5 Financial Actions to Consider at Year-End – 2023 version

A 90-second read by Anthony Benante, CFA:  What 5 things should you be thinking about at the end of the year when it comes to your finances?

1. Review your personal budget and commit to a savings plan for 2024

 a. On January 1, write down the balance in your checking account. Do this on the first of the month for the next three months. After you incorporate your income for the period, as well as take note of any cash withdrawals from other accounts, you can get a general sense of what your monthly spending is.
 b. We work directly with our clients at Baron to help understand how their budget and all their financial assets work together. If you would like a budget sheet (either electronic or hard copy), let us know. 

2. Review your long-term investment strategy

 a. Is the long-term strategy in place for you still right for your specific circumstance? Are you going to be making any large purchases coming up in the New Year? Are you thinking about revisiting your risk tolerance - becoming more aggressive or conservative?
 b. At Baron, we use a customized approach to design client portfolios. We not only consider potential return, but also risk, as well as how the investments complement each other. Having a long-term investment strategy is critical for investing success and provides a guide for when markets act unexpectedly or make a major directional move.

3. Rebalance your investment accounts

 a. Rebalancing brings the portfolio into alignment with the original target weights of each asset class. It also helps to reduce long-term portfolio volatility.
 b. Client portfolios at Baron are rebalanced on a contingent basis. This means the actual holdings are regularly compared to the recommended strategy. Triggers are in place to help identify when investments deviate too far from strategy and trades are placed. This keeps client portfolios close to their strategy. Most individuals do not follow this disciplined approach. 

4. Review your tax situation for the year and take advantage of tax trading in your investment accounts, if possible

 a. Understanding how your investments may impact your tax circumstance is important. The last trading day for 2023 is Friday, December 29th. That is the last day you can make any changes to your portfolio for your 2023 tax return.
 b. Throughout the year, we review Baron clients’ tax situations and see if any strategic trades can be made to help reduce tax-burdens. As year-end approaches, we look to minimize tax impacts when possible. However, our focus is adhering to portfolio strategy, while minimizing taxes when possible.

5. If you are 73 or older or have previously been required to take a Required Minimum Distribution (RMD), or if you have inherited a tax-deferred account, make sure you understand how RMDs apply to you

 a. You should work with your accountant to understand your tax profile and how a distribution will impact you.
 b. If your income is low or lower than normal, you should investigate if a Roth Conversion makes sense for you.

If you have any questions, do not hesitate to contact the Baron Financial Group Team. 

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Disclosure: This is a general communication being provided for informational purposes only.  This material is not intended to be relied upon as a forecast, research, tax, or investment advice. Please consult your financial planning and tax professionals for personal advice.  Every investment strategy has the potential for profit or loss.