Maximize Retirement Contributions, Fulfill RMDs & Optimize Your Tax Position
As the year draws to a close, now is the time to take proactive steps to reduce your tax liability and strengthen your financial position. Whether you’re an individual investor, a business owner, or nearing retirement, year-end planning can make a meaningful difference. Below is a checklist of essential tasks to complete before December 31.
Required Minimum Distributions (RMDs)
If you’re age 73 or older (or inherited a retirement account), you’re required to take RMDs from:
- Traditional IRAs
- SEP IRAs and SIMPLE IRAs
- Employer-sponsored plans like 401(k)s
Key Points:
- RMDs must be taken by December 31, unless it’s your first year (then you may defer until April 1 of the following year).
- Failing to take your RMD can result in a 50% penalty on the amount not withdrawn.
- Consider Qualified Charitable Distributions (QCDs) if you’re 70½ or older—up to $100,000 can be donated directly to charity tax-free and count toward your RMD.
Maximize IRA & 401(k) Contributions
Traditional & Roth IRAs:
- 2025 contribution limit: $6,500 (or $7,500 if age 50+)
- Deadline: April 15, 2026, but contributing before year-end may help with planning and compounding
401(k), 403(b), and 457 Plans:
- 2025 contribution limit: $23,000 (or $30,500 if age 50+)
- Contributions must be made by December 31 to count for the current tax year
Planning Tip: Maxing out retirement contributions not only builds long-term wealth but also reduces taxable income if contributing to traditional accounts.
Other Year-End Tax Planning Tasks
1. Review Capital Gains & Losses
- Harvest losses to offset gains and reduce taxable income
- Be mindful of the wash-sale rule when repurchasing securities
2. Consider Roth Conversions
- Converting traditional IRA funds to a Roth IRA can lock in current tax rates
- Ideal for clients in lower-income years or expecting future tax increases
3. Evaluate Flexible Spending Accounts (FSAs)
- Use remaining balances before year-end or risk forfeiture
- Some plans offer a grace period or carryover—check with your employer
4. Make Charitable Contributions
- Donations must be made by December 31 to qualify for 2025 deductions
- Consider donating appreciated assets for additional tax benefits
5. Review Estimated Tax Payments
- Ensure sufficient payments to avoid penalties
- Consider making a fourth-quarter payment by January 15, 2026
Final Thoughts
Year-end tax planning is about more than compliance—it’s about strategy. Whether you’re optimizing retirement savings, managing distributions, or leveraging charitable giving, these actions can have a lasting impact on your financial health.
Need assistance? Our team is here to assist with personalized guidance to help ensure you’re making the most of every opportunity before the calendar turns.
