Proactive Year-End Financial Strategies for Affluent Investors

As the year winds down, it’s the perfect time to reassess your financial strategies to help ensure you’re well-positioned for the upcoming market environment. For affluent individuals and families, fine-tuning your approach as the year concludes can significantly impact how you navigate potential economic shifts and focus on preserving your wealth. Here’s a look at a few ideas for strategies that can help you prepare for closing out the year.

1. Reassess Your Asset Allocation

Market fluctuations and economic forecasts can shift dramatically, making a review of your portfolio’s asset allocation critical. Ensure your investments align with your long-term goals and current market expectations. Diversifying across asset classes—equities, fixed income, real estate and alternative investments—helps manage risk. If any holdings have significantly appreciated or depreciated, it may be time to rebalance to maintain your target allocation.

2. Harvest Gains and Losses Strategically

Tax-loss harvesting can potentially be an effective tool to offset capital gains and reduce your overall tax burden. Review your portfolio for underperforming assets that could be sold before the year’s end to realize losses. Conversely, you may want to consider harvesting gains if you’re in a lower tax bracket or if doing so aligns with your strategic financial plan.

Note: Keep in mind the wash-sale rule, which prevents claiming a loss on a security sold if you repurchase a substantially identical one within 30 days.

3. Review Your Charitable Giving Strategy

Philanthropic endeavors not only support causes close to your heart but also offer significant tax benefits. Consider making contributions to a donor-advised fund (DAF), which allows you to take an immediate tax deduction and strategically distribute donations over time. If you haven’t maxed out your charitable deductions for the year, making year-end gifts can potentially reduce your taxable income, contributing to your overall tax strategy.

4. Ensure Required Minimum Distributions (RMDs) Are Taken

If you’re at or above the age for taking required minimum distributions (RMDs) from your retirement accounts, make sure they are processed before December 31 to avoid penalties. The rules around RMDs have shifted recently, so confirm the age requirements applicable to your situation (e.g., age 73 if you reached 72 after December 31, 2022). Failure to comply results in steep penalties, which have been reduced but can still impact your financial strategy.

5. Capitalize on Retirement Contributions

While many contributions for retirement accounts can be made until the tax-filing deadline, year-end planning ensures you are maximizing opportunities for employer-sponsored 401(k)s and other similar plans. The IRS limits for 2024 have increased, and if you’re over 50, additional catch-up contributions may further enhance your retirement savings. Contributing the maximum allowable amount not only boosts your future financial security but also provides immediate tax benefits.

6. Revisit Estate Planning Documents

Estate planning should be a dynamic process, evolving with legislative changes and personal circumstances. The end of the year is an opportune moment to review wills, trusts and other estate documents. Additionally, verify that beneficiary designations on retirement accounts and insurance policies are up to date. For affluent and ultra-high-net-worth individuals and families, considering the use of lifetime gift exclusions to transfer wealth efficiently may reduce future estate tax exposure.

7. Evaluate Cash Flow and Liquidity Needs

Economic uncertainty can often underscore the importance of maintaining sufficient liquidity. Ensure your cash flow projections support potential near-term expenses without needing to liquidate long-term investments at an inopportune time. With interest rates fluctuating, managing debt obligations and exploring refinanced terms could also be advantageous.

As we prepare for potential market changes in the upcoming year, a thoughtful approach to year-end financial planning can make a significant difference in your long-term financial health. While these strategies are effective starting points, personal circumstances and market trends vary, so consulting with your financial advisor for tailored advice is essential.

We’re Here to Help If you’d like to discuss any of these strategies or need assistance in preparing your financial plan for next year, reach out to schedule a consultation. We look forward to helping you navigate your wealth strategy for 2025 and beyond.

Please Note: Opinions expressed in the attached article are those of the author/speaker and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. The forgoing is not a recommendation to buy or sell any individual security or any combination of securities. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.