It’s time to take steps to minimize taxes, maximize income, and protect assets.
If you haven’t done it already, it’s time to begin year-end tax and financial planning. By starting early, you should have ample time to take any actions necessary to minimize taxes, maximize income, and protect assets as you head into the new year. Here are some questions to help you get started thinking about what needs to be done.
Are there ways to minimize my 2024 taxes?
Identify the tax-saving and income-generating opportunities that are available to you this year. They may include:
- Funding retirement accounts,
- Accelerating business deductions,
- Initiating a Roth IRA conversion,
- Implementing charitable giving strategies,
- Transferring wealth through gifting,
- Harvesting tax losses, or other tax and financial strategies.
Anyone who relies on their portfolio for income may want to review how much income has been distributed to-date and determine whether taking a December payment will adversely affect their taxes.
What financial tasks must be done before year-end?
Required Minimum Distributions: Many retirees, and anyone who inherited an IRA in recent years, will need to take required minimum distributions (RMDs) before year-end. Retirees who have more than one IRA account also should inquire about which account(s) they should tap for RMDs.
Portfolio Review & Rebalancing: Also, the end of the year is a good time to review investment portfolios and rebalance assets, if necessary. This year is unusual because it’s an election year. Financial markets often are more volatile around elections. As a result, people who have seen the value of their savings and investments grow during the recent bull market may be concerned about market volatility and the possibility of a downturn.
One way to protect your gains is to implement an asset protection strategy. An annuity is often an important part of an asset protection strategy. For example, if you are concerned about preserving current gains, consider sweeping them out of the stock market and into a multi-year guaranteed annuity (MYGA). These simple, fixed annuities offer flexibility, tax-deferred growth and interest rates that often are higher than those offered by short- to intermediate-term bonds and certificates of deposit (CDs).
How do I set myself up for success in 2025?
Think about your financial goals for next year.
If you depend on your investments to generate income, talk with your financial advisor to estimate how much income your portfolio must generate next year. If there is a gap between the amount you need and the amount your portfolio is generating, an annuity might help close the gap. Annuity rates have been rising steadily since 2022 and have been lingering near their highest levels since 2009.1
If your goal is growth and you also want to protect your savings and investments, consider allocating a portion of your portfolio to a commission-free fixed index annuity (FIA). FIAs give owners the opportunity to participate in the performance of a stock market index while protecting against market losses. These tax-deferred annuities can help grow and protect a portion of your assets, while freeing the rest of your portfolio to be invested for more aggressive growth.
If you are unfamiliar with annuities, they are insurance products – and some are designed to provide guaranteed income for life. And, now, modern annuities are available without commissions, offering lower costs and improved benefits for consumers. Ask your financial advisor about the advantages of commission-free annuities and the protections they provide.
Year-end planning season is here. Talk with your financial advisor and/or tax professional about how to minimize taxes in 2024 and position yourself for success in the year ahead. If you have questions about whether an annuity is right for you, contact your financial advisor or reach out to a DPL Consultant at 1-877-625-5544. We can help.
1 "Annuity Rates as of October 28,2024.” Annuities.org.