants and Tax Deductions

Setting up a 529 College Savings Plan is always a welcome gift when you invest in your child, your grandchild, niece, or nephew. You can allow your funds to grow tax-deferred for several years and they can be withdrawn tax-free to pay for qualified education expenses. 529 plans with NextGen offer multiple grants. You could open an account with automatic funding or contribute the max amount and receive additional funds through the grants.  Enroll before the end of the year to receive NextGen matching grants.

Annual Gifts to Loved Ones & Charitable Gifts

Annual exclusion gifts of up to $17k (or $34k for married couples) can be given to individuals free of gift tax consequences. These limits also apply to 529 college savings plan contributions. Also, you can pay qualified education or medical expenses on behalf of loved ones directly without gift tax considerations.

Donating to charity is another good strategy to reduce taxable income. Are you interested in looking into various gifting alternatives, including donor-advised funds? If you opt to make charitable contributions in 2023, you can deduct up to $600 for charitable contributions even if you don’t itemize deductions. If you're taking a required minimum distribution,  you can still make a QCD of up to $100,000 per person directly to a charity — and married taxpayers filing jointly may exclude up to $100,000 donated from each spouse’s IRA.

Use Flexible Spending Account (FSA) Dollars and Review Your Health Savings Account (HSA)

Do you have an FSA? Your employer can modify your retirement plan through the end of this year to allow you to “spend down” unused FSA funds on any health care expense incurred in 2023.

If you are enrolled in a high deductible plan, you are eligible to contribute to an HSA account. You technically have until April 15th of the following year to make the full contribution amount. Consider using a custodian that allows you to invest assets if you’ve accumulated a large balance.

Take Advantage of Marginal Tax Rates

When on the threshold of a tax bracket, ask your advisor if you can be put in the lower bracket by deferring some income to 2024. If you itemize, discuss the possibility of accelerating deductions such as medical expenses or charitable donations into 2024 (rather than paying for deductible items in 2023), which may have the same effect.

Here are a few key 2023 tax thresholds to keep in mind: 

2023 Tax Brackets

Rebalance Your Portfolio & Harvest Losses

Ask your advisor to review capital gains and losses with you to reveal any tax planning opportunities; for example, you may be able to harvest losses to offset capital gains.

  • Make sure your risk tolerance aligns with your financial goals.
  • You can offset the taxes to capital gains by selling off poor-performing investments at a loss. 
  • Can deduct up to $3,000 in capital losses against ordinary income if those losses exceed gains. 
  • Be careful: There are distinctions between short and long-term capital gains/losses. Check with your advisor to see if this strategy applies to your account. 

Required Minimum Distributions (RMDs)

  • Do Not Forget: there is a 50% penalty on the amount not taken out.
  • The RMD starting age is now 73. Anyone born before 12/31/1950 will have to take out an RMD.
  • Use these funds to help pay for living expenses, reinvest in a taxable investment account, or consider a QCD if you don’t need the funds.

You will need to file IRS Form 8915-E to report the CRD repayment or its inclusion in taxable income. Remember that those who choose not to repay the CRD will need to elect on their 2023 income tax returns how they plan to pay taxes associated with the CRD. It’s important to point out, however, that once you select a strategy, you can’t change it. 

Adjust Withholding

Are you looking at an estimated tax penalty? If you may be subject, consider asking your employer (via Form W-4) to increase withholding for the remainder of the year to cover any shortfalls. The biggest advantage of this is that withholding is considered to be paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can also be used to make up for low or missing quarterly estimated tax payments. If you collected unemployment in 2023, any benefits received are subject to federal income tax. Taxes at the state level vary, and not all states tax unemployment benefits. If you received unemployment benefits and did not have taxes withheld, you may need to plan for owing taxes when filing 2023 returns.

Review Benefits of a Roth Conversion

Evaluate converting all or some of your pre-tax Traditional IRA to an after-tax Roth IRA (read more in our recent note on this topic). You will be required to pay taxes on the amount converted, but some reasons it might make sense are:

  • Income tax rates are likely going higher.
  • You can pay taxes using cash outside of your Traditional IRA.
  • Legacy planning; non-spouse beneficiaries are now required to withdraw the entire account balance within 10 years of inheriting an account. Roth funds will come out tax-free while Traditional IRA funds will be taxable income to the beneficiary.

Review Estate Documents and Insurance Coverage 

Now is a good time to review your beneficiary designations and update estate plans to make sure they align with your goals and account for any life changes or other circumstances. Below are items that should be done on an on-going basis:

  • Check trust funding
  • Update beneficiary designations
  • Take a fresh look at trustee and agent appointments
  • Review provisions of powers of attorney and health care directives
  • Review documents to ensure you have a full understanding

Make sure your insurance coverage limits are sufficient. Many homes have increased in value, or maybe you did a home improvement recently. Make sure your umbrella coverage is enough to cover your investable asset levels.

Keep in mind, this checklist is not necessarily all-encompassing, but it does serve to help you keep your financial plan in mind, even during the holiday season and global pandemics. As always, check with a tax professional regarding any decision which may impact your taxes. If any of these financial moves raise questions, please feel free to contact us and schedule a time to review or create a tax-smart investing plan that works for you and your family. 

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisors LLC nor any of its representatives may
give legal or tax advice.

Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This
information is found in the issuer's official statement and should be read carefully before investing.

Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s
529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult
their financial or tax advisor before investment in any state's 529 Plan.


Check out our 2023 Year End Financial Planning Checklist