Goals-based planning

End the year strong: 10 planning moves to make now

Election years can add a layer of uncertainty to what the future holds. However, by taking steps to maximize your resources, you can potentially finish the year in a strong position.

The key is to start your year-end planning now.

Giving yourself ample time to review your balance sheet, along with your personal and financial goals for the coming year, can help you make thoughtful adjustments, if any are needed. And by having an early start, you have time to involve your personal and professional advisors in the review process.

Here’s where we suggest you focus your attention.

1. Create a wealth plan

Having a comprehensive wealth plan can help your personal and financial goals align with your available resources.

Using our proprietary Wealth Plan Plus planning tool can help you clearly see your risk exposure and cash flows, and help your asset allocations support your long-term objectives.

2. Hold the right amount of cash

We expect the Federal Reserve to cut interest rates at least three times before 2024 ends. Therefore, it’s important to have the right amount of cash on hand, and to consider yield opportunities now that match your time horizon and liquidity needs. Among the planning steps to take:

Assess your cash needs and holdings. Ensure you have enough liquidity to cover one to five years of operating cash flow, provide a psychological safety net, fund large capital expenditures and allow for opportunistic investments.
Consider establishing a portfolio line of credit. Even if you never use it, having immediate access to cash can create peace of mind and help you avoid selling investments at the wrong time or unnecessarily realizing capital gains. Further, delaying realization of the investment gains, coupled with any ongoing returns, might outweigh the cost of debt, even at a time of higher interest rates, if you do access the credit line/financing.

3. Enhance investment opportunities

While market volatility may resurface during election season, we believe multi-asset portfolios may continue to perform well. Consider staying invested for your long-term goals, and evaluating opportunities to invest excess cash.

Among the strategies we suggest considering:

Equities—Reposition from large-cap tech and other sectors that have outperformed so far this year to quality, dividend-paying stocks.
Fixed income—Diversify your portfolio by adding longer-duration bonds with attractive yields.
Alternatives—Explore opportunities in real estate, infrastructure and equity secondaries.

4. Complete annual to-dos

Take these steps before December 31:

Fully fund retirement accounts to take advantage of tax-deferral benefits. Evaluate the potential advantages of converting your traditional IRA to a Roth IRA.
If you’re over 73 years of age and have not yet done so, take required minimum distributions from your retirement accounts to avoid a hefty penalty.
Make annual exclusion gifts to family members. In 2024, you can gift up to $18,000 per recipient tax free. For married couples, the maximum tax-free gift amount is $36,000.
Investigate whether you and your family could save on state taxes by changing trustees or other fiduciaries, and by carefully planning distributions from trusts to ensure they are as income-tax-efficient as possible.
If you have a private foundation, make sure it fulfills its 5% annual distribution requirement.

5. Be tax-efficient

While it’s too soon to know what, if any, tax changes might take effect after the coming elections, you can take steps to maximize your tax efficiency regardless of the outcome:

Tax-loss harvesting—Consider the tax benefits of selling positions at a loss to offset realized gains, but be careful not to violate the “wash sale rule.”¹ Putting in place a strategy to continually harvest losses can help you retain more of your returns throughout the year.
Asset location—Prioritize where you hold certain assets classes: Put tax-inefficient assets inside tax-advantaged accounts, such as 401(k)s or IRAs. Meanwhile, hold tax-efficient assets in taxable accounts. This can help minimize your tax liability and maximize your investment returns. Learn more about how to create tax alpha here.
Strategic withdrawals—Carefully manage portfolio withdrawals to minimize the tax impact. For example, clients in the top tax bracket generally take required minimum distributions first (if applicable). Next, they make withdrawals from taxable accounts, followed by taking funds from tax-deferred accounts. Lastly, they withdraw funds from tax-free accounts.
If 2024 is an unusually low-income year for your family, consider withdrawing funds from tax-deferred accounts now, while you are in a lower tax bracket. This year may also be a tax-efficient time to convert traditional IRAs to Roth accounts.

6. Review your asset ownership designations

A close review of asset titling is important for many reasons, including:

Properly titling the way you own your assets helps ensure they will be distributed according to your wishes, and may also provide tax benefits.
If you wish to avoid probate, make sure accounts are correctly titled and that beneficiary designations reflect your current wishes. This is especially important for retirement accounts and life insurance policies, as outdated designations can result in assets passing to unintended beneficiaries.

7. Make thoughtful charitable donations

Before contributing significant time or resources to a charity, consider whether you are giving reflexively (e.g., because you were asked for your support), or because your donation will move you closer to achieving your philanthropic goals. Also consider how and when to make your donation to make sure you gain maximum flexibility and tax benefits.

For example, with a single gift to a donor-advised fund (DAF), you can pre-fund years of giving. In a high-income year, a giving vehicle can provide an immediate charitable deduction while also affording you time to identify organizations and causes that align with your values.

Donating long-term and highly appreciated positions in your portfolio directly to a DAF could serve you particularly well: You would receive a deduction based on the fair market value of the gifted asset, and would eliminate capital gains taxes on its unrealized appreciation.

Keep in mind: Some assets may take longer to transfer. Therefore, make sure the donation process is begun early enough to be deemed completed by December 31.

8. Give large gifts to family

If you have the capacity and desire to make a substantial gift to family members during your lifetime, consider doing so now, as estate taxes may go up in 2026.

Currently, individuals are allowed to give up to $13.61 million free of transfer (i.e., gift and estate) taxes. (The tax-free gift amount is $27.22 million for married couples). However, these limits are set to be cut roughly in half in 2026: to a little more than $7 million per person. If this rule change does go into effect, more of your assets will be exposed to transfer taxes. Therefore, we recommend you meet with your estate planning attorney as soon as possible so you have enough time to put the right plan in place.

9. Host a family meeting

It’s never too early to start discussing money and family values with your children and grandchildren. End-of-the-year holiday gatherings, in addition to more formal family meetings, can be effective venues for aligning on values, disclosing age-appropriate information and building financial literacy skills. Over time, having regular discussions can help ensure your family is prepared to manage wealth responsibly and in accordance with the family’s principles.

10. Be cybersafe in a changing world

As technology advances, so do the scams perpetrated by cybercriminals, with artificial intelligence (AI) and deepfake technology emerging as significant new threats. For example, with AI, cybercriminals can now:

Automate and enhance cyberattacks, making them more efficient and harder to detect.
Launch phishing attacks with highly convincing emails, vishing (phone) or smishing (text message) scams that are personalized according to their specific targets.

To protect yourself from impersonations, scams and deepfakes:

Always take the time to verify who is emailing, calling or texting you, even if you think it is a friend or family member.
Create a safe word to use with trusted contacts.
Be cautious about clicking links or attachments sent to you in text messages or emails.
Create a dedicated email account to use solely with chatbot tools to carefully wall off your own AI efforts from the rest of your digital life.

We can help

Ask your J.P. Morgan team for help analyzing the opportunities and risks across your balance sheet. They will work closely with you and your other professional advisors to help you bring 2024 to a close and prepare for the year ahead.

¹Under the U.S. tax code, so-called wash sale regulations disallow an investor who holds an unrealized loss from accelerating a deduction into the current tax year, unless the investor is out of the position for some significant length of time.

Making one or more of these planning moves can strengthen your financial position for this year, and beyond.

Sarah Backer, CFP ®, CPWA® Senior Associate, Wealth Planning & Innovation

Published Sep 17, 2024

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