ORLANDO, Fla. – The end of 2024 is quickly approaching but before you pop the champagne cork, it’s an ideal time to take control of your finances, including getting ahead on your taxes for 2025.
CBS News business analyst Jill Schlesinger says a little bit of time and focus right now could help you save money next year.
News 6 anchor Lisa Bell spoke with Schlesinger about the things you should be doing to protect your money in the new year.
Bell: Jill, time is money and spending some time on your money could really help you out. We know that taxes are not due until April, but you say we can get a jumpstart on them right now.
Schlesinger: Yeah, this is a very funny time to be talking about taxes, but I think it’s perfect, actually. Before you get sucked into that holiday vortex, go to the IRS website, irs.gov, and you’re going to use something called a withholding estimator. You want to see if you’ve had enough money set aside to pay your tax bill in April. Now the good news is, if you don’t, you’ve got plenty of time to notify your payroll department to increase your withholding through the end of the year, so you don’t have to write a check to the IRS in April. So now’s the time to do it.
Bell: That is always so painful to have to do in the spring, if you have to write a check to the IRS, so good advice there. We do know that 2024 was a great year for the stock market. We have seen record high after record high. So people are looking at their investment accounts right now, are there any moves that we should be making at this moment?
Schlesinger: You know, I don’t love timing the market, but I do think there are some moves to make, because really what we’re trying to make sure is that your money is invested in accordance with your time horizon when you need your money and your risk tolerance. Very easy to feel happy with risk when markets are going up, remember how bad it felt when they go down. So what we are talking about is something called rebalancing. Here’s how it works. Let’s say you started the year and
you’ve got 60% of your account and it’s in stocks and 40% is in bonds. Now with the rise in the stock market, the balance could be out of whack. Maybe instead of 60-40, you’re 70-30 now. Well, let’s use this opportunity to sell 10% of that stock position and redirect it into bonds. So you’re selling high, you’re buying low, and you’re returning to your target allocation. If you do this in a retirement account, no tax due. But if you do rebalance in a taxable brokerage account, you may have to pay a tax on the gain, not a problem. You’re just going to do it once a year, a very good way to keep accounts tidy.
Bell: And speaking of those retirement accounts for retirees with 401ks or IRAs, they may need to take some money out or face a stiff penalty. Tell us about that.
Schlesinger: Well, you know, you work your whole life, you contribute to a pre-tax retirement account, and you kind of forget until your 70s that the government requires that you have to take a certain amount of money out of that account every single year. These are called required minimum distributions, or RMDs. Now here’s the very important part: if you do not take your required minimum distribution, you could be looking at an up to 50% penalty on the amount you should have taken. So we want people to pay attention to this. If you have multiple accounts, you only have to take one RMD based on your age and the total value of those accounts, and just a reminder that Roth accounts, they are not subject to required minimum distributions. Take those RMDs gang.
Bell: All right, good advice. You know, it’s the end of the year. We want to look forward to the holidays, but we also got to pay attention to our money. We can’t put that off until next year. Jill as always, you can catch Jill on CBS Mornings and the Evening News with Norah O’Donnell, thank you again.