Your 2024 financial checklist: 5 questions to ask your advisor now

“CAN WE FINALLY SAY GOODBYE — and good riddance — to constant volatility?” That just might be the biggest question on investors’ minds heading into 2024. But it’s not the only thing to consider when it comes to your finances. The start of a new year is a particularly good time to review your financial progress and determine whether any adjustments could put you in a better position to reach your short- and long-term goals. These five questions can provide the framework for productive conversations with your advisor now and throughout the year.

How can I adjust my portfolio for expected risks and opportunities in 2024?

A: As inflation continues to fall and interest rates stabilize, “2024 should be a year of more normal market behavior,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Even so, he adds, markets could be choppy as the business cycle moves into a new phase and geopolitical tensions bring continued uncertainty. In this environment, “it’s essential to make sure your portfolio is broadly diversified and that your mix of stocks, bonds and other assets hasn’t moved too far from your intended allocation,” says Marci McGregor, head of Portfolio Strategy for the Chief Investment Office (CIO) at Merrill and Bank of America Private Bank.

“Diversification is a tool that can help you manage risk while positioning your investments for growth,” McGregor says. “And periodic rebalancing can help you take advantage of new opportunities that may emerge. Equity markets are likely to broaden in 2024, depending less on gains by a few market leaders,” she adds. “Talk with your advisor about long-term investing themes, including the intersection of technology and healthcare and automation and robotics, among other forces, that are helping to move the world forward.”

With interest rates so much higher now, should I invest more in fixed income?

A: “If you’ve shied away from bonds, depending on your personal situation, now could be an excellent time to increase your allocation and lock in higher-yielding, high-quality bonds that you can hold to term,” suggests Matthew Diczok, the CIO’s head of Fixed Income Strategy.

Diczok suggests speaking with your advisor about high-quality bonds, such as Treasury securities, agency mortgage-backed securities and investment-grade corporate and municipal bonds. And he cautions against putting too much of your portfolio into cash or cash alternatives, which also pay high interest rates but can’t be counted on for long-term income.

“For bond investors, recent years have been brutal, and today’s higher interest rates come as a huge relief,” Diczok notes. “Finally, bonds can do what they’re supposed to do — provide reliable income that outpaces inflation while also potentially reducing the volatility of your portfolio.”

What’s the outlook for mortgage rates and home prices in 2024? Is this a good year to buy or sell a home?

A: “Locking in generationally low, fixed-rate mortgages shielded U.S. homeowners from the rise in mortgage rates we experienced for most of 2023,” says Lauren Sanfilippo, senior investment strategist for the CIO. “The housing market was extremely tight in 2023, resulting in low turnover nationally as higher rates disincentivized both buyers and sellers.” With home financing so expensive, some months as high as a third of transactions were done in all cash. “That calculus could be changing going into 2024,” Sanfilippo notes.

It's been a welcome relief for prospective buyers to see mortgage rates on the decline. Also encouraging for the housing market is the Federal Reserve’s latest Summary of Economic Projections showing possible multiple cuts to the federal funds rates for next year and in 2025. Rate cuts could help boost the housing market. “We’re already starting to see new listings and pending home sales both climb in December,” Sanfilippo adds.

Are there any changes in federal tax laws or regulations I should be aware of?

A: Annual inflation adjustments to income tax brackets could make a difference in how much you owe. And other dependable strategies, such as maxing out your 401(k) contributions, could help you minimize your taxes. But the biggest change to the tax rules is almost two years away. At the end of 2025, many of the provisions of the Tax Cuts and Jobs Act of 2017 are set to expire, bringing back higher income tax rates for individuals and a lower exemption amount for gift and estate taxes, unless Congress steps in. Planning now for what may be ahead — for example, by making lifetime gifts while all-time-high exemptions are in effect — could result in considerable tax savings, says tax accountant Vinay Navani of WilkinGuttenplan.

Have there been any rule changes that could help me save more for retirement?

A: “Many key provisions of SECURE Act 2.0 taking effect for the first time in 2024 could benefit retirement savers and retirees,” says Debra Greenberg, director, Personal Retirement Product Management for Bank of America. “Whatever your age, there could be something for you to take advantage of.” For instance, there are provisions that give employers the option to match employees’ qualified student loan payments with contributions to retirement accounts. And “if you have excess funds in a 529 education savings account, you may be able to transfer unused money to a Roth IRA in the beneficiary’s name, subject to certain limitations,” says Greenberg.

Also starting in 2024: An end to required minimum distributions for workplace Roth 401(k)s and higher limits for IRA distributions to charity. People age 70½ and older can transfer up to $105,000 directly from an IRA to a charity without tax liability in 2024, up from $100,000, and that amount will be increased annually to account for inflation. Greenberg recommends talking with your advisor about each of these provisions and the opportunities they could create for you.