Planning for 2025

Dustin Hall |
Categories
Financial Planning
Tax Planning
Retirement Planning

3 Things to Focus on to Prepare Your Financial Strategy for the Year Ahead

As we approach the end of the year, it’s essential to start mapping out your financial strategy for 2025 so you can get the best outcomes. 

While we might feel like postponing these tasks to focus on more festive activities during the holiday season, taking proactive steps now can give us the best gift of all—a solid foundation for the future. 

Though this guide isn't all-encompassing, focusing on these three key areas can put you on a path in the right direction. Remember, these are just general guidelines. To get a more tailored approach, get in touch with your financial professional who can talk to you about these areas based on your own unique circumstances.

Insurance Essentials

Insurance isn’t the most fun thing to talk about. And navigating insurance can be complex. But keep in mind that having the right coverage is essential to protecting your financial future. Though premiums might seem high in the moment, having adequate insurance is crucial, especially in unforeseen circumstances where your beneficiaries will benefit from the coverage.

  • Home and auto insurance: Evaluate your current coverage costs as rates are more transparent these days. Even if you are loyal to your current provider, shopping around could reveal substantial savings for comparable coverage. Better to research and plan than be caught off guard by premium hikes.
  • Disability insurance: According to Social Security Administration data, one in four of today's 20-year-olds will experience disability before retirement.1 Disability insurance provides crucial income replacement if you cannot work for extended periods, sometimes with tax-free benefits. Check your employer's short- and long-term plans, often the most affordable. If you are self-employed, consider private options.
  • Life insurance: Employers generally offer basic group life insurance, but the coverage may be limited. Consider additional life insurance depending on your current and long-term needs. Insurance provides liquidity and tax efficiency during critical times, so regularly review your policy as your life circumstances change.
  • Health insurance: Annually updated employer health plans may come with increased costs. Stay informed about changes and explore all available options with your benefits team. If you are self-employed, you might be able to deduct health insurance costs, while low-income earners should explore marketplace policies offering tax credits or state-run programs.

If you have questions about your insurance needs, get in touch with us. 

Tax Strategies and Retirement Planning

Tax regulations are ever-changing, especially as the Tax Cuts and Jobs Act approaches its 2026 expiration. While there are many sophisticated methods to lower your tax bill, several straightforward strategies are accessible to most individuals.

  • Tax-loss harvesting: This approach can help reduce taxes in years with significant capital gains. Be cautious of wash sales if repurchasing stock within 30 days.
  • Roth IRA conversions: Consult your financial professional about whether a Roth conversion is right for you, as it might be a good plan to pair with your charitable contribution strategy.
  • Retirement contributions: Maximize contributions to employer-sponsored and other retirement plans, including catch-up contributions if you are eligible to make them (meaning, if you’re 50 or older at year’s end). Be aware that IRA deductibility and Roth contributions depend on your Modified adjusted gross income. Consider Roth contributions to your employer’s plan if appropriate.
  • Required Minimum Distributions (RMDs): If turning 73 in 2025, ensure you take RMDs from your retirement accounts to avoid up to a 25 percent penalty for late withdrawals.
  • HSAs and FSAs: Health Savings Accounts (HSAs) are excellent for saving on medical expenses, offering deductible contributions. In retirement, HSA funds can cover health insurance premiums. According to Fidelity, 2025, HSA contribution limits are $4,300 for self-only and $8,550 for family coverage. If you are 55 and older, you can contribute an additional $1,000. Flexible Spending Accounts (FSAs) allow a $660 carryforward for 2025, with a grace period to use funds.2 Meaning, make sure you use your FSA money before the end of the year, or you’ll lose anything over $660 that you don’t use. 

Deciding which of these strategies to focus on at the end of the year is a complex decision. But we’re here to help you! Give us a call and together we’ll determine the best approach. 

Budget and Lifestyle Management

Spending can get a little bit out of control at this time of year. But it’s also the perfect time to assess your spending and make a plan for 2025. Although setting a yearly budget is easy, unforeseen expenses—like an unexpected car repair—require that we plan ahead for these types of events. 

Here’s how we suggest managing your budget and lifestyle costs: 

  • Review your income and expenses: Evaluate your spending against your budget while maintaining your lifestyle. If adjustments are necessary, especially nearing retirement, your financial professional can help you track expenses and create success projections. They can also help you set up a game plan for next year and how to make the adjustments necessary to keep you on the right path. 
  • Set your goals for the years ahead: Define goals and milestones for the next three, five, and ten years. Starting now with discipline and flexibility in planning can reduce stress for you and your family.
  • Adapt to change:  If you’re already retired, assess whether your funds will last based on your current spending. You might need to cut spending, downsize, or work longer, which, while significant, are manageable lifestyle adjustments. If you’re not yet retired, we can help you put a plan in place to ensure you have the right amount for your retirement years. 
  • Manage your debt: Assess debt repayment plans and identify how to pay off different types of debt. For example, if it's low-interest debt, it might be beneficial to maintain it while earning more through other investments. If it’s higher-interest debt, it might be best to devise a plan to pay that down quickly. 

Let’s chat about your spending and budgeting for next year. We’d love to get on a call and make a plan with you. 

 

These insights aim to keep your year-end planning focused as you prepare for 2025. Remember, financial situations are unique, and not all tools will suit everyone. 

Everybody’s situation is unique, and we’re here to help you put a plan in place that takes your challenges and goals into consideration. Let’s talk.

 

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent or tax advisor. 

Sources

  1. https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
  2. https://www.fidelity.com/learning-center/smart-money/hsa-contribution-limits

Securities and advisory services offered through “Your B/D or RIA Name Here”, Member FINRA/SIPC.

This material was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer or firm.