End of Year Financial Planning For 2023

Liz Whitteberry |

It’s hard to believe that we’re approaching the end of 2023.  There’s still time to review your finances and take any needed action by the end of the year.  To help you review your situation, the following is a list of some things you should consider:

Important actions that are due by December 31: 

If you’re still working, max out your contributions to retirement accounts.

If you’ve maxed out your contributions and can still save, consider making after-tax contributions if your plan allows it.

Evaluate whether it makes sense to convert traditional IRAs/40ks to Roth IRAs/401ks this year.

Take required minimum distributions (RMDs) from your retirement accounts before year end. In 2023, the starting age for RMDs was raised to 73.

Consider making annual exclusion gifts to family members. In 2023, the annual gift exclusion amount is $17,000 per person ($34,000 for married couples).  Does a 529 plan or child’s Roth IRA make sense?

Review your health insurance options and make improvements if you can.  If you have access to a Health Savings Account, try to max it out for the triple-tax-free benefits.

Tax planning opportunities for 2023 and beyond:

Do you hold assets in the right places?  As a general rule, tax-inefficient assets are best held inside tax-advantaged accounts, such as 401(k) accounts or IRAs.

Can you sell positions at a loss to offset realized gains?  Or offset your ordinary income?  You can use losses dollar for dollar against gains, and you can use up to $3,000 in losses to reduce your taxable income.  Be careful not to violate the “wash sale rule.”

Have you strategically managed your portfolio withdrawals in 2023 to minimize taxes this year as well as long-term?  Remember to take RMDs first and use Qualified Charitable Distributions if you give on a regular basis.

If 2023 was an unusually low-income year for you, consider filling up your lower tax brackets.  You can withdraw funds from tax-deferred accounts or converting traditional IRAs to Roth IRAs. Don’t let low tax bracket go to waste.

Your Assets and Investments:

Do you have the right amount of cash on hand?  Consider what cash you will need over the next one to three years and compare that to the cash you have on hand. 

Is your cash in the right place?  The right accounts will pay substantially more interest.

Are you taking on risk in the right places?  Generally, you can afford more risk with assets and investments that are set aside for your long-term goals.

Do you have an optimal mix of equities, fixed income, and alternatives, so that your portfolio is positioned for growth as we move past the current economic slowdown? 

Your Estate Plan:

Does your life insurance coverage need updating in light of recent inflation or changes to your financial situation?  Review your policy to determine whether it continues to meet your needs, or whether changes need to be made.

Have you recently reviewed your trusts, wills, power of attorney, and medical directives?  Do you want to make any changes to who you’ve named as your trustee, executor and/or agents?

Your Giving

If you have a high-income year, a donor-advised fund will allow you to prefund years of giving while getting the tax-deduction this year.

You can also use this as a strategy to reduce a highly appreciated position that is overweight in your portfolio by gifting it to your donor-advised fund. 

Would you like to give to your family now to share your wealth while you can see them enjoy it? In 2023, the annual gift tax exclusion is $17,000 per person, $34,000 per person as a joint gift.  The lifetime gift tax exclusion amount is $12.92 million per person ($25.84 million for married couples).  

Your Legacy

Twenty-five years from now, what do you hope your children or grandchildren say about money? 

It’s never too early to start discussing money and family values with children and grandchildren, with those conversations adapted to each child’s level of understanding and responsibility.