As the year draws to a close, it’s the perfect time to take stock of your financial situation and ensure you’re setting yourself up for success in the year ahead. Whether you’ve had a strong financial year or faced some unexpected hurdles, making a few smart financial moves before December 31st can help you maximize your opportunities and strengthen your financial position. Here are three key financial moves to make now to wrap up the year on the right note.

1. Max Out Retirement Contributions

One of the most effective ways to reduce your tax bill while boosting your retirement savings is to max out contributions to your retirement accounts. For 401(k)s, IRAs, and other tax-advantaged retirement accounts, the IRS sets annual contribution limits that you’ll want to take full advantage of. For 2023, the contribution limits are:

• 401(k): Up to $22,500 for those under 50 and $30,000 for those 50 and older (including the catch-up contribution).
• Traditional IRA/Roth IRA: Up to $6,500 for those under 50 and $7,500 for those 50 and older.

Maxing out these contributions not only helps build your retirement nest egg but also reduces your taxable income for the current year. Even if you can’t contribute the full amount, contributing as much as possible before the end of the year will give you a head start on your future savings.

2. Review Your Tax Strategy

Taxes are an inevitable part of your financial life, but year-end planning can help minimize the amount you owe. Now is the time to review your tax strategy and take advantage of any tax-saving opportunities, such as:

• Tax-Loss Harvesting: If you have investments in a taxable account that have lost value, consider selling them to offset gains in other investments. This strategy, known as tax-loss harvesting, can help reduce your overall tax liability.
• Charitable Contributions: Donating to charity not only supports causes you care about but can also provide a tax deduction if you itemize your deductions. Make sure to keep detailed records of your contributions and ensure the charities are eligible for tax-deductible donations.
• Maximizing Deductions: Consider prepaying deductible expenses like mortgage interest, property taxes, or medical bills to increase your itemized deductions for the year.

Consult with a tax professional if needed to ensure you’re making the most of these opportunities.

3. Rebalance Your Investment Portfolio

With the market’s fluctuations throughout the year, your portfolio might have drifted from its original asset allocation. Rebalancing your portfolio is essential to maintaining your risk tolerance and staying aligned with your financial goals. Here’s what you should do:

• Assess Your Current Allocation: Review how your investments have performed and whether your portfolio is now overweight in certain assets or underweight in others.
• Realign with Your Goals: If you find that your portfolio has drifted significantly, consider selling some investments and buying others to return to your target allocation.
• Consider Future Needs: As you near important financial milestones, such as retirement or buying a home, adjust your asset allocation to reflect your evolving goals and risk tolerance.

By rebalancing your portfolio, you can keep your investment strategy on track and set yourself up for a more stable financial future.

Tune into CAPitalize Your Finances for More Year-End Financial Tips

These three key financial moves can make a significant impact on your year-end financial standing and prepare you for success in the coming year. Whether you’re working to maximize retirement contributions, fine-tune your tax strategy, or rebalance your portfolio, taking action now can lead to lasting benefits.

To dive deeper into these strategies and gain even more actionable advice, check out the latest episode of CAPitalize Your Finances. In this episode, we explore these year-end financial moves in greater detail and offer insights to help you wrap up the year right and start the next one on a solid financial footing. Don’t miss out!