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Three Months to Prepare: Year-End Financial and Tax Planning

Zoe Team and CAPTRUST (Zoe Network Advisor)

Oct 5, 2022

6 min read

A financial advisor reviewing a plan with two clients at a table

Key Takeaways

Review your financial plan and adjust investments before the year ends.
Max out retirement contributions to lower taxable income effectively.
Use tax-loss harvesting to offset gains and optimize your tax burden.

Frequently Asked Questions

What is tax-loss harvesting?

Selling underperforming assets at a loss to offset capital gains, potentially lowering your overall tax liability.

When is the deadline for IRA contributions?

You can generally make tax-deductible contributions to an IRA until the tax filing deadline, typically April 15th.

Why review my tax bracket?

Shifting income between years can help optimize your tax bracket, reducing total taxes paid over your lifetime.

With less than three months left in a year filled with unexpected twists and turns, let’s focus on a few items we can control regarding financial and tax planning. Paying attention to the things that can positively impact your financial outcomes in 2023 can help you get a jumpstart for 2024.

With summer in the rearview mirror and the holiday season quickly approaching, many of us are scratching our heads and wondering what happened to the year. After so many months of volatile markets, we’re now also subject to rising prices that force us to spend our excess savings on basics like food and energy. The result of these changes: a frustrated consumer and investor.

With less than three months left in a year filled with unexpected twists and turns, let’s focus on a few items we can control. Paying attention to the things that can positively impact your financial outcomes in 2023 can help you get a jumpstart for 2024.

Whether you are early in your career, building wealth, or in retirement, there are five things you can consider to put your financial house in order by December 31st.

1. Make Sure You Are Looking Forward

Make a plan. Now more than ever, as we are faced with volatile markets and historical inflation, tax planning and having a financial and investment plan will help you navigate the current choppy waters. It will also help you see a clear action plan toward your life goals. Whether paying for a child’s education, buying a second home, or keeping your retirement date pinned to the calendar, look back at your spending in 2022 and current balances across all account types. If you already have a financial plan, this is a good time to fine-tune it.

2. Don’t Max Out Your Credit Cards, Max Out Your Contributions

Start by considering your budget and cash flow. Then, look for ways to max out your savings in retirement accounts and other tax-friendly vehicles. For example, in 2023, you can contribute $22,500 to your employer’s retirement plan if you are under 50 and an additional $7,500 if you are over 50.

Talk with your financial advisor about 401(k) maximum contribution limits and how you can get there. Depending on your employer’s plan, you may have opportunities for additional savings, including after-tax and Roth conversions.

Even if you don’t have a workplace retirement plan, you may be able to save up to $7,000 in a traditional individual retirement account (IRA). Other opportunities include tax savings through SEP, 529 plans, donor advised funds, and health savings accounts (HSAs). A few of these options—like IRAs and HSAs—do not have year-end deadlines, so that you can make tax-deductible contributions until April 15, 2024. Talk to your advisor about your unique needs and goals. Don’t leave tax deductions and savings on the table.

3. You Have the Power To Make The Storm Go Away

Turn losses into gains. Tax-loss harvesting means selling stocks or funds that have lost value in the past year. Doing so allows you to offset the required taxes on profits from selling other investments.

In other words, if you hold assets in a brokerage or investment account and you’ve made money by selling a portion this year, you may be able to lower your tax burden by trimming some poor performers. Given the state of the global economy in recent years, most of us haven’t had opportunities to harvest our losses. Now is the time to reassess and look for opportunities.

4. An Expense that Reduces Tax Bills… That Happens?

Take a moment to consider whether the standard deduction or itemization makes the most sense for you this year versus next year. The standard deduction is a specific amount of your income that is not subject to income tax and can be used to reduce your tax bill. It varies depending on your age, filing status, and more.

Itemization allows you to deduct certain expenses, like home mortgage interest, property taxes, and gifts to charities but also requires that you keep track of those expenses. Be strategic about utilizing itemized deductions by bunching as many deductions as possible into those years and, if possible, using itemized deductions when income is higher. Your financial and tax advisors can help you determine which choice is most beneficial for you this year.

5. Manage Your Tax Bracket Buckets

Consider the impact on your tax return of increasing or decreasing your total income for the current and future years. At retirement, people generally see an initial decrease in their marginal tax rates and then an increase starting at age 72, when withdrawals from tax-deferred savings begin.

The question is: What can you do to plan for these changes? The answer might be to shift your income from higher-tax-rate years into lower-tax-rate years. One option is converting your traditional retirement accounts to a Roth IRA.

A Roth conversion helps you manage your tax brackets by increasing your current income. You’ll pay taxes on IRA assets now but also capture tax-free growth for the future. But there are multiple variables to consider. If your current situation requires an income reduction, consider tax-loss harvesting to realize losses or charitable gifting strategies. Your financial advisor will need to crunch the numbers to see if this move makes sense for you this year.

Gift Yourself Financial Knowledge for The EOY

As we all sprint toward the end of the year, keep this to-do list handy to improve your bottom line. Now is a great time to evaluate your financial plan and tax situation.

Taking advantage of these tax-planning tactics can have a cumulative effect and may generate significant savings, both now and in the longer term. Moreover, considering these options, you’ll also set yourself up to enter 2024 with a tailwind.

Whether you are early in your career, building wealth, or in retirement, there are five things you can consider to put your financial house in order by December 31st.

1. Make Sure You Are Looking Forward

2. Don’t Max Out Your Credit Cards, Max Out Your Contributions

3. You Have the Power To Make The Storm Go Away

4. An Expense that Reduces Tax Bills… That Happens?

5. Manage Your Tax Bracket Buckets

Gift Yourself Financial Knowledge for The EOY

As we all sprint toward the end of the year, keep this to-do list handy to improve your bottom line. Now is a great time to evaluate your financial plan and tax situation.

Disclosures: Zoe Financial, Inc. ("Zoe Financial") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Zoe Financial provides investment advisory services and access to independent registered investment advisers through its platform. The information provided by Zoe Financial is for educational and informational purposes only and should not be construed as personalized investment advice or as an offer to buy or sell any security. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. Clients should consult with their own financial, tax, or legal professionals before making any investment decisions. The material presented by Zoe Financial is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Material presented has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Past performance is no guarantee of future results. Zoe Financial does not provide legal or tax advice, and nothing contained in these materials should be taken as legal or tax advice. SEC Registration does not constitute an endorsement of Zoe Financial by the SEC nor does it indicate that Zoe Financial has attained a particular level of skill or ability. The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be appropriate for all clients. Before making any investment, each investor should carefully consider the risks associated with the investment, as discussed in the applicable offering memorandum, and make a determination based upon their own particular circumstances, that the investment is consistent with their investment objectives and risk tolerance. Lower expenses do not guarantee better investment performance. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund may differ materially from those reflected or contemplated in such forward-looking statements.

Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.

The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.

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