As if you needed another reminder that the end of year is fast approaching, I’m sharing eleven quick but impactful planning ideas to consider as we close out another calendar year. These ideas can help you maximize retirement, minimize taxes, and even make a difference to loved ones or charities. You’ll also find a handy download with key retirement, HSA, and estate planning limits.
1. Maximize Your Retirement
The IRS recently released their Contribution and Benefit Limits for 2025.
401(k) participants will be getting a bump in how much they can contribute by $500 to $23,500.
Catch-up contributions:
- Ages 50-59, 64+ or older will allow a combined $31,000 of contributions!
- $7,500 for this age range did not change from 2024’s numbers.
“Super” Catch-up contributions:
- NEW FOR 2025!!! - Ages 60-63 will allow a combined $34,750 ($11,250 super catch-up). The SECURE 2.0 Act introduced these contributions which are designed to provide a substantial boost to retirement savings during these critical years.
Contribution limits to Traditional and Roth IRAs remain the same at $7,000.
- Catch-up contribution remains at $1,000 (Age 50+)
Planning Tip:
Don’t forget to max-out your 401(k) contribution for this year. If you are ages 50-59 or 64 years or older (or will turn 50-59, 64+ years old anytime during 2025), you also are eligible for the catch-up contribution. Make sure you have contributed both the $23,000 deferral and the $7,500 catch-up maximum (for a total of $30,500) by December 31st. Then, in January, you can elect to defer the new higher amount for 2025.
You can download this chart for future reference here: 2025 Contribution and Benefit Limits
2. Maximize Your Health Savings Account (HSA)
HSAs can be a powerful savings tool for high income families. In fact, they are the only investment vehicle that delivers triple-tax benefits: contributions are tax-deductible, earnings grow tax-deferred, and withdrawals are tax-free when used for qualified medical expenses.
You can read more about how high-net-worth families use HSAs here.
If you are covered under a high-deductible-health-plan you have the option to make a tax-deductible contribution to your HSA.
For 2025, a high-deductible-health-plan is defined as one which requires minimum annual out-of-pocket deductibles of $1,650 for an individual and $3,300 for families. Yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) cannot be more than $8,300 for an individual or $16,600 for a family. You also must not be enrolled in Medicare, covered by another health plan that is not a high-deductible-plan, or claimed as a dependent on someone else’s tax return.
Planning Tip:
You have until April 15th to maximize contributions and have them count for 2024.
3. Maximize Your Charitable Contributions
- In 2024, the Standard Deduction for filers under the age of 65 is $14,600 for single filers or $29,200 for married filing jointly.
- For single tax filers above the age of 65 (or under the age of 65 and blind) you claim an additional standard deduction of $1,950.
- For single tax filers above the age of 65 AND blind, the additional standard deduction is doubled to $3,900.
- For joint tax filers above the age of 65 (or under the age of 65 and blind) you claim an additional standard deduction of $1,550 per qualifying individual.
- For joint tax filers above the age of 65 AND blind, the additional standard deduction is doubled to $3,100 per qualifying individual.
It is estimated that more than 85% of taxpayers claim the standard deduction on their tax return.
However, high earners often itemize deductions when the total of mortgage interest, state and local taxes (SALT), charitable contributions, and/or medical expenses exceed the standard deduction. To take full advantage of charitable deductions (other than the obvious altruistic benefits), you really must itemize.
If you’ve had an uncharacteristically high income this year, you can use “charitable bunching” by making a larger than usual tax-deductible contribution to a Donor Advised Fund (DAF). Bunching allows you to advance your next few years of charitable gifts into the current tax year. The aim is for this deduction to exceed the standard deduction so you can take a large tax deduction today. In future years, you then direct your DAF to make gifts to charities on your behalf with the timing and dollar amount of your choosing.
You can read more about DAFs and making the most of your charitable contributions in our updated Charitable Planning Guide.
Planning Tip:
Cash is not always the most efficient asset to give to charity. Consider donating highly appreciated securities to a Donor Advised Fund (or directly to a charity) to maximize your charitable contribution and minimize taxes.
4. Required Minimum Distributions, IRA Contributions, and 529s
The SECURE Act was initially passed by Congress at the end of 2019 and intended to improve retirement savings opportunities, hence the acronym “Setting Every Community Up for Retirement Enhancement”. It was a big deal at the time, the most significant piece of retirement legislation since the 2006 Pension Protection Act.
Congress came together to pass SECURE 2.0 at the end of 2022, building on this popular legislation and clarifying some of its provisions.
The SECURE 2.0 Act includes 92 new provisions designed to promote savings, add incentives for businesses to offer retirement plans to their employees, and provide more overall flexibility to those saving for retirement. Here are some notable points:
- The update pushed back the starting date for Required Minimum Distributions (RMDs) from IRAs/401(k)s to age 73 (if you reach age 72 after December 31, 2022). The original law was age 70 ½. SECURE Act made it age 72. And now, the RMD age will increase again in 2033 to age 75! This allows savers more time for additional compound growth and tax deferral in their retirement plans.
- Contributions to Traditional IRAs can be made at any age. Under original rules, contributions were disallowed after reaching 70 ½. If you have earned income and a desire to pad your Traditional IRA, there’s still time to make a contribution prior to April 15th.
- Starting in 2024, 529 College Savings plan account holders can move money to a Roth IRA under certain conditions. You can read more here.
Planning Tip:
If you turned 73 years old in 2024, you have until April 1st of 2025 to take your first RMD. However, that means you’ll take two RMDs in the same calendar year. Subsequent RMDs must be taken by December 31st annually thereafter.
For 529 Plans, remember to reimburse yourself for all those qualified college expenses. All reimbursements must be made in the year the expense was incurred.
5. Gifting to Loved Ones
The estate tax exemption is $13,610,000 per person in 2024 and rises to $13,990,00 in 2025.
For those above these exemption amounts, a federal estate tax is levied at a 40% rate on all assets above the exemption. (The rate is 18-39% up to $1,000,000 and then 40% on anything above that. We’ll use 40% for simplicity.)
These unprecedented and large estate tax exemption limits are scheduled to sunset in January of 2026. The exemption would revert back to an estimated $7,000,000 per person, depending on inflation the next two years.
It may be a good time to sit down with your financial advisor and estate attorney to determine if large gifts to children and/or charities make sense for your situation.
Remember, too, that anyone can give tax-free gifts up to $18,000 per person this year. (This limit gets a boost in 2025 to $19,000.) Annual gifts do not rollover, so make your gifts before year-end.
Planning Tip:
Since the annual gifting limit is $18,000 per person in 2024, a husband and wife with two married children and four grandchildren could gift a total of $288,000 in 2024 without affecting their lifetime gift and estate tax exemption. (That’s $18,000 to each of the 8 family members, from both husband and wife, or $36,000 x 8!)
6. Make a Qualified Charitable Distribution (QCD)
One of the most exciting aspects of the Pension Protection Act of 2006 was the Qualified Charitable Distribution, or QCD. A QCD allows you to make a charitable donation directly out of an Individual Retirement Account, or IRA, up to a maximum of $105,000 per person in 2024 and will increase to $108,000 in 2025. The amount donated directly offsets the Required Minimum Distribution, or RMD.
High-net-worth individuals in the RMD stage are typically receiving more in required distributions than they want or need. By donating to your favorite charity directly from an IRA or an Inherited IRA, your required distribution and taxes are reduced under the QCD method. This is especially important for those unable to itemize their deductions, as one can still receive the full benefit of their charitable donation while claiming the standard deduction. If you’re currently taking RMDs or expect significant future RMDs, and are making charitable donations, QCD’s can be a fantastic strategy.
Planning Tip:
Review your current and planned charitable contributions. If you're 70½ or older, consider donating directly from your RMD or in preparation for your future RMDs, as you can make a QCD prior to age 73 provided you’ve reached age 70½.
401(k) and 403(b) are ineligible for QCDs, but you can simply rollover your employer plan to an IRA if you wish to execute such a transaction.
7. Tax Loss Harvesting
The market has delivered attractive returns (so far) this year, but not all sectors, asset classes, or individual securities have participated. Some of the portfolio holdings in your taxable investment account may have losses that you can harvest for tax purposes.
Tax-loss harvesting is the process of selling an investment that has dropped in value below an investor’s cost basis to lock in a paper loss. The investor then reinvests the sale proceeds into a different security that still meets their overall investment risk profile and asset allocation strategy. The recognized loss can then be used to offset taxable gains in other parts of the portfolio, or it can be carried over to offset capital gains in future years.
For our clients, we’ve been actively harvesting losses all year, where applicable. In fact, it’s such a core part of our value proposition that we wrote a quick explainer on it: When Life Hands You Lemons – The Power of Tax Loss Harvesting.
Planning Tip:
2024 may be a great time to divest from concentrated stock positions that have historically carried large, embedded capital gains. You can reinvest into a diversified portfolio and use capital losses from this year (or those carried forward on your return from 2023) to offset some or all of those realized gains.
8. Tax-Gain Harvesting
Conversely, if you are experiencing a low taxable income year, you might consider harvesting gains in your nonqualified / taxable accounts.
Tax-gain harvesting works the opposite of loss harvesting, where an investor deliberately realizes capital gains to take advantage of favorable tax rates and increase their cost basis. See below:
Single filers can realize capital gains at a 0% tax rate if their taxable income is $47,025 or less.
Joint filers can realize capital gains at a 0% tax rate if their taxable income is $94,050 or less.
Planning Tip:
The strong performance in 2024 may present an opportunity to realize capital gains from concentrated positions with minimal tax consequences, while reallocating the proceeds into a more diversified portfolio.
9. Roth Conversion
If there is not an immediate reliance on your investment assets for retirement income, and you are experiencing a low taxable income year, consider converting all or a portion of a Traditional IRA to a Roth IRA. Doing so means you’ll recognize income today on the amount converted, but withdrawals in the future will be tax-free.
The first $11,600 of ordinary income (beyond standard or itemized deductions) for single filers and $23,200 for married filers carries just a 10% federal tax rate. The rate is only 12% up to $47,150 and $94,300 respectively. You may consider converting up to the max of the first two brackets if your expected income in the future (earned income, Required Minimum Distributions, Pension, etc.) will be higher.
If you’re carrying an ordinary loss on your tax return, you could convert Traditional IRAs to Roth essentially tax-free as you eat into the loss.
Planning Tip:
Converting from Traditional to Roth is not an all or nothing proposition. You can make partial conversions and spread them out over several years.
10. Tax Efficient Withdrawal Sequencing
If there is an immediate need for income from your investment assets, and you are in a low taxable income year, consider splitting withdrawals between qualified and nonqualified accounts. Doing so means you may recognize more taxable income today but could significantly reduce the overall amount of taxes paid over the remainder of your lifetime.
Planning Tip:
The idea is to utilize taxable distributions from your Traditional / pre-tax retirement accounts to fill the lower 10% and 12% bracket(s). If left to compound uninterrupted, retirement account balances can grow rather quickly, often resulting in larger annual RMDs than may be needed in retirement. This can lead to higher ordinary income tax rates, a higher percentage of social security benefits being taxed, and a potential increase in Medicare premiums due to a monthly surcharge later in retirement.
You can learn more about how Social Security benefits are taxed here.
11. Update Your Beneficiary Designations
The end of the year is a great time to make sure your beneficiaries are current. Log into your 401(k) plan, speak with your HR administrator, pull up your IRAs and life insurance policies, and request a review of your beneficiary designations to verify that they match your current wishes.
Life transitions, such as divorce or the death of a spouse, are incredibly difficult. It’s understandable that during these challenging times, beneficiary designations are sometimes overlooked and left unchanged. This is your reminder to review them.
Planning Tip:
Whatever you have listed on a beneficiary form usually overrides what is written in your will or trust. A beneficiary form provides its own direction for the asset it covers, so make sure it accurately reflects your wishes.
Now is an ideal time to review these eleven year-end planning tips, as even one of them can make a positive difference in your plan.
Please reach out to us to talk through any of these planning opportunities in more detail.
Happy Holidays and Happy Planning,
Brian