Can you believe that 2024 is almost over?! It is true that the years go by faster as you get older. I’m 51 this year and it’s been 2024. Mrs RB40 and I still feel like we’re 30! It’s crazy that we’re this old, but we’ll be 70 before we know it. Yes! Anyway, we have to enjoy ourselves wherever we are in life. You never know how much time you have. That’s why I love early retirement. The last 12 years have been pure gravy. I’d hate to be stuck in a cubicle at Intel all that time. (I scream “to hell” every time I drive by their building. Ha-ha-ha).
Anyway, the end of the year is here. Let’s do some financial planning to get everything in order. 2024 has been a banner year for investors. The stock market went through the roof! I’m sure everyone’s portfolio is overweight with stocks if you haven’t rebalanced recently. This is the first order of business.
Rebalancing
I’ve been very lucky in 2024. Earlier this year, I matured one-year US Treasuries and moved the money into stocks. At the same time, I rebalanced almost all bonds into stocks. I have been disappointed with bond funds because they have behaved very strangely over the past few years. As a result, we were about 95% in stocks, 5% in alternatives (real estate), and very little in bonds. Fortunately, the stock market had a great year and our portfolio benefited from my reckless move. Typically, you should stick to an asset allocation plan and rebalance only once a year. Fiddling with your wallet too much can be harmful.
The stock market rose further after Trump won the election. That’s great, but I think it’s overheating now. Shiller’s PE ratio is historically very high and I’m starting to get nervous. So I’m working to rebalance our investment portfolio to match our target asset allocation. We’re getting older, so allocating more to bonds is probably a good idea.
2025 target asset allocation
This is my asset allocation goal for 2025.
- 75% of US stocks
- 5% international stocks
- 15% bonds and money market
- Alternatives 5%
Over the past few weeks, I’ve traded some stocks and put money into bonds and money market funds. This rebalancing was done in our tax-sheltered accounts to avoid taxes. We’re almost there.
An 80/20 stock/bond asset allocation is fairly aggressive, but we don’t plan on pulling out for at least another 5 years. Once we’re both fully retired, maybe I’ll be more conservative and go 60/40.
Prepare for tax season
December is also a good time to clean out your investment portfolio. Unfortunately, I rarely care about individual stocks anymore. I have a lot of other things to do. Eventually, I plan to move most of our investments into passive index funds. For now, we still have a collection of individual stocks. Most of these stocks have done very well and I don’t want to sell them because it would be a taxable event. However, there are always a few bad apples in the basket.
It is a good time to sell losers and offset the loss with some profit taking. I have recently sold LEG, NLY and WU products. to pee! I offset these losses by taking profits from DIS and EMN. The proceeds went into I bonds to enhance our bond allocation.
You can deduct up to $3,000 in capital losses each year. Sell these losers! You can always buy them again in January if you want to add them to your portfolio. You have to wait 30 days to avoid the wash and sell rule.
Top up a Roth IRA and 529
For 2024, the Roth IRA contribution limit is $7,000 for those under 50. If you’re over 50 like me, you can contribute up to $8,000. A Roth IRA is the best retirement account because you don’t have to pay tax when you withdraw from the account. Everyone should max out their Roth IRA each year. If you haven’t reached your maximum contribution yet, now is a good time to do so. In fact, the 2024 deadline is April 15y. But I like to contribute in the same calendar year to keep it simple.
We try to contribute to our Roth IRA as early in the year as possible. This gives our investment more time to grow. If you’ve already maxed out your Roth IRA for 2024, now is a good time to have some cash ready for 2025. It’s not easy for most of us to come up with an extra $8,000. I will sell some investment to prepare.
The same goes for a 529 college savings account if you have children.
Take a look at real estate crowdfunding
Recently I heard that the real estate investment market is starting to improve. Which is good because we have $115,000 invested in real estate crowdfunding. For the past few years, I didn’t want to add money because commercial real estate was so uncertain. Now that the picture is better, I’ll take a look at Crowd Street and see if there are any good investments. I would like to put some money into apartments and senior housing.
In particular, senior housing should be a good investment in the coming years. The baby boom generation is aging, and most of the wealth in the United States is concentrated in that generation.
The other reason I want to look at Crowd Street is because I plan to sell the rental apartment next year. Our tenant is moving out and I don’t want to be the landlord anymore. Portland’s apartment market is bad. The value of this apartment is approximately $200,000. This is the same price it was when it was converted to a condominium from an apartment in 2006. We got it into foreclosure in 2011 so we paid less than that price. However, the estimate is negligible. From now on, I’ll leave real estate investing to the professionals. I’ve never had any luck with direct ownership. Any property I own I haven’t appreciated much. This is ridiculous in this crazy housing market.
diverse
That’s about all the financial housekeeping for us. Here are some other items that may be more relevant to your situation.
- Minimum required distribution. You must take the RMD by the end of the year.
- HSA financing.
- Roth IRA conversion.
- Charitable giving.
- Increase umbrella insurance. This does not depend on the calendar, but it may be a good time to increase canopy coverage. 2024 has been a great year for investors and your net worth is probably much higher than the last time you spoke to your insurance agent.
Well, that’s all I got for today. Let’s get everything done this week. Then we can relax during the winter holidays. Did I miss anything?
Have you rebalanced recently? What is your asset allocation?
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Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects all over the USA so check them out!
Joe also highly recommends Personal Capital to DIY investors. They have many useful tools that will help you reach financial independence.
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