Planning for your Financial Future

Have you thought about the financial, business, or life priorities that you want (or need) to address this year?  2024 is still new, and now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives – whether that is building your retirement fund, considering an estate strategy, or any number of other options.

* * Remember that this article is for informational purposes only and not a replacement for real-life advice.  The tax treatment of assets earmarked for retirement can change, and there is no guarantee that the tax landscape will remain the same in years ahead.  Your financial or tax professional should be consulted for up-to-date guidance.

Ideas to Consider for Future Financial Wellness

Can you contribute more to your retirement plans this year?
In 2024, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $7,000 ($8,000 for those making “catch-up” contributions.)  Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA.  With a traditional IRA, you can contribute if you (or your spouse is filing jointly) have taxable compensation.  Income limits are one factor in determining if a traditional IRA contribution is tax-deductible. (1)

Can you wait to withdrawal from your IRA?
Once you reach age 73, you must take the required minimum distributions (RMDs) from a traditional IRA.  The IRS taxes withdrawals as ordinary income, but if those withdrawals happen before age 59½, they may be subject to a 10% federal income tax penalty.

Have you looked into a Roth 401(k) account?
Though the employer match is pretax and not distributed tax-free during retirement, Roth 401(k)s offer their investors a tax-free and penalty-free withdrawal of earnings on the portion considered the employee contribution.  Qualifying distributions from a Roth 401(k) must meet a five-year holding requirement, and occur after age 59½.  But the investor is not required to take minimum annual withdrawals.  A qualifying distribution can also occur under certain other circumstances, such as the owner’s passing.

Make a charitable gift.
You may be able to claim your charitable giving as a deduction on your tax return, provided you follow the Internal Revenue Service guidelines, as the paper trail can be important here.  If you give cash, be sure to document it – a bank record can demonstrate some contributions;  you can also use payroll deduction records, credit card statements, and/or written communication from the charity with the date and amount.  Incidentally, the IRS does not equate a pledge with a donation.  If you pledge $2,000 to a charity but only end up gifting $500, you may be able to only deduct $500. (2)  Be sure to consult your tax, legal, or accounting professional before modifying your record-keeping approach, or strategy for making charitable gifts.

Do you have a home office?
If you have a dedicated home office, you may be able to take a home office deduction for your small business.  And if your home office area qualifies, you might be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves complex tax rules and regulations.  Before moving forward, consider working with a professional familiar with the tax rules related to home-based businesses.

Open an HSA.
A Health Savings Account (HSA) works like your workplace retirement account. However, there are some HSA rules and limitations to consider.  In 2023, you are limited to a $4,150 contribution if you are single; and $8,300 if you have a spouse or family.  For “catch up” purposes, those limits increase by a $1,000 for each person in the household over the age of 55. (3)

If you spend your HSA funds for non-medical expenses before age 65, you may need to pay ordinary income tax and a 20% penalty. After age 65, if you spend your HSA funds for non-medical expenses, you may need to pay ordinary income tax. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Review your asset location.
Asset location is one factor to consider when creating an investment strategy. Asset location is different from asset allocation, which is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

Review your withholding status.
Should it be adjusted due to any of the following factors?

• You tend to pay the federal or state government at the end of each year.
• You tend to get a federal tax refund each year.
• You recently married or divorced.
• You have a new job with adjusted earnings.

Consider consulting your tax, human resources, or accounting professional before modifying your withholding status.

Has your marital status changed?
If you were recently married, divorced, or widowed, it may be time to review the beneficiaries of your retirement accounts and other assets.  The same goes for your insurance coverage.  If you are changing your last name for one reason or another, you will need to get a new Social Security card.  Be sure to inform your tax professional by securely providing a copy of your new SSA card, so that your tax return states your new name correctly.  Retirement accounts may need to be revised or adjusted for your new name, as well.

Are you coming home from active duty?
If so, check on the status of your credit. Check on any other orders that you might have preempted, too.

Consider the impact of any upcoming transactions. Are you preparing to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2024? Do you anticipate selling an investment held outside of a tax-deferred account?

Vow to focus on your overall health and practice sound financial habits in 2024. And don’t be afraid to ask for guidance from a professional who understands your situation.

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This blog is intended for general informational purposes, and should not be taken as strategy or advice by ATLAS Lifestyle Planning Group (ATLAS LPG).  ATLAS LPG encourages all individuals to consult their financial professional about these or other matters which concern their personal finances or financial strategy.  If you do not have a financial advisor, or feel you may benefit from seeking the advice of a different financial advisor, please do not hesitate to reach out directly to your ATLAS office, or contact us HERE.  Your ATLAS LPG Team is always ready and happy to help, whatever your needs may be!

 Investment advisory services offered through ATLAS Lifestyle Planning Group (ATLAS LPG), a Registered Investment Advisor.  ATLAS LPG will only provide investment advisory services in jurisdictions where it is registered as an investment adviser or exempt from registration.  Insurance and annuities offered through ATLAS Risk Management Group (ATLAS RMG) CA License # 0M41231.  ATLAS LPG and ATLAS RMG are separate entities and neither provides legal or tax advice.

Citations:
(1)  TheFinanceBuff.com, August 10, 2023
(2)  IRS.gov, June 5, 2023
(3)  IRS.gov, September 5, 2023

* Some of the information found in this article may have been provided by FMG or Assetmark Inc.