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6 Financial Moves to Make This Fall

The transition into fall brings about busy school schedules, holiday gatherings (and therefore increased spending) and an excitement for the new year. However, it is an important time to assess your financial plans and make strategic moves before the end of year. 2024 in particular brings a special set of circumstances, with interest rates likely coming down for the first time in years and a presidential election cycle.

Fall is often seen as a season of preparation, and your financial health should be no exception. Whether it’s adjusting to changes in interest rates, navigating the complexities of an election year, or ensuring your retirement contributions are on track, this guide will walk you through key financial steps to take before the year’s end.

1. Preparing for Potential Interest Rate Changes

Interest rates are on the minds of many consumers as the cost of debt has increased to levels not seen in years. The Fed has been watched closely for signs of what may lie ahead, and it looks like they may finally be prepared to start lowering interest rates. If the Fed does decide to lower interest rates this fall, it can have significant implications for your financial strategy. Here’s what to consider:

  • Refinancing Your Mortgage: Lower interest rates mean it could be a good time to refinance your mortgage, particularly if you purchased your home over the last few years. By locking in a lower rate, you can reduce your monthly payments or shorten your loan term without significantly increasing your monthly outlay.
  • Reevaluating Debt: If you have variable-rate loans or credit card debt, a decrease in interest rates might lower your payments. Consider paying down high-interest debt more aggressively to benefit from potential savings. Debt consolidation may also make sense if you can pay off high interest rate debt through a lower rate personal loan.
  • Investing in Bonds: Falling interest rates often lead to rising bond prices. If you’re already invested in bonds, you may see some appreciation in your portfolio. While interest rates on cash accounts are likely to go down, putting some of that money into high quality bonds could make sense.
  • Savings Accounts and CDs: Keep in mind that lower interest rates may also mean lower returns on savings accounts and Certificates of Deposit (CDs). You might want to explore other options for your short-term savings to maximize returns.

2. Investing Wisely in an Election Year

Election years can bring about a lot of uncertainty in the financial markets and anxiety among investors. However, with the right strategy aligned to your needs, it should be easier to look past any short term volatility and focus on the long-term picture. Here are ways to help mitigate making emotional reactions this fall:

  • Diversify Your Portfolio: Diversification is key to managing risk, and investing in an election year is no different. Spread your investments across different asset classes—stocks, bonds, real estate, and commodities—to reduce exposure to any single market’s fluctuations.
  • Focus on Long-Term Goals: While markets may experience short-term volatility due to election results, keeping your long-term investment goals in mind can help you stay on track. Avoid making knee-jerk reactions to market movements based on political events. History has shown that who wins the White House has had little impact on the longer term performance of the stock market.
  • Consider Defensive Stocks: These are stocks from sectors that tend to perform well regardless of economic conditions, such as utilities, healthcare, and consumer staples. Including these in your portfolio might provide some stability during uncertain times.
  • Stay Informed, But Don’t Overreact: It’s important to stay informed about potential policy changes that could impact your investments. However, avoid making drastic changes based on speculation. Stick to your investment plan unless you have solid reasons to adjust it.

3. Maxing Out Retirement Contributions

As the year-end approaches, it’s essential to review your retirement contributions to ensure you’re maximizing your tax-advantaged savings opportunities. While IRA contributions can carry into the new year for the previous year, other retirement contributions such as 401(k)s need to be made before year end:

  • 401(k) Contributions: The contribution limit for 401(k) plans in 2024 is $23,000 (or $30,500 if you’re over 50). Make sure you’re on track to max out your contributions. If not, consider increasing your contributions in the final months of the year. Your contributions need to come from salary deductions, so give yourself enough time for the adjustments to take affect to hit your goals.
  • IRA Contributions: The limit for IRAs (Traditional and Roth) is $7,000 (or $8,000 if you’re over 50). Even if you can’t contribute the maximum, every bit helps in building your retirement nest egg.
  • Employer Matching: Don’t leave free money on the table. Ensure you’re contributing enough to your 401(k) to take full advantage of any employer matching contributions.
  • Catch-Up Contributions: If you’re over 50, take advantage of catch-up contributions. This is a great way to boost your retirement savings as you approach retirement age.

4. Considering a Roth Conversion

Roth conversions can be a powerful tool for tax-efficient retirement planning, and fall is a great time to evaluate whether this strategy makes sense for you:

  • Why Convert? A Roth IRA offers tax-free growth and withdrawals in retirement. If you expect to be in a higher tax bracket in the future, converting now and paying taxes at your current rate could save you money in the long run.
  • Timing Matters: The timing of your Roth conversion is crucial. Consider doing it in a year when your income is lower, perhaps due to job loss, retirement, or a business downturn, to minimize the tax impact.
  • Partial Conversions: You don’t have to convert your entire Traditional IRA to a Roth IRA in one go. Partial conversions can help you spread the tax liability over several years, making it more manageable.
  • Consult a Professional: Roth conversions are complex and have significant tax implications. It’s wise to consult with a financial advisor or tax professional to determine if this strategy aligns with your overall financial goals.

5. Reviewing Employee Benefit Elections

Fall is often open enrollment season for employee benefits, making it an opportune time to review your options and ensure you’re maximizing the benefits available to you. If you have experienced a significant life change over the past year such as getting married, adding a child to the family, or moving, then this is even more important.

  • Health Insurance: Review your health insurance plan to ensure it meets your needs. Consider factors like premiums, deductibles, co-pays, and coverage limits. If you have a Health Savings Account (HSA) option, it might be worth contributing, as HSAs offer triple tax advantages.
  • Retirement Plans: Confirm that your 401(k) contributions align with your retirement goals. If your employer offers a Roth 401(k) option, evaluate whether it makes sense for you based on your current and expected future tax bracket.
  • Life and Disability Insurance: Ensure that you have adequate life and disability insurance coverage. Life insurance can protect your family in case of an untimely death, while disability insurance safeguards your income if you’re unable to work due to illness or injury.
  • Flexible Spending Accounts (FSAs): If your employer offers an FSA, decide how much to contribute. FSAs can be used for qualified medical expenses or dependent care, and contributions are pre-tax, which can reduce your taxable income. On the topic of FSA’s, if you have one then be sure to use the funds before year-end. FSA accounts are a “use it or lose it” benefit and do not rollover from year to year.

6. Budgeting Wisely for Holiday Shopping

The holiday season is fast approaching, and it’s easy to get caught up in the excitement of gift-giving, travel, and celebrations. However, without a solid plan, holiday expenses can quickly lead to debt. Here’s how to budget wisely and prepare for holiday shopping:

  • Set a Realistic Holiday Budget: Start by determining how much you can afford to spend on holiday expenses without dipping into savings or going into debt. Include all potential costs—gifts, travel, decorations, food, and entertainment.
  • Make a Gift List and Stick to It: Write down everyone you plan to buy gifts for and set a spending limit for each person. This helps prevent impulse buying and ensures you don’t overspend.
  • Start Saving Early: If possible, create a dedicated holiday savings fund. Start contributing to it as early as possible, so by the time the holidays arrive, you have the cash on hand to cover your expenses.
  • Shop Smart: Look for sales, use coupons, and consider buying gifts throughout the year when items are on sale. Shopping early can also help you avoid the last-minute rush, which often leads to overspending.
  • Use Cash or Debit, Not Credit: Whenever possible, pay with cash or debit to avoid racking up credit card debt. If you do use a credit card, try to pay off the balance in full when the bill comes due to avoid interest charges.
  • Track Your Spending: Keep a close eye on your holiday expenses as you go. There are many apps and tools available that can help you track your spending and stay within your budget.

Conclusion

Don’t let the busy fall season distract you from making important and impactful financial decisions. This list is just a few of the areas that you should be addressing this upcoming season. By implementing these steps you will put yourself ahead of the pack on working toward a more secure financial future.