LIFESTYLE
Financial Planning for the New Year
Savvy moves to start 2024 on the right track.
The start of the new year is a time for self-reflection, goal-setting and the pursuit of new opportunities. It can also be an ideal time to revisit your financial plans with a fresh perspective. Ask yourself, what do I want to accomplish in 2024?
Your finances can play a large role in helping to achieve your goals. Here are some moves you can make to help set yourself up for a successful year.
Revisit Your Asset Allocation
Review your investment strategy and asset allocation to help ensure your portfolio is diversified amongst stocks, fixed income, cash and other asset classes while in alignment with your goals and risk tolerance. In periods of uncertainty, active management strategies where portfolio managers aim to identify opportunities and manage risk may outperform passive investment strategies that track an index (an investment cannot be made directly in a market index).
Tidy Up Your Finances
Having a number of accounts at different institutions can make you feel disorganized. Consider consolidating your accounts to gain a clearer understanding of your financial streams and overall wealth. Or, if you prefer to maintain accounts with different banks, take advantage of digital tools that let you see all of your accounts in one place. This can help you take inventory of your income and expenses, get a clearer picture of your budget and cut wasteful spending to make smarter financial decisions. Action steps that you can take today include:
- Changing your preferences to “paperless” notifications. When you receive statements digitally, it can be easier to track your finances because your statements are all in one place.
- Consolidating any debt. Paying off your various debts via a single loan with a competitive interest rate not only helps you save money, but also leaves you with one simple payment date each month.
Plan for Your Tax Return
Whether or not you live in a state with high taxes, consider how minimizing the impact of taxation on your portfolio can help you build and sustain your long-term wealth. For example, a tax-aware asset allocation strategy, which accounts for variations in the way different accounts are taxed, may help increase after-tax returns. And, for taxable accounts, a strategy known as tax-loss harvesting can help minimize taxes owed from capital gains.
Make the Most of Your Retirement and Health Insurance Benefits
Evaluate your health insurance deductibles and make a plan on how to best leverage your flexible spending and HSA accounts. If you’re not doing so already, consider fully funding your employer-sponsored retirement plan, such as a 401(k), to maximize any match being offered and make the most of your pre-tax contributions. In 2024, you can save up to $23,000 through your 401(k) plan, with up to $7,500 in additional contributions for those age 50 and older. In addition, for the 2024 tax year, you can save up to $7,000 in an individual retirement account (IRA), plus an additional $1,000 if you are age 50 or older.1
Update Your Estate Plan
Consider periodically updating wills and other estate planning documents. Review any changes the past year brought to your family, as well as your overall estate plan to ensure it still reflects your current situation and objectives. Financial gifts to family members can help reduce your overall tax liability while also helping them with their finances. To count toward 2024 taxes, gifts must be made before year-end. The annual gift tax exclusion limit increases to $18,000 in 2024 ($36,000 for couples) and the federal estate tax deduction increases to $13.61 in 2024, but keep in mind that individual states often have lower exemptions.2 Setting up trusts or providing for education expenses through a 529 plan or direct gift to an institution are some additional strategies to consider.
Invest With Impact
Examine how well your portfolio aligns with your personal values. For investors concerned about issues such as climate change, gender equality and access to education, investing in companies that focus on environmental, social and governance best practices can help generate positive financial returns while driving positive change.
Plan Your Charitable Giving
When making your upcoming philanthropic plans, decide whether you want to give cash, appreciated securities, or give through the gift of volunteerism.Another option for giving back is participating in a donor-advised fund, which provides potential tax advantages while helping you support your favorite causes. If you’re more serious about creating a substantial structure and commitment, consider creating a family foundation in which you engage family members in your philanthropic goals.
Review Your Financial Plan
Review your plan or speak with your Morgan Stanley Financial Advisor to stay on track to meet your financial goals in 2024.
Disclosures
1 “401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000”, IRS.gov. https: //www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000
2 “What's New - Estate and Gift Tax”, IRS.gov. https://www.irs.gov/businesses/small-businesses -self-employed/whats-new-estate-and-gift-tax
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