2024 Year-end Financial Housekeeping

Can you believe 2024 is almost over?! It’s true the years go by faster as you get older. I’m 51 this year and 2024 flew by. Mrs. RB40 and I still feel like we’re 30! It’s crazy we’re this old, but we’ll be 70 before we know it. Ugh! 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 were pure gravy. I’d hate to be stuck in a cubicle at Intel for all that time. (I yell out “IN HELL” every time I drive past their buildings. Hahaha.)

Anyway, the end of the year is here. Let’s do a little financial housekeeping to put everything in order. 2024 was an outstanding year for investors. The stock market went through the roof! I’m sure everyone’s portfolio is overweight with stock if you haven’t rebalanced recently. That’s the first order of business.

Rebalance

I got very lucky in 2024. Earlier this year, our 1 year US Treasury Bonds matured and I moved the money into stocks. At the same time, I rebalanced almost all bonds into stocks. I was disillusioned with bond funds because they behaved so strangely over the last few years. As a result, we had about 95% in stocks, 5% in alternatives (real estate), and very little in bonds. Fortunately, the stock market had a banner year and our portfolio benefited from my boneheaded move. Normally, you should stick with your asset allocation plan and rebalance only once per year. Tinkering with your portfolio too much can be detrimental.

The stock market ran up even more after Trump won the election. That’s great, but I think it is overheated now. The Shiller PE Ratio is very high historically and I’m starting to get nervous. So I’m working on rebalancing our portfolio back to my target asset allocation. We’re getting older so more bond allocation is a probably good idea.

2025 Target asset allocation

Here is my target asset allocation for 2025.

• 75% US stocks
• 5% International stocks
• 15% bonds and money market
• 5% alternatives

Over the last few weeks, I traded in some stocks and put the money into bonds and money market funds. This rebalancing was done in our tax-sheltered accounts to avoid tax. We’re almost there.

An 80/20 stock/bond asset allocation is moderately aggressive, but we don’t plan to withdraw for at least 5 more years. Once we both fully retire, I’ll probably become more conservative and go to 60/40.

Prepare for tax season

December is also a good time to clean up your investment portfolio. Unfortunately, I rarely pay attention to individual stocks anymore. I have plenty of other things to do. Eventually, I plan to move most of our investment into passive index funds. For now, we still have a bunch of individual stocks. Most of these stocks did very well and I don’t want to sell them because it’ll be a taxable event. However, there are always a few bad apples in the basket.

It is a good time to sell off the losers and offset the loss with some profit-taking. Recently, I sold off LEG, NLY, and WU. Pee-ew! I offset these losses by taking profit from DIS and EMN. The proceeds went into I-bonds to beef up our bond allocation.  

You can deduct up to $3,000 in capital losses every year. Sell off those losers! You can always buy them back in January if you want them in your portfolio. You need to wait 30 days to avoid the wash-sale rule.

Top up 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. The 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 every year. If you haven’t maxed out your contribution yet, now is a great time to do it. Actually, the deadline for 2024 is April 15^th. 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 already maxed out your Roth IRA for 2024, it’s a good time to get some cash ready for 2025. It isn’t easy for most of us to come up with an extra $8,000. I’ll sell some investment to get ready.

The same applies to the 529 College Savings account if you have kids.

Take a look at real estate crowdfunding

Recently, I heard the real estate investment market is starting to improve. That’s good because we have $115,000 invested in real estate crowdfunding. Over the last few years, I didn’t want to add money because commercial real estate had been so uncertain. Now that the picture is improving, 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. Baby Boomers are getting older and most of the wealth in the US is concentrated in that generation.  

Another reason I want to look at Crowd Street is because I plan to sell our rental condo next year. Our tenant is moving out and I don’t want to be a landlord anymore. The Portland condo market sucks. This condo is worth about $200,000. That’s the same price as when it was converted to a condominium from an apartment in 2006. We got it in a foreclosure in 2011 so we paid below that price. Still, the appreciation is negligible. From now on, I’ll leave real estate investing to the professionals. I never had much luck with direct ownership. Any real estate I own never appreciated much. That’s ridiculous in this crazy housing market.

Miscellaneous

That’s about all the financial housekeeping for us. Here are some other items that might be more relevant to your situation.

• Required Minimum Distribution. You need to take RMD by the end of the year.
• HSA funding.
• Roth IRA conversion.
• Charitable giving.
• Increase umbrella insurance. This one isn’t dependent on the calendar, but it might be a good time to increase your umbrella coverage. 2024 was a great year for investors and your net worth is probably much higher than the last time you talked to your insurance agent.

Alright, that’s all I got today. Let’s get everything done this week. Then we can relax over the winter break. Did I miss anything?

Have you rebalanced lately? What’s your asset allocation?

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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