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 1. Home
 2. Retirement
 3. Retirement-plans
 4. Roth-iras


CHECK OFF THESE FOUR FINANCIAL TASKS TO FINISH 2024 STRONG

The new year is a popular time to set financial goals, but now is the ideal time
to check how you're doing. Four tweaks could make a big difference.

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commission. Here’s how it works.

(Image credit: Getty Images)

By Daniel Razvi, Esquire
published 20 July 2024
in Features

Reassessing your finances throughout the year is necessary to optimize outcomes.
Throughout the second half of 2024, navigating key areas, such as maximizing
tax-free opportunities, protecting your assets amid market highs, optimizing
your interest-earning potential on savings and ensuring your estate planning is
up to date, is important. By proactively managing these aspects, you could
greatly improve your financial stability and security.




1. MAXIMIZE TAX-FREE OPPORTUNITIES: THERE ARE ONLY 1½ YEARS LEFT TO SAVE.

The clock is ticking on the Tax Cuts and Jobs Act, which is set to expire at the
end of 2025. Starting in 2026, most tax brackets and federal income tax rates
will likely increase. Now is an important time to get as much money into your
tax-free bucket as possible before rates go up.



Roth IRAs are one of the easiest and most common methods to move money to
“tax-free” status. Other unique strategies involve maximum funded life insurance
or municipal bond funds, which may be something to consider after you’ve maxed
out your Roth contributions.


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Roth IRAs do come with relatively low contribution limits. For 2024 the limit is
$7,000 per person per year, or $8,000 if you are 50 or older. In addition, you
cannot contribute the full amount if you have a modified adjusted gross income
of $146,000 or more as a single filer, or $230,000 or more as a married couple.
Contributions phase out after these limits, and you become ineligible to
contribute anything at all when your income hits $161,000 if single or $240,000
if married.

However, there is a way around these limits — if you have access to a Roth
401(k). Those with this savings option can contribute up to $23,000 to their
Roth 401(k) (or $30,500 if you are 50 or over). Contributions inside Roth
401(k)s have no income caps, making almost anyone eligible. Any employer match
is likely to go into the traditional 401(k), but your own contributions can go
in after-tax and grow tax-free inside the Roth 401(k).



The biggest long-term savings could come from a Roth conversion. That is when
you take existing traditional IRA or 401(k) funds and pay taxes now to convert
to a Roth IRA. Paying these taxes upfront could feel like a burden, but in most
cases, it will save you more on taxes in the long term once that money is
growing tax-free. Take advantage of today’s “low” tax rates, before they go up
in 2026. Remember, to convert to a Roth you need to complete that transaction by
Dec. 31 for it to count for this year. You cannot backdate a conversion like you
can for a contribution.

Talking to a tax attorney or CPA can help you develop an ideal strategy for how
much is appropriate to convert each year given your specific situation. When
searching for a tax adviser, keep in mind that it is important to have someone
who considers the long-term picture and works to minimize taxes over your
lifetime, not simply in a given tax year.


2. PROTECT YOUR ASSETS FROM MARKET DOWNTURNS.

Remember the old adage “buy low, sell high”? We’ve recently seen the market at
its all-time highs. While it is impossible to know if and when the market will
have another downturn, it may be wise to take advantage of the current market
highs and pull some cash out onto the sidelines. Historically speaking, after a
market crash it often takes several years or more to break even.

Particularly, if you have a need or desire to spend some of your savings in the
next few years, it would be a good idea to have cash available to use if the
market were to drop. That way, you won’t be “selling low.” This is especially
true given the great interest rates available today for short-term guaranteed
accounts (money markets, CDs, Treasury bills, etc.). Whatever you may want to
spend or withdraw over the next several years may be advantageous to keep in a
guaranteed account (also known as a “volatility buffer”).


3. BE MINDFUL OF INTEREST RATES.

Speaking of safe money, when was the last time you did an optimization check of
your savings accounts? Most advisers recommend having at least six months’ worth
of expenses someplace safe and guaranteed. However, just because it is safe
doesn’t mean you can’t earn interest on it. Make it a habit to regularly search
and see if there are options to earn a higher interest rate on your emergency
fund without taking any more risk.

On the flip side of interest rates, just as you can earn high interest in the
bank, the cost of borrowing has also increased significantly relative to a few
years ago. It is becoming more difficult to find an affordable home to purchase.
If you have a great interest rate on your mortgage from a few years ago, don’t
be in a rush to pay it down. One potential loophole if you do need to purchase a
home and want a lower interest rate is to look for a home with an assumable
mortgage. Many loans, particularly if they are FHA, USDA or VA loans, are
assumable, meaning you could potentially take over the seller’s existing
mortgage with a favorable interest rate.


4. FOLLOW UP ON YOUR ESTATE PLANNING CHECKLIST.

As we go down the home stretch in 2024, it is a good idea to do an annual review
of your estate plan. This should start with reviewing the beneficiaries on all
of your assets. It is important to remember that beneficiary designations trump
everything — this means that even if you have a great will and trust, your
401(k) plan or life insurance policy will pay the listed beneficiary directly,
whether or not your will and trust say differently.

Where a trust becomes very important (rather than just a will) is for real
estate. If you don’t have your house in a trust, you should strongly consider
creating one in order to bypass probate, increase privacy and exercise more
control over your assets. Watch out for common trust pitfalls, including naming
more than one co-trustee, having a restrictive A/B setup for a married couple
even if your assets are under the estate tax limit, or leaving a single property
to several beneficiaries without direction on whether/when to sell the property.


RELATED CONTENT

 * Key Tax Provisions That Are Expiring After 2025
 * Is a Roth Conversion for You? Seven Factors to Consider
 * Are Stocks in a Bubble?
 * How Big Should My Emergency Fund Be?
 * Estate Planning: Who Needs a Trust and Who Doesn’t?

DISCLAIMER

This article was written by and presents the views of our contributing adviser,
not the Kiplinger editorial staff. You can check adviser records with the SEC or
with FINRA.





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By submitting your information you agree to the Terms & Conditions and Privacy
Policy and are aged 16 or over.
Daniel Razvi, Esquire
Social Links Navigation
Tax Attorney, Higher Ground Financial Group

Daniel Razvi is an attorney who owns Higher Ground Legal, a nationwide law firm,
specifically focused on trusts, wills and taxes. Also a partner in Higher Ground
Financial Group with his father, Imran Razvi, Daniel is passionate about
assisting clients with planning for retirement, minimizing risk, fees and
taxes. He thoroughly enjoys designing plans to meet the varying needs of his
clients. Daniel has appeared on Fox Business and can be heard on weekly radio
shows on AM 570 “The Answer” in Washington, D.C., and 560 KSFO in San
Francisco. His teaching style and advice have been invaluable to listeners.



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