Beyond the Obvious: Year-End Personal Finance Tips and Strategies
While December financial articles provide basic advice like maxing out your 401(k), I want to share a series of strategies that created the most value for my clients in 2024. These are the moves that sophisticated individual and families are making now - and might be right for you.
Tax-Harvesting to Save at Tax Time: Tax-loss harvesting is a straightforward strategy to reduce your tax bill by selling investments with losses to offset realized gains. With January fast approaching, it’s time to review your investment accounts for harvesting opportunities.
In 2024, while equity markets performed strongly, certain stocks and sectors lagged, potentially leaving you with unrealized losses to capitalize on. For instance, a number of US companies struggled to keep up in the AI boom, including Intel (-61%) and Adobe (-26%). In addition, many long-term bond funds remain below their 1Y and 3Y high water marks due to the rate hikes of 2022. Examples include iShares 20+ Year Treasury Bond ETF (ticker: TLT), down 34% since 2022, and and Vanguard Long-Term Treasury Fund (ticker: VLGSX), down 30% over the past 3 years. There are a host of potential Funds and positions that offer tax-loss opportunities, if you look!
Reminder: Beware of the wash-sale rule if rebuying the same or substantially identical positions.
Review Your Portfolio and Rebalance: A cornerstone of smart investing is never taking more risk than you need to, or more than you can stomach. After a prolonged bull market in equities and a lousy period for bonds, many investors who once held conservative stock/bond allocations may now face greater downside risk than they realize.
For instance, without rebalancing, the classic 60/40 portfolio in 2018 is now 77% equities and 23% bonds (using the S&P 500 Index and Bloomberg Barclays U.S. Aggregate Bond Index as proxies). The downside risks of the two are markedly different:
Rebalancing is a disciplined strategy that helps investors “sell high and buy low” by realigning their portfolio to target allocations. This process capitalizes on market cyclicality - particularly when valuations are elevated, like today - and ensures portfolio risk aligns with your financial objectives and long-term goals.
Do Well (Paying Less Tax) By Doing Good with a DAF: Donor Advised Funds (DAFs) are a pillar of effective financial planning and impactful giving. They allow you to strategically support the causes you care about while enjoying significant tax advantages.
An effective way to leverage a DAF is through “bunching” contributions. By combining multiple years’ donations into a single year, you can exceed the standard deduction threshold, maximizing your tax benefits while maintaining the flexibility to distribute funds to your favorite charities over time.
If you don’t have a DAF, opening one is simple. Schwab Charitable and Fidelity Charitable offer straightforward options. In Jackson, consider opening a DAF with the Community Foundation of Jackson Hole. Their reasonable fees support the Foundation’s invaluable contributions to our local community.
Funding your DAF with long-term appreciated securities avoids capital gains taxes and allows a deduction at full market value. Avoid donating securities held under a year, as deductions are limited to cost basis.
Leverage Tax and Philanthropic Benefits with a QCD: For individuals over 70½, taking your annual Required Minimum Distribution (RMD) from an IRA can trigger high income tax rates and increase your Adjusted Gross Income (AGI)—potentially raising your Medicare premiums. If you don’t need the funds for personal expenses, making a Qualified Charitable Distribution (QCD) is a smart, tax-efficient solution.
QCDs allow you to donate up to $100,000 annually directly to qualified charities, reducing your AGI, avoiding taxes on the distribution, and satisfying your RMD requirements. This way, you can support causes you care about. Like DAFs, they’re a win-win strategy for your finances and philanthropy. Check with your Advisor or Accountant for more information.
Chip Away at Education Expenses: If you have kids or grandkids, they should have a 529 plan, a tax-advantaged savings account designed to help families save for education expenses. All investment growth and withdrawals within 529 plans are tax-free if used for qualified education expenses, including K-12 tuition and higher education costs.
Starting in 2024, unused 529 plan funds can be rolled into a Roth IRA (subject to guidelines), benefiting your kids' or grandkids' retirement planning.
If your state offers a tax deduction for contributions to a 529 college savings plan, take advantage of it. For example, New York allows joint filers to deduct up to $10,000 per year for its New York 529 college savings plan. If your state doesn’t offer a tax incentive, you can choose any plan nationwide.
A standout option (and Bootpack favorite) is Utah’s my529 Plan, known for its low fees, highly rated investment choices (including Dimensional Fund Advisors), and ease of use. You don’t need a financial advisor—just choose the enrollment date portfolios, a smart “set it and forget it” solution that adjusts as your beneficiary nears college age.
Estate Planning Check-Up: If you’re like me, you spent a significant amount of time and money setting up your Will and Trust years ago, only to throw the binders in a drawer and forget about them. Let’s commit to doing better—2025 will be my year for tackling this, and it can be yours too.
Here’s a checklist to keep your estate plan in top shape:
Confirm Your Core Documents Are Executed: Double-check that your Will, revocable trust, powers of attorney, and health care directives are signed and up-to-date.
Review Beneficiary Designations: Ensure the beneficiaries on your 401(k)s, IRAs, 529 plans, and other accounts align with your wishes. Remember, beneficiary designations override your Will, so keep them updated.
Incorporate New Family Members and Assets: If you’ve added to your family or acquired significant assets, update your Will and Trust to reflect these changes.
If you don’t have a Will or Trust yet, fear not. For straightforward situations, platforms like WillandTrust.com provide basic and cost-effective estate planning tools. If your family and financial life is complex, work with an estate attorney. Use the American College of Trust and Estate Counsel’s “Find a Lawyer” tool.
Maximize Tax-Free Gifts with the Annual and Lifetime Exclusions: Many parents and grandparents wait too long to transfer wealth. They often leave inheritances to beneficiaries in their 50s or 60s—when their lives are already established.
Consider the impact of gifting wealth earlier, during pivotal moments in your loved ones’ 20s or 30s, like buying a home, paying off student loans, or starting a family. Thoughtful gifts empower loved ones to build a foundation for lifelong happiness and success—something we want for our families.
You can gift up to $18,000 per person annually ($36,000 for couples) without it counting against your lifetime exemption, currently $13.61 million per individual and $27.2 million per couple. These generous exemptions allow significant gifting today without triggering estate taxes later.
If a loved one is at a transformative point in their life, consider giving a meaningful gift now—it may have a greater impact than waiting until they no longer need it.
Save Grief By Starting Family Conversations Now: No one looks forward to it. It’s awkward and sometimes even dramatic. But delaying discussions about family wealth and inheritance leads to confusion, misunderstandings, and unnecessary stress when it matters most.
Here’s a good WSJ article on the subject: https://www.bootpack.com/s/Grief-Then-Paperwork_-The-Messy-Thankless-Job-of-an-Estate-Executor-WSJ.pdf
Starting estate planning conversations early allows your family to clarify intentions, align priorities, and create a shared understanding. Addressing these topics now can reduce the emotional and financial challenges of estate planning surprises.
For Self-Employed Entrepreneurs, Maximize Retirement Savings with a Solo 401(k): Solo 401(k)s are a hidden gem for self-employed individuals and small business owners, offering greater flexibility and higher contribution limits than SEP IRAs. Key Benefits:
Higher Contributions: In 2024, contribute up to $69,000 ($76,500 if over 50) through combined employee and employer contributions.
Roth Option: Enjoy tax-free growth with Roth deferrals on the employee portion.
Loans: Borrow up to $50,000 or 50% of your account balance for personal or business use.
If your spouse works for the business, they can participate, allowing a married couple to contribute up to $132,000 annually—or $147,000 if both are over 50. While Solo 401(k)s are more complex to set up and manage than SEP IRAs, the additional tax savings and compounding potential make them worth the effort. Whether you run a thriving S Corp or a side-hustle LLC, ask your advisor or accountant if a Solo 401(k) is right for you.
CYA in Case of Damage to Your Home: Unless you have Guaranteed Replacement Coverage on your homeowner’s insurance policy—and most don’t—it’s your responsibility, not the insurance company’s, to ensure the rebuild value of your home is accurate. Rising construction costs make it crucial to regularly review and update your policy. If your home suffers damage exceeding your coverage, the gap could lead to significant out-of-pocket expenses.
Zillow offers a Home Insurance Coverage Tool that estimates your home’s rebuild value based on several inputs. To check your coverage:
Access your homeowner’s policy on your insurance underwriter’s website.
Use Zillow’s tool to calculate your home’s estimated rebuild value at https://www.zillow.com/brands/home-insurance-coverage/.
Compare the two numbers.
If the figures differ significantly, contact your insurance agent to discuss and adjust your policy. This quick check takes 3–5 minutes and could save you stress in a disaster.
Protect Your Identity and Accounts: Hackers and phishing scams are becoming more creative and sophisticated. In 2023, the FBI’s Internet Crime Complaint Center (IC3) received 880,418 complaints, with losses over $12.5 billion—a 22% increase from 2022. Fraud can seriously damage your and your loved ones’ financial (and mental) health – and don’t think it can’t happen to you.
Password managers like Dashlane and 1Password are the first line of defense. They generate strong, unique passwords for each account, autofill credentials on legitimate websites to avoid phishing scams, and alert you to suspicious or fake URLs before you share your login details.
Still writing passwords in a notebook or using the same password for multiple accounts? You’re not alone, but it’s time for an upgrade. Encourage a loved one (or yourself!) to adopt a password manager. Setting it up over the holidays could save significant heartache and money later.
If you have questions or need clarification on any of the topics or strategies, reach out to me anytime at matt@bootpack.com. I’d love to hear from you!
Disclosure:
The content provided in this blog post is for informational purposes only and should not be considered as investment advice or a recommendation to buy, sell, or hold any specific security or financial product. The information expressed represents the personal opinions of the author and may not necessarily reflect the views of Bootpack Financial Partners, LLC.
Investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. All investments involve risks, including the loss of principal. There is no guarantee that any investment strategy will achieve its objectives or that it will be profitable.
Before making any investment decision, it is recommended that you consult with a qualified financial advisor who is familiar with your personal financial situation. This blog post may include information or references to specific securities or strategies; however, the author or Bootpack Financial Partners, LLC does not guarantee the accuracy, timeliness, or completeness of this information.
The author may hold positions in some of the securities or investments mentioned, and these positions may change at any time. Neither Bootpack Financial Partners, LLC nor its affiliates are responsible for any losses or damages resulting from the use of this content.