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Category: Goal setting

2023 Year-End Financial Planning Moves to Consider

Posted on by Kelsie Joos

As you prepare to say “goodbye” to 2023 and “hello” to 2024, here are a few smart financial planning moves to consider:
 

1. Make 2023 Contributions to IRAs (Individual Retirement Accounts)  
When? Before you file your taxes. 
 
If it’s part of your financial plan, consider “maxing out” your IRA by 12/31. This means contributing the maximum allowable contribution: $6,500 if under age 50, and $7,500 if age 50 or above. If you don’t have the cash flow to contribute by 12/31, don’t worry! Just make sure you do so before you file your taxes next year. 

2. Make 2023 Contributions to HSAs (Health Savings Accounts)  
When? Before 12/31. 
 
If it’s part of your financial plan, consider “maxing out” your HSA by 12/31. This means contributing the maximum allowable contribution: $3,850 for individual coverage or $7,750 for family coverage. Be sure to include any HSA contributions made by your employer when calculating your eligible contribution amount. If you are not contributing to your HSA via payroll deductions, you have until you file your taxes to make the contribution.

3. Make 2023 Contributions to 529 Education Accounts
When? Before 12/31. 
 
For clients living in and contributing to 529s in states with a state income tax deduction for contributions (like Ohio), be sure to contribute to those plans before 12/31 to claim this year’s deduction. 

4. Perform Conversions from Traditional IRA to Roth IRA  
When? Before 12/31. 
 
For those that are planning to do the Backdoor Roth strategy, make the conversion from Traditional to Roth IRA by 12/31 in order to take any applicable tax in the current year. As a Commas client, your advisor will perform the Backdoor Roth Conversion for you on accounts that we manage! 

5. Take your Required Minimum Distributions from Retirement Accounts 
When? Before 12/31. 
 
If you own a Traditional IRA or 401(k) and you have reached the age of 73, you must take your Required Minimum Distribution by 12/31. If you forget to take the distribution by the deadline, you may be subject to a 50% penalty on the shortfall.

If you inherited a Traditional IRA after 2019, you are not required to make distributions from the account for the 2023 tax year; however, you can still make voluntary distributions and might be better off doing so. Taking voluntary distributions could help reduce the tax spike that would potentially occur in the year you are forced to empty the account (10 years after the death of the original IRA owner).

As a Commas client, your advisor will make sure that you’ve taken distributions from the necessary accounts that we manage!

6. Donate to Charity  
When? Before 12/31. 
 
Donating to charity is an incredible way to support your community. It could also be a smart way to avoid capital gains taxes. Additionally, if you itemize your taxes instead of taking the standard deduction, charitable donations could enable you to deduct even more! 

7. Review Your Estate Plan 
When? Once annually. 
 
If you already have estate documents in place, review your documents to confirm that they are still up to date and consistent with your current wishes.

If you do not have estate documents in place, contact your advisor to learn more about your options.

Check your beneficiaries on your accounts at least annually. A beneficiary will receive the funds in your account if you pass away. To check your beneficiaries on accounts that Commas manages, log into Betterment, navigate to Settings, and click Accounts. 

8. Line Up a Tax Specialist for Filing your Taxes 
When? By January. 
 
Consider working with a tax professional, such as a CPA or EA, for your tax preparation. Not only will working with a tax professional make sure your taxes are filed accurately and on time, but it will save you time and reduce stress. If you’re interested in working with a tax professional and want a referral, please reach out to your advisor.

9. Planning for 2024! 
When? Before 12/31. 

Annual contribution limits are increasing in 2024 for various financial accounts:

  • Reach out to your advisor with any questions you have during your employer’s open enrollment period.
  • Contributions for many employer-sponsored retirement plans (like 401(k) and 403(b)) are increasing from $22,500 to $23,000 per year. Catch-up contributions will remain $7,500 per year.
  • HSA contributions are increasing from $3,850 to $4,150 for individual coverage and from $7,750 to $8,300 for family coverage.
  • IRA contributions are increasing from $6,500 to $7,000 per year. Catch-up contributions for those over the age of 50 are still $1,000 per year.

Webinar: Optimizing Your Family Finances

Posted on by A.Tuke

Unlock Financial Success for Your Family

Are you a growing family seeking to optimize and simplify your finances? Watch our webinar where we’ll provide you with actionable strategies to take control of your financial journey. You’ll be guided through techniques that address your real-life challenges and empower you to make informed decisions.

Key Takeaways:

Cast a vision and set financial goals: Start financial planning by setting meaningful and inspiring goals. Ask deep questions to uncover what truly matters and write down specific, tangible goals to work towards.

Automate your finances: Allocate money to savings, investments, and bill payments automatically to ensure consistent progress and stay on track.

Key financial planning opportunities to explore:

  • High-Yield Savings Account
  • Health Savings Account (HSA)
  • Brokerage Accounts
  • Estate Documents
  • 529 Plans

About Jordan Patrick

Jordan serves in a dual role as a wealth advisor for Truepoint Wealth Counsel and Commas. Jordan works with clients to create personalized financial plans that help them achieve their goals. He enjoys combining his analytic knowledge with his relational skills in order to craft strategies that fit each client personally.

Read more about Jordan here.

The Pros and Cons of High-Yield Savings Accounts

Posted on by Hillary Mitchell

If you’re interested in growing your funds but still want access to them, a high-yield savings account could be the perfect choice. High-yield savings accounts can be a great way to earn more interest and stash away funds so you can meet your short-term savings goals.  

Here, we’ll go over the pros and cons of high-yield savings accounts, and offer our recommendations for getting the most out of these savings vehicles.

What is a High-Yield Savings Account? 

A high-yield savings account (HYSA) is what it sounds like: It’s a savings account that offers account holders higher-than-average yields (or interest rates) on the deposits they make.

Here’s an example:  

You’re interested in opening a savings account with a $1,000 initial deposit, with plans to add $100 monthly. You could open a traditional savings account, with an average interest rate of 0.07%.  Alternatively, you could put your $1,000 in a high-yield savings account, which at the time of the writing of this article, is earning around 3-4%.  

If you open that traditional savings account, over a year, you’d get a little over a dollar in interest. At a rate of 3.5%, the high-yield savings account would earn you just under eighty dollars for that year.  

That may not seem like much. But imagine if you left money in that account for years. Suddenly, those dollars in extra interest can turn into much more. 

What are the Pros of High-Yield Savings Accounts?

In addition to the increased ability to grow your funds through higher interest rates, high-yield savings accounts have many other benefits.  

The pros of high-yield savings accounts include:  

  • The ability to grow your money risk-free (as opposed to an investment, which always comes with some risks).   
  • The peace of mind that your money is insured. High-yield savings accounts tend to be Federal Deposit Insurance Corporation (or FDIC) insured. With this type of insurance, your funds (up to $250,000 per depositor) will always be protected, even if your bank loses money. 
  • The flexibility of liquid funds. Taking your money out of a HYSA shouldn’t result in any penalties, and it should only take a day or two to move your money from a HYSA to other accounts.

Why Should I Open a High-Yield Savings Account?

If you already have several financial products to your name—a checking account, a traditional savings account, or an individual retirement account— you may wonder why adding a HYSA is worth it. Here’s why.  

High-yield savings accounts are good for short-term savings goals. 

While checking and savings accounts are great for managing everyday expenses, and investment accounts are great for long-term asset growth, your HYSA is great for setting aside and growing funds for expenses coming up in one or two years.  

For example, if you’re saving up for a home renovation, gifts, or a long-awaited vacation, it makes sense to put that money aside in a HYSA. Once you need it, you can withdraw it easily; and, until you do, it’ll grow faster than it would in checking or savings.  

Some companies (such as Betterment) allow you to categorize your HYSA cash in “buckets.” This can help you visualize your progress towards your short-term goals as you make deposits in your HYSA. 

Considerations when Weighing the Pros and Cons of High-Yield Savings Accounts

While high-yield savings accounts can be powerful tools to help you reach your short-term savings goals, they may not be for everyone (or for every situation). These aren’t necessarily  ‘cons’ of high-yield savings accounts – but they are good things to keep in mind.  

  • High-yield savings accounts are not best-suited for daily banking purposes. The money you put in a HYSA should stay put so you can start seeing high yields. This means that you will need a checking account in addition to your HYSA.  
  • High-yield savings accounts usually have more requirements than a regular savings account. Your account may have limits on how much you can withdraw or transfer in a certain amount of time or require a higher deposit when you first open the account.  
  • High-yield savings accounts are not the most powerful vehicle for retirement savings. High-yield savings accounts will net you more interest than the average traditional savings account, but they likely won’t grow as well as investing in the market. Having a separate account for your longer-term savings goals will be best.  
  • High-yield savings accounts could be subject to changes in interest rates. Your bank may be able to change the interest rate of your account over time (unlike, say, a CD account). To avoid surprises, ask your bank about how this would work.

Our Recommendations for High-Yield Savings Accounts 

Now that we’ve gone over the pros and cons of high-yield savings accounts, here’s what we’d recommend:

First, work with your financial advisor to find a high-yield savings account with requirements and an interest rate that works for you, and then use it strategically to meet your short-term goals.  Then, move your emergency fund into a HYSA. It’s a great way to increase your financial resilience and earn interest at the same time.  

We usually recommend keeping enough funds to cover 3-6 months of needs (e.g., your rent, car payment, groceries, and insurance payments, not “wants” such as entertainment). If you’re approaching retirement or have a large family, it may be best to work toward a large enough emergency fund to cover one year, if needed.  

Interested in working with a professional to ensure your finances are in the best place possible? The team at Commas is here to help. Contact our team online for more information.