As the year comes to a close, here are a few stratigies that will help you set yourself up for investment success in 2025 and beyond.
The end of the calendar year is a good time to review your finances and ensure that you’re on track to meet your goals.
A few year-end steps – like completing your retirement plan contributions or distributions and making charitable donations or gifts – can help prepare you for success in the coming year and beyond.
Tax-loss harvesting may help you offset capital gains taxes, but you should keep the wash sale rule in mind.
Retirement Plans, Accounts and Contributions
Contributions to a traditional or Roth IRA for 2024 must be made by the due date for filing your 2024 income tax returns (not including extensions) – or April 15, 2025. Review what you have already contributed for 2024 and plan for any future retirement contributions.
If you own a business and want to set up a retirement account for your business, the SECURE Act extended the deadline to set up and fund most employer-sponsored qualified retirement plans to the sponsor’s tax filing deadline, including extensions (generally September 15 or October 15 of the following year, depending on the type of entity).
HIGHLIGHTS OF THE ACT
A provision that increases the tax credit for small employer pension plan startup costs from 50% to 100% for the first three years and creates a new tax credit of up to $1,000 per employee for employer contributions to new plans;
Mandatory automatic enrollment of employees in 401(k) and 403(b) plans once they become eligible;
An increase in the age at which RMDs are to begin, to 73 in 2023 and 75 in 2033;
A provision that allows student loan payments by employees to be treated as elective deferrals for purposes of employer matching contributions;
Creation of the Saver’s Match, which involves a federal matching contribution into a taxpayer’s IRA or retirement plan account;
Waiver of the 10% tax on early distributions for emergency personal expenses, employees with a terminal illness, in cases of domestic abuse, and instances in which an employee is impacted by a qualified federally declared disaster;
Creation of a Starter 401(k) or a safe harbor 403(b) for employers with no retirement plans;
More generous rules to allow a greater number of part-time workers to participate in employer-provided retirement plans;
A provision that allows employers to offer pension-linked emergency savings accounts to their employees; and
Provisions that allow employees and employers to make larger contributions to Simple plans.
Expanding Coverage and Increasing Retirement Savings
One of the main reasons many Americans reach retirement age with little or no savings is that too few workers are offered an opportunity to save for retirement through their employers.
However, even for those employees who are offered a retirement plan at work, many do not participate. But automatic enrollment in 401(k) plans – providing for people to participate in the plan unless they take the initiative to opt out – significantly increases participation.
Retirement Plan and Required Minimum Distributions
Take any required minimum distributions from your own retirement accounts before December 31 to avoid stiff penalties. Under SECURE Act 2.0, the age at which individuals must take their first required minimum distribution rose to 73. You can defer your first RMD to April 1 of the year after the year in which you turn 73, but after your first RMD, subsequent RMDs must be taken by December 31 of each year to avoid additional taxes.
On July 18, 2024, the Internal Revenue Service (IRS) issued Final Regulations regarding RMDs from inherited IRAs and qualified plan accounts. No excise tax will be assessed for designated beneficiaries (and certain others) who inherited IRAs between 2020-2023 and do not take a minimum distribution in 2024. However, on January 1, 2025, final RMD regulations will become effective and certain designated beneficiaries will be required to take RMDs in 2025. These rules are complex and we recommend clients consult with their own tax advisors before making decisions related to required distributions from inherited IRAs.
Starting this year, employer-provided Roth accounts (such as Roth 401(k)s) will no longer require that the employee account-holder take RMDs.
Harvest Investment Losses to Offset Capital Gains
Tax loss harvesting can help you offset taxes on capital gains but beware of the wash sale.
We break down how it works in this article.
Tax Loss harvesting Works
Tax-loss harvesting is an optimization method that allows you to offset taxes on capital gains. It works by selling your underperforming investments and replacing them with comparable assets. Then, you’ll be able to claim the losses you’ve incurred when you file your taxes, lowering the amount you need to pay.
Here’s a step-by-step look at how it works:
Identify losses. This is where you take a holistic overview of the assets in your portfolio. Specifically, the ones you would target for loss harvesting would be those that have decreased in value.
Sell losing positions. Once you’ve identified losing assets, the next step is to sell them. This makes the losses count as a potential offset to your taxes.
Buy similar (not identical) assets. After selling the assets, you’ll have to replace them with similar ones. They can’t be the exact same, though. This would violate the IRS’s “wash-sale” rule, which disallows buying too closely related investments.
Offset gains. As long as your capital gains fall below your losses for the present year, you can write off up to $3,000 of losses on your taxes. If you exceed this, however, you’re also able to carry the remaining losses forward to subsequent years, helping reduce your future losses.
What is the Wash Sale Rule?
The wash-sale rule, according to the U.S. Securities and Exchange Commission (SEC), prohibits buying “substantially identical securities,” including contracts and options, 30 days before or after selling another for a loss.
Violating the rule means that you won’t be able to use the sale of the losing security to offset your tax losses in the current year. So, if you plan on using tax-loss harvesting, it’s imperative to follow it to the letter.
Tax-loss harvesting is an optimization method that allows you to offset taxes on capital gains.
Make Gifts Before Year End
In 2024, you can make an annual gift of up to $18,000 ($36,000 for married couples) to each recipient – the annual exclusion.1 If you don’t use your annual exclusion in a particular year, you lose it. Even if you are over the annual exclusion in a given year, you can make aggregate lifetime gifts of up to $13.61 million ($27.22 million for married couples) – the lifetime exemption applicable to 2024 – without triggering gift or estate taxes.
If you used your full lifetime exemption in 2023, you have an additional $690,000 ($1.38 million for married couples) to give away in 2024. The unified credit for gift and estate tax is currently set to revert to pre-2018 levels at the end of 2025, and it could revert sooner if Congress addresses this issue in legislation, although we believe this is unlikely in a divided Congress.
Charitable Contributions
Charitable contributions may be deductible from U.S. federal taxable income if certain requirements are met and you itemize deductions, although the deduction is limited to a percentage of your adjusted gross income.
Subject to exceptions, deductions that exceed the applicable limit can generally be carried forward for five years. The allowable deduction is generally the fair market value of the gift subject to adjustments.
Registered Investment Advisors
Registered Investment Advisors, are fiduciaries, meaning your interests always come first. A RIA must register with the SEC or state securities regulator, depending upon the assets under management.
Financial Planners help individuals and corporations meet their short-and long- term financial goals. Services include asset allocation, estate planning, tax planning, retirement and more.
There are several methods by which you might pay an investment advisor, including a fixed fee, an hourly fee, or a percentage of the value of your assets they are managing.
BrokerCheck
Begin with a search of the firm and it's representatives with FINRA's BrokerCheck!
About BrokerCheck
BrokerCheck is a free tool from FINRA that can help you research the professional backgrounds of investment professionals, brokerage firms and investment adviser firms.
Firm Profile: Akin Investments, llc CRD# 281450
Individuale Profile: Stephen Herbert Akin CRD# 1104380
39 Years in the business
Where BrokerCheck Information Comes From
Both brokerage firms and individuals must be registered with FINRA to conduct securities transactions and business with the investing public. Individuals might also be required to meet state registration requirements. Additionally, firms must meet certain membership standards to attain registration. The information about brokerage firms and associated registered investment professionals that you find in BrokerCheck comes from the Central Registration Depository (CRD®), which is the securities industry online registration and licensing database. Information in CRD is obtained through forms that investment professionals, brokerage firms and regulators complete as part of the securities industry registration process.
The information about investment adviser firms and representatives comes from the Securities and Exchange Commission's Investment Adviser Registration Depository (IARD) database.
Take the next step, schedule a free consultation and learn how we can help you. Asset and Cash Management Solutions
Kommentare