This has undoubtedly been an eventful year, to say the least. We experienced a continuation of the Artificial Intelligence boom, a shift in dual mandate focus from the Federal Reserve, and, of course, the U.S. presidential election.
Following these events and many others, the markets have resulted in another above-average year for the three major stock market indices (DJIA, NASDAQ, S&P500), with each of them hitting all-time highs at one point or another throughout 2024. With most of 2024 in the review mirror, we now have a framework that gives us a different perspective moving forward; however, many uncertainties still remain.
Notable Economic and Financial Themes To Watch In 2025
The year 2025 will be significant from both a legislative and monetary perspective. We have pending expirations for the Tax Cuts and Jobs Act, as well as the enhanced subsidies for health insurance provided through the Inflation Reduction Act. These changes could have a substantial impact on costs, particularly in the areas of taxes and health insurance for those retiring before age 65.
Shifting Focus From Inflation To Employment
On the monetary side of the equation, the Federal Reserve has shifted its focus from inflation to employment. They will have to continue the balancing act of keeping interest rates restrictive enough to control inflation, while not being restrictive to the point where our economy slows too quickly, forcing the unemployment rate to spike. This is a fine line to toe, but something they seem to be navigating.
The Best Laid Financial Plans Need Flexibility
If 2024 has taught me anything, it’s that having a financial plan is essential. However, it’s not an exact science due to the many unknowns that can arise. Just like the goals and plans I have with my family; it likely won’t be perfect. Adjustments need to be made along the way, but they provide a framework and direction to navigate life’s moments.
As we finalize the game plan for 2024, it is an excellent time to begin thinking about 2025 and beyond.
Here is a starting point for things to consider for next year.
Tax Planning Tips and Considerations
It’s important to understand how much your income will be for the year. Depending on the amount, there may be opportunities to take advantage of certain tax strategies like Roth conversions or capital gains harvesting.
Consider if you have any large expenses coming up. To help control your tax burden, it can be beneficial to plan at least 1 to 2 years in advance.
If you are still working, ensure that you are contributing money to the most tax-advantaged investments for your specific situation.
Review your charitable donation strategy to ensure you receive the best tax benefit for your charitable intentions.
Consider the future impact your Required Minimum Distributions (RMDs) may have on your situation and ensure you are mitigating it to the greatest extent possible.
Estate and Legacy Planning Guidelines
If you plan to leave some of your assets to charity, ensure you leave them the right assets to avoid unnecessary taxes on your estate.
When was the last time you reviewed your beneficiary designations and titling of your assets and property? We typically do this for our clients at least every three years or sooner if necessary.
If you plan to give assets while you are living, ensure you are gifting the most strategically by keeping in mind your own tax situation, as well as your giftee.
Planning for Retirement and Navigating Job Changes
If you are planning to retire or change jobs, review your compensation to ensure you don’t leave any money on the table from vesting schedules, bonuses, or employer profit sharing.
If you are retiring before age 65, review your plan to maximize your tax credit eligibility for more affordable health insurance.
If you are changing jobs, review your new benefits package to ensure you choose the most advantageous options for your situation.
These items are by no means an exhaustive list, but just a starting point for things to consider as we head into 2025. Our advisors actively plan around these topics and many others for our clients, but it’s good exercise for you to think about them as well before working with a financial advisor.
Have retirement questions?
Schedule a quick 15-minute call with one of our CERTIFIED FINANCIAL PLANNER™ professionals to discuss your most pressing questions related to retirement. You can also reach us directly at (866) 832-1173.
The opinions voiced in this material are for general information only and are not intended to provide specific investment or tax advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
