As fall arrives, the changing of the season can be an ideal time to revisit your financial plans with fresh perspective. Ask yourself: What goals do you still need to tackle this year? And which ones do you want to pursue in 2024?
For your finances, here are four moves you can make in the final months of 2023 to help set yourself up for success in 2024 and beyond.
1. Revisit Your Asset Allocation
The end of the year is a good time to revisit your investment strategy and asset allocation to help ensure your portfolio is still apportioned among stocks, fixed income, cash and other asset classes in a way that fits your goals and risk tolerance. If recent gains or losses in financial markets have caused your investments to drift away from your target allocations, it may be time to consider rebalancing them. Your Morgan Stanley Financial Advisor can help you make the necessary adjustments to bring your portfolio back in line with your overall investing strategy and prepare for any changes in economic and market conditions that may be ahead.
2. Plan for Your Tax Return
Whether or not you live in a state with high taxes, consider how mitigating the impact of taxation on your portfolio can help you build and sustain your wealth over time. For example, a tax-aware asset location strategy, which accounts for differences in the tax treatment of various accounts, may help increase after-tax returns. And, for taxable accounts, a strategy known as tax-loss harvesting can help mitigate taxes on capital gains.
If you’re not doing so already, consider fully funding your employer-sponsored retirement plan, such as a 401(k), since your contributions can be made on a pretax basis. In 2023, you can save up to $22,500 through your 401(k) plan, with up to $7,500 in additional contributions for those age 50 or older. Separately, for the 2023 tax year, you can save up to $6,500 in an individual retirement account (IRA), plus an additional $1,000 if you are age 50 or older.1
3. Update Your Estate Plan
You may want to consider periodically updating your wills and other estate planning documents. Year-end can be a good time to review the changes the past year brought to your family, as well as your overall estate plan to ensure it still reflects your situation and goals.
Those planning to give financial gifts to family members should keep in mind the annual gift tax exclusion limit of $17,000 for 2023 ($34,000 for couples) and look to make those gifts before year-end. Though the federal estate tax deduction rose to $12.92 million per person in 2023, individual states often have lower exemptions. Given that, you may want to share some of your estate with your family today to help them with their own finances. Strategies for this may include setting up trusts gifting to reduce your overall estate tax liability and providing for education expenses for family members through a 529 plan or directly paying their tuition to an institution.
4. Plan Your Charitable and Holiday Giving
During the holidays, many feel the call to give back through charity. When making your gifting plans, you need to also decide whether you want to give cash, appreciated securities, or through a gift of your volunteer time.
Another option for giving back is a donor-advised fund, which provides potential tax advantages while helping you support your favorite causes. If you’re serious about creating a more substantial structure and commitment, you might consider a family foundation in which you engage your family members in the philanthropy as well.
Especially given recent inflation, holiday shopping may cost more this year. Before buying gifts for everyone on your list, consider first setting a budget for planned year-end spending, also keeping in mind any service providers and special people in your life to whom you’d like to give holiday bonuses.
Talk with your Morgan Stanley Financial Advisor to discuss your year-end plans.
