Autumn is the time to finalize year-end plans and make smart moves in your investment accounts, tax strategy and workplace benefits — including any equity compensation you hold from your employer.
Year-end planning looks a little different for everyone. It’s important to give yourself a moment to review where you are in your current financial life, decide how you want to wrap up any remaining goals for 2023 and set yourself up for what you want to accomplish in 2024. Consider adding these five important steps to your year-end checklist to help you stay on track:
1. Fix your eyes on the finish line.
With the clock ticking on 2023, refocus your financial strategy. Check in on basic items like your account balances and budget, as well as more strategic tasks like a gut-check of your tax readiness or identifying any changes in strategy you want to make to respond to current market conditions. As you assess and organize yourself, jot down any questions you might like to discuss with a financial professional — such as whether your overall blend of investments in stocks, fixed income, cash and other asset classes still fits your goals and risk tolerance.
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Year-end is also a great opportunity to make sure your workplace retirement accounts and any equity compensation you receive from your company are where you want them to be. Many company insiders have limited trading windows, which means you may have just a few more opportunities to tap into your company holdings for trading or tax planning alternatives to mitigate your potential liability for the next season. Check your company policies and trading restrictions to make sure you know the important dates, restrictions and resources to help you plan.
2. Revisit your benefits elections.
Autumn is usually the time that companies hold open enrollment season for their employee benefits programs. While financial topics like investing and budgeting usually take the headlines, the choices you make with workplace benefits like retirement, equity and insurance coverage are a key area of your financial life that are worth strategizing.
Even if nothing has changed, connect with a relationship manager or take advantage of benefits webinars and engagement drives to help you get better acquainted with your company’s full support system.
If you’re not doing so already, consider maximizing your contributions to employer-sponsored retirement plans, which can usually be made on a pretax basis.
Next, sit down and assess how you used your benefits this year and whether your needs might be similar or different for 2024, especially if you anticipate any major life events.
Review any life, disability, long term care and property or casualty insurance policies offered through your workplace to help ensure you and your loved ones are well protected. Don’t ignore the fine print.
3. Make final moves for the 2023 tax season.
Tax implications can be a killer, and smart tax strategies are put into action well before Tax Day, yet even many savvy investors may not have a clear tax management strategy to help keep more of their investment income. Minimizing the impact of taxation on your income — including capital gains from your investment portfolio and any equity compensation — can have a cumulative effect when it comes to helping you grow and maintain personal wealth over time.
This final lap before tax season is a chance to potentially reduce your upcoming tax bill. It’s important to speak with a tax adviser about which tax planning strategies may be most appropriate for your individual situation.
If you hold company equity or other securities investments, popular strategies include donating to charity, “harvesting” investment losses to offset gains or saving in a tax-advantaged account. For example, many investments allow you to save for a variety of goals while also offering tax benefits, such as municipal bonds, tax-efficient mutual funds or separately managed accounts that aim to limit the number of taxable events within your portfolio.
4. Plan your holiday spending.
The holidays inspire a giving spirit for many of us, but we don’t always think of making a budget or strategy for the holiday spend. Think about how you prefer to give, and to whom — for example, do you want to give cash, appreciated securities or time? Do you send your nephew a card with cash or transfer some company equity shares to his tax-advantaged 529 education savings account?
Another option for giving back is through a donor-advised fund (DAF), a public charity that allows you to delay decisions on where your money is going in order to develop a more thoughtful and impactful giving approach, while also allowing you to give to qualifying public charities in installments over time. A DAF can offer potential tax advantages — for example, it allows for donating a portion of equity compensation with unrealized gain, instead of selling the shares, generating a taxable gain and then donating cash.
However, be aware that many DAFs require a minimum initial contribution or make minimum grant recommendations.
Again, equity shares and taxes are complicated, so find a trusted professional who can help.
5. Make more hours in the day by delegating.
The adage still rings true: One of the only guarantees in life is taxes. And tax-smart financial planning can be complex, especially if you have assets like equity compensation in the mix. It’s important to find the right support, tap into expertise and delegate sensitive tax-related financial tasks to better prepare and position your finances for what lies ahead — including tax season.
With the end of the year right around the corner, time is short. So, if you’re looking to make more money moves, update your investment strategy or simply want access to additional insights on your financial planning choices, a financial adviser or tax professional can play an essential role in helping you bring your portfolio back in line with your overall goals and prepare for potential tax costs.
Your workplace benefits may be a good place to start looking for additional support. Don’t hesitate to ask for help finding resources or even an appropriate financial professional — you never know if you don’t ask.
This material has been prepared for informational and educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
When Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors (collectively, “Morgan Stanley”) provide “investment advice” regarding a retirement or welfare benefit plan account, an individual retirement account or a Coverdell education savings account (“Retirement Account”), Morgan Stanley is a “fiduciary” as those terms are defined under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or the Internal Revenue Code of 1986 (the “Code”), as applicable. When Morgan Stanley provides investment education, takes orders on an unsolicited basis or otherwise does not provide “investment advice”, Morgan Stanley will not be considered a “fiduciary” under ERISA and/or the Code. For more information regarding Morgan Stanley’s role with respect to a Retirement Account, please visit www.morganstanley.com/disclosures/dol. Tax laws are complex and subject to change. Morgan Stanley does not provide tax or legal advice. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a Retirement Account, and (b) regarding any potential tax, ERISA and related consequences of any investments or other transactions made with respect to a Retirement Account.
Morgan Stanley at Work, Morgan Stanley Smith Barney LLC, and its affiliates and employees do not provide legal or tax advice. You should always consult with and rely on your own legal and/or tax advisors. Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley. CRC6003860 - 10/23
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