5 Things You Must Do Before 2024 Ends

Important information

1. The first step to budgeting is balance. Most investors may be due or may even be out of balance.
2. Taking minimum required returns is a great opportunity to balance and refine a small portfolio.
3. People who are still working and saving for retirement have until December 31 to fully fund their company’s retirement plan.
4. Now is a good time to review insurance coverage and insurance needs for 2025.
5. There are opportunities for people who are inclined to give to tie their portfolios to giving.

Susan Dziubinski: Hi, I’m Susan Dziubinski with Morningstar. We’re about to start 2024, and Christine Benz of Morningstar is with me today to discuss some financial steps we can take to finish the year strong—at least from a financial perspective. Christine is Morningstar’s director of personal finance and retirement planning, host of The Long View podcast, and author of a best-selling book How to Retire: 20 Lessons for a Happy, Successful and Wealthy Retirement. I read Christine’s new book, and it would make a great holiday gift. Nice to see you, Christine.

Christine Benz: Good to see you too, Susan. Thanks for the speed of the sale.

Benefits of Rebalancing Your Portfolio

Dziubinski: Really. Let’s talk about some of the things we should do before the end of the year. Your first one has to do with portfolio management, and you think that many investors may be there for a reason or maybe even slow to make returns. Let’s talk about that and the benefits of balance again.

Benz: That’s right. The main benefit of balancing is taking the risk out of your job. The basic exercise here is that you want to find your targets for your asset allocation, and compare that to how your portfolio is doing, and you can move some assets away from the heavy weights. excesses according to those criteria, and place them in the property groups. of weight. So, for people doing this exercise today, they are likely overweight US stocks, which have outperformed other major asset classes, particularly US growth stocks. That would be the type of basic style box bag that you might want to focus on. If you want to take risk out of your portfolio, you’ll go back to that stock. What you do with them from there depends on the nature of your portfolio. For many elderly people who are approaching or retiring, it is probably a safe asset of weight – fixed income and income. They may want to ship to those groups. For small investors, they may want to keep a portfolio heavy. So their balance may stay in stocks but go to other parts of the market. Non-US stocks have not performed as well as the US, and stocks and small value stocks have not performed well. So, they could make some changes in their gender expression.

And one thing that we don’t hear a lot about, Susan, is if you have near-term or medium-term goals and you’ve valued certain parts of your portfolio, yes, if you withdraw from the trading account, you will have a profit to sell the appreciated securities. But it’s not a bad time to think about reducing some of the positions you’ve done well, using them to meet your near- and medium-term spending goals.

Don’t Forget to Take Your RMDs

Dziubinski: The next thing to do is for retirees, especially those over 73. They should take at least their required contributions for this year, if they haven’t already. from their tax returns. You think there’s a good chance you’ll adjust to taking your RMDs along with the balance sheet. Talk a little about that.

Benz: That’s right. I like that idea of ​​combining balancing and taking the required-minimum-distribution. If you are taking your donations for 2024, look at your portfolio and pull assets where there is the greatest opportunity to do so. So, going back to my first point, US stocks, maybe very large stocks would be a very good source for the allocation needed for people who haven’t taken it for 2024 .You can add money to your account. accounts and use them for the next year. I think it’s kind of a win. You can refill that money bucket. I think there is also an opportunity here for people who take the small allocation needed to clean up a portfolio. Maybe you have some holdings that you don’t like that you would like to cut for important reasons. Those are great sources of limited editions needed, in my opinion.

Fully Support Your Company’s Retirement Plan Before The Last Year

Dziubinski: You also have things to do for people who are still in that savings phase and are working and saving for retirement. They are not off the hook. What should be done for them?

Benz: You have until December 31 to fully fund your retirement plan. So, jump on your platform for a 401(k) or whatever you have for your retirement plan. See how you’re doing on those contribution limits for 2024. I think it’s $23,000 for people under 50 and $30,500 for people 50 and over. See how you’re doing with those contribution limits. If you are a high saver and your company plan allows you to make late 401(k) contributions, that can be a great opportunity to save even more in your 401(k). . But unlike that IRA contribution deadline, which is the tax filing deadline for 2024, with your company retirement plan you have to do it at the end of the year . So, take advantage of maybe these last few rewards for 2024 to save some extra money if you have room in your budget.

Check Your Insurance Requirements and Insurance Requirements for 2025

Dziubinski: What you should do is not a matter of portfolio management. You also think now is a good time to review your insurance coverage and insurance needs. Talk a little about that.

Benz: Join the open enrollment period if you are covered by an employer-provided health care plan. This is often your time to shop for health care plans. It depends on what your employer offers; you may not have a choice. But many employers offer a choice between a PPO and a high-deductible health care plan. That’s a normal configuration. So come back again. See what incentives your company can offer you to choose one type of plan or another. If you’re someone with Medicare coverage, now is the time to take advantage of open enrollment, which runs until December 7. And while you’re checking your prescription drug coverage, your Part D coverage. See if the medications you’re taking have changed or if your plan’s coverage has changed. changed, check that again. This is also an opportunity for people who have chosen Medicare Advantage to join original Medicare or vice versa. And so, you can revisit that content.

And you can literally check your entire insurance game. If you have disability insurance through your employer, this is usually the time to make your choice for your 2025 coverage. Disability coverage is a great deal. Check the life insurance that may be offered by your employer. It may not be the best price, but at least shop around. Then revisit your property and casualty insurance. We have seen a very strong increase, especially in the area of ​​home ownership. Of course, it depends on when your policy comes out. But do it carefully, don’t stick with the same insurance company. Buy it small because we feel you need to do your homework there because this is becoming a huge expense for many homeowners to bear.

How Subsidies Contribute to Tax Profitability and Portfolio Risk

Dziubinski: And now the last thing you have to do for 2024 has to do with giving. You think there are opportunities for people to tie up their portfolios and maybe take some risk on them and associate that with giving. So talk about that.

Benz: We had a good stock market environment. For people who like to give, I think it makes sense to put their portfolios in this action. People over age 70½ can take advantage of a wonderful arrangement called a qualified charitable distribution, or QCD, where you direct a portion of your IRA to a charity or charities of your choice. If you are a very large donor, then you have a small increase in how much you can give according to the QCD. It is now up to $105,000 depending on how much you can contribute to charity through QCD. And the good thing is that any money you give through this machine will not owe regular tax and will not be charged to the charity. Therefore, it is a really good arrangement. If you are under age 70½, it is more difficult to take advantage of the tax break on charitable contributions.

Most people today don’t give their opinion. And so one thing that you can think about, and maybe get tax advice on this, is whether you can afford what is called the amount of your donations, to give large donations in the year granted, maybe a few years. And the idea is that you can put yourself above that deductible and you can get a donor-advised fund in the process. Let’s say you value securities in your portfolio. You can withdraw from that taxable portfolio, give it to a donor-advised fund in order to get a tax break, a tax deduction on the donation, and get those assets to appreciate from your portfolio where they can add danger. The old saying is that if you have a lot of employer stock sitting in a taxable account that you received through referrals, it’s probably a bigger part of your portfolio than you want it to be. . So that’s a really good opportunity to reduce that exposure, send money to a donor fund, get a tax break, and take that risk out of your portfolio at the same time.

Dziubinski: Christine, thanks for your time today and giving us some things to do before the end of the year. We appreciate it.

Benz: Thank you very much, Susan.

Dziubinski: By Susan Dziubinski and Morningstar. Thanks for listening.

Check out 5 Ways Retirement Can Support a Wealthy Retirement for more from Christine Benz.