Year-end action items to help you wrap up your 2024 finances

The end of the year is an opportune time for investors to review their financial situation and make any necessary adjustments to maximize savings and minimize taxes. The following key action items can help to ensure you’re meeting relevant deadlines and taking advantage of pertinent planning opportunities before year-end.

1. Assess and manage your tax situation

By reviewing your realized and unrealized capital gains and losses, as well as year-end mutual fund distributions in your taxable accounts, you can take actions to reduce and/or prepare for any upcoming tax liability—or take advantage of a lower-than-usual tax bill.

• Be aware of year-end capital gains distributions: Mutual funds are often required to distribute capital gains (long term and/or short term) to investors at the end of the year. These distributions are expressed as dollars or cents per share. Preliminary estimates are typically available around late October and are paid in December.
  • Note that these distributions will only trigger a tax liability in taxable accounts, not individual retirement accounts (IRAs) or other tax-deferred accounts.
  • While you may want to avoid new investments in some mutual funds right before they distribute large gains, selling a fund ahead of the distribution may not result in lower taxes (due to the gain that may be realized through the sale of shares).
  • Don’t forget that your fund’s share price may drop on the day of the distribution. If your distributions are set to reinvest, your total investment in the fund won’t have changed, but you’ll have more shares and a higher total cost basis.
• Complete any Roth IRA conversions by December 31: Converting a set dollar amount from a traditional IRA to a Roth IRA can provide tax-free growth and withdrawals in retirement, but it also triggers a taxable event in the year of conversion.
  • If your income was lower than usual this year, or if you have other reasons to believe a conversion in this tax year could benefit you, be sure to consult with a financial advisor to weigh the pros and cons and plan to complete the conversion by December 31.
• If tax-loss harvesting could help reduce your tax liability, sales must be executed by year-end: Some investors opt to sell all or a portion of taxable positions at a loss in order to offset capital gains realized on sales or distributions from other investments throughout the year.
  • If your realized losses exceed realized gains, you can deduct up to $3,000 in capital losses from ordinary income, and any additional losses can be carried forward to future tax years. But if you intend to utilize tax-loss harvesting this year, those sales must occur by the end of the calendar year.

2. Maximize retirement account contributions

Retirement accounts offer a tax-advantaged way to save for the future. Year-end is a great time to assess your savings rate and maximize (or make a plan to maximize) tax-advantaged savings.

• Maximize employee 401(k) and 403(b) contributions by year-end: The contribution limit for 2024 is $23,000 (or $30,500 for those age 50 and older, including catch-up contributions). Remember that the limit does not include employer matching contributions.
  • If your goal is to maximize your contribution and you find that you’re behind, temporarily increasing your deferral percentage may help you reach that target before year-end. If those contributions are pretax, this boost can help to further reduce your taxable income for the year but will also result in lower net income over the holidays.
  • If you’re unable or unlikely to reach the annual maximum before year-end, plan to adjust your deferral percentage to ensure that you are on track to max out your plan contributions next year. To calculate the necessary percentage, divide your contribution limit by the number of paychecks in a year. Then divide that amount by your gross pay per paycheck. Also, check with your plan provider to ensure  that
    contributions will stop automatically once you reach the limit.
  • Even if you aren’t in a position to max out your contributions, signing up for an auto-increase plan of 1% or more can help to ensure you’re gradually increasing your contributions.
• Though not immediately required, you might consider making IRA contributions: You have until the tax filing deadline (April 15, 2025) to contribute to an IRA for 2024, but many investors opt to make their contributions before year-end—both to smooth out cash flows and potentially benefit from several more months of tax-advantaged growth. The annual limit for Traditional and Roth IRA contributions is $7,000 ($8,000 if you are over age 50).

3. Make 529 plan contributions and maximize gifts (if applicable)

If one of your financial goals is to strategically pass along your wealth to your loved ones each year, prioritize making 529 plan contributions and/or direct gifts of cash or securities by year-end. Each year, you can gift up to $18,000 per beneficiary—in combined 529 contributions, cash, or securities transfers—without needing to file a gift tax form. That limit is $36,000 per beneficiary for married couples.

• Complete 529 contributions by December 31: 529 college savings plans offer tax-free growth and withdrawals for qualified educational expenses, and many states provide tax benefits for contributions, but typically, the deadline to receive a state tax deduction is December 31.
  • If you want to make a larger contribution to a 529, you can “superfund” the account by contributing up to five years’ worth of gifts ($90,000 for individuals, $180,000 for couples) all at once, provided other gifts are not made to the beneficiary during that five-year period.
• If you intend to gift up to the annual gift tax exclusion, do so by year-end: Some individuals have both the desire and the financial means to see their family members enjoy their inheritance while they’re still around (and reduce the size of their future taxable estate in the meantime). If you haven’t reached your annual gift tax exclusion amount and intend to, you might consider making your gifts before year-end.

4. Take required minimum distributions (RMDs)

If you’re age 73 or older, you must take RMDs from Traditional IRAs, 401(k)s, and other qualified retirement accounts by December 31.¹ Missing this deadline can result in a penalty tax as high as 25% of the amount you should have withdrawn. Note that Roth IRAs are not subject to RMDs until after the death of the owner.

• Calculate and distribute your RMD: The amount of your RMD is based on the age you turned this year and your account balance as of December 31 of the previous year.
  • If you turned 73 in 2024, you have until April 1, 2025, to take your first RMD. However, deferring your first RMD until 2025 will likely result in higher taxable income, since your second RMD will need to be taken by December 31, 2025. For this reason, retired investors who reach age 73 in 2024 may want to take their first RMD by December 31 to ensure that income is taxed in the present tax year.

T. Rowe Price provides your RMD amount online for any Traditional IRAs you have held with us since December 31 of the previous year. Simply log in to your account, locate your RMD calculation and amount, and set up your distributions using our Auto-RMD tool. It’s a simple way to set up and manage your required minimum distributions.

5. Complete charitable donations

Charitable gifts can help to support the causes you care about while reducing your taxable income for the year. Direct charitable gifts of cash or securities held in taxable accounts will only reduce your taxable income if, when combined with other itemized deductions, you exceed the standard deduction ($14,600 for individuals and $29,200 for married tax filers). The exception is qualified charitable distributions (QCDs). QCDs are not taxable whether or not you itemized deductions.

• Execute QCDs by December 31: If you are over the age of 70½, you can make up to $105,000, in 2024, in QCDs per year directly from your IRA to a qualifying charity.
  • If you are over 70½, but not yet RMD age, QCDs can reduce the size of future RMDs, without increasing your taxable income. But if your other deductions bring you close to exceeding the standard deduction, QCDs cannot be itemized and therefore won’t help you exceed that threshold. So, if you’re close to itemizing, you may want to stick with cash gifts or transfers of securities from taxable accounts.
  • Once you reach RMD age (age 73 in 2024), QCDs can count toward satisfying your RMD while excluding the amount from taxable income. Keep in mind that if your annual QCDs exceed your RMD for the year, you cannot count the overage against RMDs in subsequent tax years.
• Make direct gifts of cash or securities transfers by year-end: For those who itemize deductions, charitable donations of cash or securities can be added to itemized deductions. If you’re planning to make charitable donations, ensure they are completed by December 31 to qualify for inclusion in itemized deductions for this year.
• The end of the year is a crucial time for individual investors to take stock of their financial situation and make any necessary adjustments to maximize savings and minimize taxes. By addressing these year-end financial tasks, you’ll be better prepared for the upcoming year and can make the most of the available tax advantages—while ensuring your accounts are structured to meet your goals.

For a more structured approach, donor-advised funds (DAFs) can allow you to make a large contribution now and then make grants to charities over time. DAFs can be funded by cash or the transfer of appreciated securities from taxable accounts. Funding a DAF with appreciated securities can provide dual tax benefits: You can avoid capital gains tax on the sale of those securities and, if you itemize, deduct the current market value of the appreciated securities at the time of the donation. Keep in mind that QCDs cannot be directed to a DAF.

Next steps:

• Consider working with an advisor or tax professional if your financial situation is complex. Learn more about the T. Rowe Price Retirement Advisory Service.
• Contact a Financial Consultant at 1-800-401-1819.

Year-end miscellaneous items

Here are a few things that may be helpful to review at year-end.

• Review your asset allocation: Take a look at your current mix of stocks, bonds, and other investments to ensure it aligns with your goals, risk tolerance, and time horizon. Because you are a T. Rowe Price customer, you have access to our Portfolio Optimizer tool (available upon login), which can help you get an initial sense of your current positioning in comparison with an appropriate allocation. If you need additional help determining the changes necessary to better align your portfolio with your age and objectives, call your financial advisor to make an appointment in the new year.
• Use the funds in your flexible spending account (FSA): You can only carry over $640 of your FSA balance each year. Any amount above that will be lost unless you use it or reimburse yourself for qualified expenses. (This doesn’t apply to Health Savings Accounts.)
• Check and update your beneficiary designations: Take this opportunity to ensure that the beneficiary designations on your retirement accounts, insurance policies, and other financial accounts are up to date. This is especially important if there have been any changes in your family situation, such as a marriage, divorce, or birth of a child.
• Update income tax withholding or estimated taxes: Adjust any withholding or determine fourth-quarter estimated taxes, if necessary. (Note that, generally, estimated taxes aren’t due until January 15.)
• Request your free annual credit report: If you haven’t yet this year, take advantage of your annual free credit report to monitor accuracy of your accounts and detect fraud.