Smart Money Moves for 2025
As 2024 wraps, take these steps for a better 2025
By Deborah Jeanne Sergeant
To put yourself in a better financial position a year from now takes planning. Here are a few ideas from area financial experts.
— Tips from Cynthia Scott, financial adviser and owner of OMC Financial in DeWitt:
• “Maximize your 401(k) or 403(b) contribution if you are able to increase it. Many people will only put in 6% since many corporations match by 3%. But if you increase your contribution to 10%, you will receive 13% on the money. Usually, I recommend in order to maximize the contribution by the end of the year that they contact their HR department to see what the best way it can be handled. There are yearly limits for contributions, but your HR will be able to advise you.
• “If you are not contributing to an IRA or Roth, think about setting one up and begin to fund it so that by tax filing time you will have completed it. Roths are not tax deductible, but you will get into a habit of saving for your retirement.
• “If you have a personal investment account, evaluate it to determine if there is a stock or stocks that have not performed as expected. On the other hand, if you own a stock or stocks that have performed well, you can sell them and any losses you incur they can be used to offset your gains. Remember, if you sell a stock at a loss and do not offset with a gain, you are limited to $3,000 annually, but the loss can be carried forward until it has been completely used.
• “Check with your accountant if you had any sales or purchases during the year that could affect your taxes.”
— Tips from Randy L. Zeigler, certified financial planner and private wealth adviser for Ameriprise Financial Services, LLC, Oswego:
• “For those over age 70.5 who own an IRA account, they should convert their cash-based charitable giving into qualified charitable distributions (QCDs) from their IRA account. Most people are no longer able to itemize deductions to take a tax deduction for their charitable gifts. The QCD strategy allows one to make a charitable gift directly from an IRA account, treating the gift as a non-taxable distribution from the IRA and also counting the amount toward their IRS required minimum distribution as well (if they are subject to RMDs).
• “If one is holding individual stocks that contain long-term tax losses, harvesting those losses by selling those shares could be a wise strategy. If the investor wants to continue to own those shares, they can repurchase them after the 31-day wash sale period ends and will then have a lower starting tax basis in the new shares.
• “Increased interest rates have made carrying short-term debt more expensive. Always a good idea to reduce or eliminate interest carrying costs by paying off short-term debt balances.
• “Since we are sitting at the lowest personal income tax bracket rates over the past 30 years, IRA owners may wish to consider making Roth conversions of traditional IRA balances while tax rates are low. Converted amounts are fully taxable and must be held for five years after conversion and before liquidating. IRA owners older than age 73 cannot use Roth conversions for the amount of their RMDs. Conversions must be only for amounts greater than their RMD amount. Roth conversions trigger taxation at the time of conversion, but all future earnings on those investment amounts, post conversion in the Roth IRA, are then tax-free.
• “Aged married couples holding pre-tax IRA and 401(k) account balances should explore how best to maximize their annual income tax planning since single surviving spouses are subject to much lower standard deductions and tax brackets than are married couples. It often makes tax sense to accelerate the withdrawal of taxable income for couples in order to maximize the use of the 10% and 12% federal tax brackets.
• “Higher income retirees should also be aware of the Income Related Monthly Adjustment Amount (IRMAA) rules related to the Part B and Part D Medicare premium costs as they may inadvertently subject themselves to these higher Medicare premium costs by not utilizing careful tax planning. Purposely increasing taxable distributions could create adverse tax consequences with IRMAA rules and for the inclusion of Social Security income in the tax computation so careful consideration is required. For these and several other reasons people should investigate these strategies with their financial or tax advisers prior to executing to determine how these strategies may fit with their individual situation.
— Tips from Jeff Feldman, Ph.D., and certified financial planner at Rochester Financial Services in Pittsford:
• “One thing I always tell clients is to possibly do a mock tax return before the end of the year to see how much taxable income they’ll have. Some people, especially those who are retired, don’t have enough money to offset the marital or single person standard deduction. Some don’t have that amount of income and they should consider a Roth conversion or withdraw money from IRA accounts to get a free pass. They can do this without paying additional tax. If they’re in a 10%-12% tax bracket, they can do a Roth conversion this year and take advantage of that.
• “As far as IRA contributions, people have until April 15 to make the contributions; they don’t have to do it by the end of the year.
• “For 401k contributions, if you’re under 50, the maximum is $23,000. For those 50-plus, it’s $30,500. If they’ve been under-contributing, they can increase their weekly deductions to take advantage of that. These work on a calendar year basis.
• “529 plans are on a calendar year basis. If they have children or grandchildren who will be looking to go to college, you get a New York state income tax deduction. The maximum is $10,000 for married, $5,000 for individuals.