Heading into the end of the year, as you contemplate the ramifications of the recent presidential election, prepare your Thanksgiving celebration, and compose your holiday gift lists, it’s a good time to assess your financial foundation.
Here are five essential investment moves to consider before the New Year.
Review and Adjust Your Risk Exposure
Start by evaluating how much risk you’re currently taking on. Market conditions can shift dramatically, and your risk tolerance may need adjusting. Ask yourself if you’re comfortable with the level of risk in your portfolio.
If you’ve experienced significant gains, taking some profits off the table and reducing exposure to volatile assets might be wise. Conversely, if your investments have underperformed, this could be an opportunity to reassess and take on more risk if your financial situation allows. Finding a balance that aligns with your current goals and comfort level is key.
Reassess Your Portfolio Allocation
Take a close look at your portfolio allocation. Diversification is critical for managing risk. Ensure your investments are spread across different asset classes —such as stocks, bonds, and real estate — to help provide a buffer against market fluctuations. Make sure your current allocation still aligns with your long-term goals.
For instance, you may shift toward more stable investments when nearing retirement. On the other hand, younger investors might benefit from holding a higher percentage of growth-oriented assets. Adjusting your allocation can help you stay on track toward your financial objectives.
Strive to Reach Your Annual Contribution Limits
With the end of the year approaching, now is the time to boost your retirement savings. Consider maximizing your contributions if you have retirement accounts like a 401(k) or IRA.
Maximizing your contribution not only helps secure your financial future but can also provide tax advantages. Contributions to these accounts often reduce your taxable income, allowing you to keep more of your earnings. Even if you’ve already made contributions, check if you can make catch-up or prior year contributions if you’re over a certain age.
Charitable Giving Strategies
As we enter the season of giving, consider your charitable contributions to support causes you care about, which can also provide tax benefits. Donating appreciated assets, such as stocks, instead of cash can help you avoid capital gains taxes, while also receiving a charitable deduction for the asset’s total market value. This strategy can enhance giving power and be a strategic tax planning move.
Consider Upcoming Law Changes and Estate Planning
As investors approach the end of the year, it’s important to be aware of upcoming legislative changes that could impact investment and estate planning strategies.
For example, the Tax Cuts and Jobs Act is due to sunset on Dec. 31, 2025, and it could have major financial impacts. Changes can impact everything from your tax rate to retirement. Now is an excellent time to review your estate plan to ensure it reflects your current wishes and takes advantage of any favorable tax rules. Consult with a professional to discuss trusts, wills, and any changes to beneficiary designations that might benefit your heirs. Proper planning now can save your loved ones from complications later.
Time is of the essence, so consider implementing these five investment moves to help position you for success. Enhance your financial strategy wellness by reviewing your risk exposure, reassessing your portfolio, maximizing retirement contributions, exploring charitable giving, and considering potential law changes. Act now to simplify your approach and make informed adjustments that can lead to lasting benefits in your financial journey.
Judson Embree is an Investment Advisor at Bryn Mawr Trust. He is responsible for tactical asset allocation, investment management, and economic commentary for high-net-worth individuals, families, and institutions. He joined Bryn Mawr Trust in 2023 having previously worked as a financial advisor and trust consultant. Embree holds a Certified Trust and Fiduciary Advisor (CTFA) designation and is a member of the American Bankers Association.
