Financial Pros Share Smart Money Moves to Make Before 2024

As another volatile year in the markets draws to a close, many Americans remain uncertain of what lies ahead. The long-awaited recession is still not here. The economy is roaring, clocking up eye-popping growth metrics, while the unemployment rate remains low, showing jobs available for almost everyone who wants one.

Yet, Americans seem to be more worried about money than ever. 

A recent survey from the American Academy of Sleep Medicine (AASM) showed that from a sample of 2,000 U.S. adults, 69 percent reported losing sleep over worries about job security, and three-quarters are tossing and turning over fears the country is headed for a recession.

Amid this persistent fretting about financial security, prudent money moves may make an outsized difference. 

No matter what lurks around the corner, taking stock of one’s financial health at the end of the year and planning ahead for 2024 can hold one in good stead for the future. Financial advisors offer insights into some of the best moves to make ahead of the new year. 

Tax Time Coming

The tax burden is weighing more heavily on the minds of Americans now. A Gallup poll this year showed that 60 percent of Americans feel they are paying too much federal income tax. Negative sentiment toward federal taxes has not been so high for over two decades, especially among wealthy individuals and families. Now is an ideal time to get tax ducks lined up in a row. 

“This is a very important time to take a look at tax strategies that make sense for your situation before the year ends,” says Sean Polley, Private Wealth Manager at Polley Wealth Management. “This is especially important to many strategic tax strategies that can be implemented before taxes are set to go up in 2026.”

According to the Congressional Budget Office website, rates are set to rise on taxable ordinary income for most, but not all – of the seven tax brackets. Beginning in 2026, the rates will shift from the current rates (ordered lowest to highest) of 10, 12, 22, 24, 32, 35, and 37 percent, to become 10, 15, 25, 28, 33, 35, and 39.6 percent, respectively.

“For clients with variable income…it is important to ensure they’ve paid enough in taxes throughout the year to avoid under withholding penalties, and to cover that gap if need be,” says Andy Moran, Founder, and Financial Planner of Ad Astra Financial Planning.

“For most of my clients, this potential exists because the withholding rates for supplemental income, including vesting stock options, are based on a separate system from “regular” withholding on your pay statement,” Moran adds. “These supplemental income rates may not be enough to cover the tax liability for high-income earners.”

The end of the year is also a good time for investors to review portfolio performance and trim off underperforming stocks, that can offer additional benefits come tax season. 

“Tax loss harvesting is a very easy way for the average investor to sell assets that are showing losses for the year, which can lead to tax savings,” says Jesse Carlucci, Ph.D., CFP, and Chief Investment Officer at Arrow Investment Management

“Up to $3,000 per year can be claimed as a capital loss, and the excess can be carried forward to future years.”

When an investor sells an asset for profit, they realize a capital gain, which is a taxable event. Capital gains are either taxed at that person’s ordinary income rate (if held for less than a year) or otherwise at the long-term capital gains rate (ranging from 0% to 20%). Yet, if that investor had first sold something at a loss, they can use that loss to offset their gain, lessening the amount they owe in tax for the profitable trade.

Tax loss harvesting can be an effective strategy to rebalance portfolios and lighten the tax burden. However, investors must hire a tax accountant or stay abreast of the latest rates to judge if it is the smartest choice for them at the time.

Looking Ahead

The investing outlook for 2024 is a decidedly mixed picture, with fears over a coming recession jarring against hopes for a reversal in the Fed’s monetary tightening and questions over whether American corporations can maintain their bottom lines amid all the flux. 

“2022 was a tough year for investors, but 2023 has recovered, and clients are satisfied with the rebound,” says David Berns, Financial Planner at Truadvice Wealth Management. “2024 is an election year, and those can be more volatile than other traditional market years.”

Others see more room for upside.

“Most investors are optimistic about 2024 because the expectation is that we’ve reached the end of interest rate increases, though there still remains uncertainty if those elevated rates will hurt businesses and eventually lead to a recession,” says Carlucci.

However, some financial advisors are more concerned.  

“While 2023 has actually been a solid year in terms of market returns, investors are largely still cautious after the market declines of 2022, and many worry about a looming recession,” says Moran. 

“The best strategy we can employ to set us up for long-term success is to make decisions for the long-term based on long-term thinking, instead of making decisions based on current circumstances and chasing short-term returns,” he adds.

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Disclaimer: This article is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.