Financial moves to make before 12/31

[StassneyHorn 6755]

Thought now would be a good moment to make this thread, financial advisors feel free to chime in with good info to prepare guys for end of year. What’s everyone goals? Keep holiday spending to a specific target? Max contribute to 401k/Roths etc? Would love to hear it and get some discussion going.
 

Have 3.5 months to meet max contribution for 401k for the year. I’ve never done it before, but I’m 35, so first time for everything and had no reason not to this year. Spent some of the year contributing nothing, some time at 10% now bumped it to 33% for this month to test out. Will probably go further. Spent a lot of the year slowly chipping away at a 25k debt from taking flight lessons during COVID cause YOLO and always wanted to learn that. Pretty sure IRA limits go until tax day 4/15 so wasn’t sure if it makes sense to include plans for that until after the new year.

Edited September 14 by StassneyHorn

[Texas St. Armadillos 1388]

If you have an HSA, max that out too.  I think the limit is $8k this year.

[Muny_Tex 315]

@StassneyHorn Experts may disagree, but I think you're wise RE: delaying (but NOT foregoing) Roth contributions in favor of tax deferred (401k) or tax deductible (HSA) prior to 12/31...espec if you are in that sweet-spot of being high enough income to meaningfully benefit from the short-term tax savings while still being eligible for the full Roth direct contribution limit of $7k.

My reasoning is based on the fact you can still contribute to "this year's" Roth (prior to the 4/15 deadline you mentioned) even after the clock runs out on 401k/HSA deadline and you file your completed year-end IRS return.  Therefore, if you anticipate a tax refund, filing taxes right away early in Jan/Feb is a slick way to parlay those credited funds toward your 2024 Roth limit (or get a head-start on 2025, since you have the either/or option between Jan 1 - April 15.

That said, I wouldn't go balls-out for 401k max limit if it comes at the expense of eventually topping off your entire Roth $7k limit before 4/15.  A healthy portfolio should possess a solid combination of tax-deferred and tax-free accounts, since they will both serve their own unique purposes as your income trajectory grows and/or eventually prep for retirement.

Also, I would not have guessed you were anywhere near 35....I pegged you at like 53 so take that for what you will.

Edited September 14 by Muny_Tex

[Muny_Tex 315]

On personal front, my plan for end of year is to continue tradition of only having kids born in Q4 so we can optimize the full year Child Tax Credit before all the bullshit comes due.  I will also create a new 529 in new baby's name and drop a fat contribution before 12/31 to realize the immediate state income tax benefits (note: user name does not remotely check-out). 

I also am planning a mortgage re-finance within next 1-2 months (bought in Spring 2023 and expecting substantial rate improvement), and will leverage the incremental cash flow from the two "skipped payments" toward some end-of-year retirement plan targets.

 

Edited September 14 by Muny_Tex

[UTPhil2006 3907]

Buy a house 

[CleverNickname 1345]

State worker here. Next paycheck has an across the board increase. Always a great time to bump up 457/401k contribution, and to add an extra $100 to whatever loan has the highest interest rate (if one exceeds the 4.5% vanguard cash plus is paying out today).

[UTPhil2006 3907]

11 hours ago, Muny_Tex said:

On personal front, my plan for end of year is to continue tradition of only having kids born in Q4 so we can optimize the full year Child Tax Credit before all the bullshit comes due.  I will also create a new 529 in new baby's name and drop a fat contribution before 12/31 to realize the immediate state income tax benefits (note: user name does not remotely check-out). 

I also am planning a mortgage re-finance within next 1-2 months (bought in Spring 2023 and expecting substantial rate improvement), and will leverage the incremental cash flow from the two "skipped payments" toward some end-of-year retirement plan targets.

 

Our main lender has a 75bps refi incentive until 10/31 if you wanna take advantage of that. 

[Wally Fairway 5663]

22 hours ago, UTPhil2006 said:

Buy a house 

Me: I already have a house

Phil: Buy another house

 

[UTPhil2006 3907]

4 hours ago, Wally Fairway said:

Me: I already have a house

Phil: Buy another house

 

See. He gets it 

[StassneyHorn 6755]

Is it possible to tell a company to stop giving me the employer contribution on HSA? I’ve got like one, maybe two more pay periods before I go over the yearly contribution limit. I already stopped my employee contribution for the year. I may have moonlighted for a bit and the other company contributed a stupid amount upfront. 

Edited September 25 by StassneyHorn

[Da Fino 2819]

44 minutes ago, StassneyHorn said:

Is it possible to tell a company to stop giving me the employer contribution on HSA

You can tell them anything and they will probably do it. 

[After irth 1245]

On track this year as usual, and it always feels so good.  We have no debt this year and have had nothing to spend our money on, which is kinda nice. 

401k and HSA will hit perfectly with the remaining payroll checks left. 

Already contributed and then Backdoor Roth'd both of our IRAs.  

Emergency Savings is at the amount we want in an AMEX HYSA.

$1,000 a month goes into my Fidelity "play account" Brokerage for Stonks.

Any excess cash goes into VMSXX in our Vanguard Brokerage.  When it hits a certain limit, it gets 3-Fund-Bogle'd.  

Damn, it feels good to be a gangster...

 

[Brisketexan 106607]

That this thread has made it this far without "acquire hookers and blow" just disappoints me.

[Parliament 14555]

On 9/13/2024 at 8:54 PM, Texas St. Armadillos said:

If you have an HSA, max that out too.  I think the limit is $8k this year.

I’m not having enough withheld to get to $8k.  Are we allowed to make a 1-off contribution to get up to the cap?  Like literally look where I’m at on 12-31 and write a check for the shortfall?

[Texas St. Armadillos 1388]

11 minutes ago, Parliament said:

I’m not having enough withheld to get to $8k.  Are we allowed to make a 1-off contribution to get up to the cap?  Like literally look where I’m at on 12-31 and write a check for the shortfall?

I would check with your HR team or Payroll team ASAP.   I'm not as knowledgeable as my benefits people (your mileage may vary).

[Okie State 3887]

I was a little short on HSA max one year and trued it up before filing taxes for the year. You can still claim it as a deduction, but don't get the full payroll deduction benefit.

Edited October 2 by Okie State

[Slacks 7018]

On 9/15/2024 at 4:22 AM, Wally Fairway said:

Me: I already have a house

Phil: Buy another house

 

This is not a joke.

[Slacks 7018]

I need to open a Roth. This is the clearest gap in my retirement plan. I don't know why I've blown it off for my entire adult life. 

[Zepol87 9308]

6 hours ago, Brisketexan said:

That this thread has made it this far without "acquire hookers and blow" just disappoints me.

I’m here now!! 
Great thread thanks for starting it I am 36 and grew up 0 knowledge of this shit. Do well I think and getting a significant raise next year. It’s already on the books, been doing 8% 401k with 4% match, hsa is almost done. Not “rich” like the rest of you assholes but always trying to learn this play the game stuff. Roth needs more but again I love hookers and blow

Edited October 2 by Zepol87
Edit because the next raise and promotion should put me at about 170k

[StassneyHorn 6755]

Yea looking at it with clearer eyes now, I’m absolute maxing 401k til end of year to get to 23k max, while paying off a remaining 7.5k debt. When new year starts I’m resetting the contribution to 0, and will pay off remainder of debt if there is any and contribute 7k total as fast as possible to Roth before 4/15 for previous year, then another 7k to Roth this year immediately before doing 401k full contribution again.

Im a big proponent of “get to 100k” as soon as possible in all accounts, before letting time do the rest of the compounding work and get full paychecks for individual investing.

 

…and then Thailand and Philippines for self instructed research.

Edited October 2 by StassneyHorn

[Nice Guy Eddie 13706]

12 hours ago, Parliament said:

I’m not having enough withheld to get to $8k.  Are we allowed to make a 1-off contribution to get up to the cap?  Like literally look where I’m at on 12-31 and write a check for the shortfall?

 

12 hours ago, Texas St. Armadillos said:

I would check with your HR team or Payroll team ASAP.   I'm not as knowledgeable as my benefits people (your mileage may vary).

I was under the belief that you can make HSA contributions independent of your employer or paycheck but I'm neither a CPA nor HR rep. Somehow you will need to report this as tax-deferred on your 2024 tax return. I don't know if this is just you attesting to it, or if the financial HSA entity sends you a tax doc.

[Celery Man 21076]

Cleaning up accounts from a job change and I’m pissed to see I left $100 in an fsa from last year. Spend that shit.

[UT_OB1 2260]

15 hours ago, Zepol87 said:

I’m here now!! 
Great thread thanks for starting it I am 36 and grew up 0 knowledge of this shit. Do well I think and getting a significant raise next year. It’s already on the books, been doing 8% 401k with 4% match, hsa is almost done. Not “rich” like the rest of you assholes but always trying to learn this play the game stuff. Roth needs more but again I love hookers and blow

I’m only 6 years older than you, but I finally started maxing my 401k yearly at about 36 and wish I’d started at 26. 

[Wally Fairway 5663]

Sit down and let me tell you a story. I had a plan, had a could of people look at it, and with minor tweaks it was all good. I've hit level 1 max for almost 20 year, and that is making sure to get max employer match, there was a period of 10 years I hit the 401k max, then about 5 years ago I took a job that offered more life balance and that was great, but I didn't max the 401k. But I've always invested fairly aggressively, S&P 500, a couple of growth funds, little in bonds...and that has done well.

The plan was that I would continue to do contact consulting until 70, because a) it maxes or SS, 2) I really like most of the clients I've worked for. Mrs Fairway was going to with to 65, and get Medicare, draw her SS until I started to draw at which point she'd get an increase to 50% of mine. And we be set, even if we made it to 100.

The Mrs Fairway gets a cancer diagnosis (see the cancer thread), and she may be done working, I've shifted my contracts to someone else. And although we are "comfortable", there are a couple of financial unknowns, that can wait until we know where she is with the big C.

The moral is, didn't wait until later to start investing, pay your future self first because you may not get the choice about when you do contributing or when you will need to pull money out. 

Good luck, let time be your friend in inventing, and only speculate with a small % of portfolio. 

 

[Texas Jeff 1998]

I was under the belief that you can make HSA contributions independent of your employer or paycheck but I'm neither a CPA nor HR rep. Somehow you will need to report this as tax-deferred on your 2024 tax return. I don't know if this is just you attesting to it, or if the financial HSA entity sends you a tax doc.

You should be able to do this up until the filing date in April. I am not a tax professional but I have topped off my HSA in some years by making a deposit into the HSA via check or transfer.

There is a form you fill out that has how much your employer put in and how much you put in to reconcile who put in what. If you use something like TurboTax this is done as part of filling out your tax forms.

[Texas Jeff 1998]

4 hours ago, Texas Jeff said:

You should be able to do this up until the filing date in April. I am not a tax professional but I have topped off my HSA in some years by making a deposit into the HSA via check or transfer.

There is a form you fill out that has how much your employer put in and how much you put in to reconcile who put in what. If you use something like TurboTax this is done as part of filling out your tax forms.

OK, I looked at my return from last year.  This is on Form 8889, "Health Savings Accounts (HSAs)".

One line is for the amount you put in, one line is for the amount your employer put in.  There is some math there to figure out your max contribution.  If you don't have a high deductible health plan for the entire year then the amount you can put in is less.  "See the instructions", says the IRS, which is one of their favorite things to say.

[Nice Guy Eddie 13706]

28 minutes ago, Texas Jeff said:

OK, I looked at my return from last year.  This is on Form 8889, "Health Savings Accounts (HSAs)".

One line is for the amount you put in, one line is for the amount your employer put in.  There is some math there to figure out your max contribution.  If you don't have a high deductible health plan for the entire year then the amount you can put in is less.  "See the instructions", says the IRS, which is one of their favorite things to say.

I believe the amount is prorated at the same percentage that you were covered for the HDHP for that year. 

[Newdoc 3508]

If you can get to a HDHP and HSA while young and healthy then do it. Your health care expenses should be low if relatively healthy. You get over 50 yo then you may start to occur big chunks of health care expenses that could make your out of pocket in a HDHP pretty high and start to chip away at the advantages of having that HSA. This is especially true if the monthly cost of the HDHP is close to your cost for a more traditional HMO or PPO type plan.

[Nice Guy Eddie 13706]

20 hours ago, Newdoc said:

If you can get to a HDHP and HSA while young and healthy then do it. Your health care expenses should be low if relatively healthy. You get over 50 yo then you may start to occur big chunks of health care expenses that could make your out of pocket in a HDHP pretty high and start to chip away at the advantages of having that HSA. This is especially true if the monthly cost of the HDHP is close to your cost for a more traditional HMO or PPO type plan.

This happened to me. I have a HDHP and HSA and needed physical therapy this year. It was somewhere close to $200 per visit. The therapist prescribed twice per week, and I countered with one with take home instructions. 

[Newdoc 3508]

1 hour ago, Nice Guy Eddie said:

This happened to me. I have a HDHP and HSA and needed physical therapy this year. It was somewhere close to $200 per visit. The therapist prescribed twice per week, and I countered with one with take home instructions. 

Yep, PT will put a hole in your health savings pretty quickly. HDHP used to be pretty economical and significantly less than traditional plans so the HSA made sense with it. With a little CR thrown in, the Affordable Health Care act made HDHPs cover so many things that the insurers have seen it fit to raise the rates just as much as other plans. They would rather you stay in a narrowed network with tightly controlled cost and authorizations for care. 

[StassneyHorn 6755]

Had 3 HSA accounts so finally got around to submit a rollover on one of them and stop eating fees. Looks like I’ll have to wait another 12 months after it lands in the other account, before I can roll that over into the main one. Fidelity made it easy and completely paperless, so kudos for that.

[Firemans4Horn 18498]

Tax rates could see an increase in 2026 (we’ll know more in 10 days). Most people are overindexed to pre-tax accounts so adding some to Roth could make sense the next 14 months. 

[Nice Guy Eddie 13706]

11 hours ago, Firemans4Horn said:

Tax rates could see an increase in 2026 (we’ll know more in 10 days). Most people are overindexed to pre-tax accounts so adding some to Roth could make sense the next 14 months. 

It may not be the best now decision but I’ve decided to go 100% Roth 401k for my few remaining work years. I want to have that as a bucket to pull from in retirement when it’s the right tax decision then.

[Firemans4Horn 18498]

5 minutes ago, Nice Guy Eddie said:

It may not be the best now decision but I’ve decided to go 100% Roth 401k for my few remaining work years. I want to have that as a bucket to pull from in retirement when it’s the right tax decision then.

I'm a big fan of tax diversification even if the math doesn’t work out exactly perfectly. Roth conversions in early retirement (when w-2 income drops) can make a lot of sense for a lot of families. 

[Parliament 14555]

4 minutes ago, Firemans4Horn said:

I'm a big fan of tax diversification even if the math doesn’t work out exactly perfectly. Roth conversions in early retirement (when w-2 income drops) can make a lot of sense for a lot of families. 

Strippers and cocaine.  Just hear me out...

[Nice Guy Eddie 13706]

29 minutes ago, Firemans4Horn said:

I'm a big fan of tax diversification even if the math doesn’t work out exactly perfectly. Roth conversions in early retirement (when w-2 income drops) can make a lot of sense for a lot of families. 

I hear you. I go back and forth with a later conversion strategy or just annually pushing 40k into my Roth 401k now. My take home is obviously smaller now but this is after a career of only having pretax 401k.

[Parliament 14555]

We forget how hard it was to save for retirement in the 80’s and 90’s.  The original IRA came out in 86 or so(?) and was capped at $2k.  From then until 94 or so you did that and saving outside anything with a tax advantage.

The 401k came out in 94 or so and was a step change but still had limitations.  Then they made the ROTH IRA then ROTH 401k and here we are.  But before that people who worked for a company that didn’t offer pension had a rough go.  We need to tip our hats to retirees who succeeded at doing it the right way, the hard way.

[Wally Fairway 5663]

1 hour ago, Parliament said:

We forget how hard it was to save for retirement in the 80’s and 90’s.  The original IRA came out in 86 or so(?) and was capped at $2k.  From then until 94 or so you did that and saving outside anything with a tax advantage.

The 401k came out in 94 or so and was a step change but still had limitations.  Then they made the ROTH IRA then ROTH 401k and here we are.  But before that people who worked for a company that didn’t offer pension had a rough go.  We need to tip our hats to retirees who succeeded at doing it the right way, the hard way.

I had 401k way before 1994, at least the mid 80s. 
Looking it up section 401(k) of the IRS code was written and approved in 1976, but it wasn't until 1980 that it was first implemented. I know that by 1986 I was in a 401K, and all of them were rolled into a rollover IRA sometime before 1990. 

Also here is a quote from the IRA wiki page - Traditional IRAs were introduced with the Employee Retirement Income Security Act of 1974 (ERISA) and made popular with the Economic Recovery Tax Act of 1981.

[Parliament 14555]

Well nvm sry.

[Wally Fairway 5663]

24 minutes ago, Parliament said:

Well nvm sry.

your overall point was 100% correct; it was hard due to the limits, small company match (I think it was 50% of the first 5 or 6% for quite a while, but the worst was the limited investments to choose from and the ability to change investments only quarterly or semi-annually). Investments were typically mutual funds from big companies, with very limited options.

[Parliament 14555]

And when was there a viable S&P 500 index option?

[Coelenterate Fuccboi 13385]

On 10/2/2024 at 11:25 AM, StassneyHorn said:

…and then Thailand and Philippines for self instructed research.

I feel the need to advise you visit Indonesia, as well. 

[Vintner 27]

Roth 401Ks are goldmines for the crowd under 35. At least do the company match but the best advice is to contribute all that you can.  It’s hard to see the benefit when you are early in your career, because it’s taking away from your discretionary spending aka “fun budget”. The first $100K is the hardest but that will grow and the next $100K comes faster (barring financial crises…but that’s when things get cheap and markets will recover) and eventually the annual growth of your investments exceeds your contributions.
 

Keep the pedal to the metal if you can but I will say that as your earnings increase throughout your career you may choose to shift some to traditional 401K in order to moderate/minimize current taxes. 

Regardless of your vehicle keep making the biggest contribution that you can afford and keep it all invested in something.  Most companies 401K managers have crappy money market vehicles.

 

[Wally Fairway 5663]

On 10/28/2024 at 6:48 PM, Parliament said:

And when was there a viable S&P 500 index option?

The Standard & Poor's Depositary Receipts were launched by Boston asset manager State Street Global Advisors (SSGA) on January 22, 1993, as the first exchange-traded fund in the United States (preceded by the short-lived Index Participation Shares that launched in 1989); and are part of the SPDRs ETF chain.

https://en.wikipedia.org/wiki/SPDR_S%26P_500_ETF_Trust

[Muny_Tex 315]

On 9/13/2024 at 11:23 PM, Muny_Tex said:

I also am planning a mortgage re-finance within next 1-2 months (bought in Spring 2023 and expecting substantial rate improvement), and will leverage the incremental cash flow from the two "skipped payments" toward some end-of-year retirement plan targets.

I think less than a week after I typed this the rates began surging upward again, so this definitely ain't happenin' anymore.

I also was pretty excited about my $200 Astros WS/Longhorns CFP combo parlay that would've paid out $30k....until it was reduced to rubble.

See yall in 2025....

[UTPhil2006 3907]

On 9/14/2024 at 9:51 AM, UTPhil2006 said:

Our main lender has a 75bps refi incentive until 10/31 if you wanna take advantage of that. 

This got extended through November. 

[Slacks 7018]

11 hours ago, Vintner said:

Roth 401Ks are goldmines for the crowd under 35. At least do the company match but the best advice is to contribute all that you can.  It’s hard to see the benefit when you are early in your career, because it’s taking away from your discretionary spending aka “fun budget”. The first $100K is the hardest but that will grow and the next $100K comes faster (barring financial crises…but that’s when things get cheap and markets will recover) and eventually the annual growth of your investments exceeds your contributions.
 

Keep the pedal to the metal if you can but I will say that as your earnings increase throughout your career you may choose to shift some to traditional 401K in order to moderate/minimize current taxes. 

Regardless of your vehicle keep making the biggest contribution that you can afford and keep it all invested in something.  Most companies 401K managers have crappy money market vehicles.

 

Follow this advice. 

Max it out.  Pick a target date fund around the time you'll turn 75. And don't even think about it until you're 55.

I'm 53. Had I listened to this lesson when I was 30, I'd be ready to retire now. 

Instead I invested up to the measly 6% match for awhile.... Took a loan to buy a house... Got divorced 2 years later. Goodbye house. Goodbye chunk of the first 100k... Then I started over with small match amount. 

I was fortunate to switch into a higher paying career to help me catch up, and eventually I went all in on maximum contributions, but I lost the initial compounding time, which is critical.

Start now. Max it. Thank me when that 2nd comma pops up.

[StassneyHorn 6755]

… financial moves to make in 2025. 401k limit increases $500 to 23,500. Trad and Roth IRAs contribution limit stay same but with income tweaks to Roth. HSA limit increase to 4300 single/8550 family

https://www.kiplinger.com/taxes/401-k-and-ira-contribution-limit-changes#:~:text=The contribution limits for a,%247%2C000 (same as 2024).
 

 

 

[UTPhil2006 3907]

22 minutes ago, StassneyHorn said:

… financial moves to make in 2025. 401k limit increases $500 to 23,500. Trad and Roth IRAs contribution limit stay same but with income tweaks to Roth. HSA limit increase to 4300 single/8550 family

https://www.kiplinger.com/taxes/401-k-and-ira-contribution-limit-changes#:~:text=The contribution limits for a,%247%2C000 (same as 2024).
 

 

 

......and?

[StassneyHorn 6755]

And see @UTPhil2006 for any mortgage refinancing or home buying questions. Make your home work for you in the new year.