6 Essential Financial Moves to Make Before Dec. 31: Wills, IRAs, Trusts & More!

As we approach the close of 2024, it’s a crucial time to consider what financial actions you need to take before the year ends.

Financial advisors typically focus on these considerations during the last few weeks of December.

Last year, we consulted several financial experts to compile a list of six essential financial steps to complete by December 31. The response was overwhelming, prompting us to ask the same experts, plus a few new ones, for their updated advice this year. Interestingly, their recommendations remained largely the same.

Their advice includes increasing retirement contributions, adjusting insurance policies, and exploring effective tax strategies.

Update Your 401(k) and Life Insurance Beneficiaries

It’s common for investment and life insurance policies to require naming beneficiaries—those who will inherit your assets. For many, these designations are a key component of their estate planning, legally specifying the future of their asset distribution.

However, sometimes people delay naming beneficiaries. Changes such as births, deaths, and family disputes can alter your intended plans. The end of the year is a perfect moment to review these designations.

“Updating your beneficiaries on your investment accounts is crucial,” noted Colin Day, a certified financial planner based in St. Louis.

“The holiday season, filled with family gatherings, serves as a poignant reminder of the importance of ensuring your assets will reach your loved ones,” added Day.

Examine Your Estate Plan and Insurance Policies

Paul Mendelsohn, a certified public accountant in Livingston, New Jersey, suggests that the end of the year is an optimal time to review your estate plan, including powers of attorney and your various insurance policies.

“Have you secured life insurance, long-term disability insurance, and long-term care insurance?” Mendelsohn inquired. If not, it might be time to consider these options. Notably, long-term care insurance can help cover expenses associated with assisted living and nursing home care.

Mendelsohn also pointed out that insurance through an employer might not extend to your spouse.

“It’s wise to consult with an estate planning attorney to either initiate or update your will and other critical legal documents,” advised Niv Persaud, a certified financial planner in Atlanta.

Gift Charitably and Personally

Charitable contributions are a significant aspect of the holiday spirit, and the IRS recognizes cash donations to qualified charities, potentially deductible up to 60% of your income.

For tax deduction eligibility, contributions must be made to approved charities and require proper documentation for substantial amounts, according to NerdWallet.

“If you’re planning on claiming a deduction for charitable gifts, make sure they are made before the end of the year,” stated Seth Benjamin Mullikin, a certified financial planner in Charlotte, North Carolina.

Mullikin also noted the festive season as an ideal time for personal gifts, mentioning that in 2024, individuals can gift up to $18,000 per recipient without needing to file a gift tax return.

Boost Your Pre-Tax Retirement Contributions

“December is the time to ensure you’ve maximized your contributions to retirement plans,” said Catherine Valega, a certified financial planner in Winchester, Massachusetts.

Retirement accounts like IRAs and 401(k)s offer tax advantages for contributions up to a certain limit.

“It’s especially important to max out your 401(k) contributions now, as these typically must be processed through your employer’s payroll system,” explained Robert Brokamp, a senior advisor at The Motley Fool.

Rob Schultz, a certified financial planner in Encino, California, suggests preparing for increased contribution limits in 2025 by adjusting your payroll deductions accordingly.

Required Minimum Distributions for Those Aged 73 and Over

If you’re 73 or older, make sure to withdraw the required minimum distribution (RMD) from your retirement accounts like IRAs and 401(k)s by December 31, advised Devin Pope, a certified financial planner in Salt Lake City.

RMDs are mandated by the IRS to ensure that retirement savings are gradually drawn down, and failing to do so can result in a hefty penalty.

Capitalize on Tax-Loss Harvesting

The end of the year is also an opportune moment for tax-loss harvesting, a strategy used to offset capital gains taxes by realizing losses on investments.

“If you have investments that have lost value, consider selling them to reduce your tax liability,” suggested Mullikin.

As we count down to the new year, see how many of these financial strategies you can implement to enhance your financial well-being.