Year-end is the ideal time to review your financial strategy and prepare for success in the coming year. The actions you take in December on taxes, contributions, insurance, and estate planning can save thousands of dollars and provide peace of mind.
This checklist walks you through eight essential year-end financial planning tasks. Set aside a few hours with your advisor to work through them.
1. Tax Planning: Review Your Current-Year Situation
Before year-end, assess whether your income for the current year will be higher or lower than expected.
If You Expect Higher Income
Consider strategies to offset higher tax liability:
Roth Conversions: Convert funds from a Traditional IRA to a Roth IRA. You will pay tax on the conversion, but the money then grows tax-free forever. This works best when you expect higher income next year -- do the conversion this year while in a lower bracket.
Traditional IRA/401(k) Contributions: If you are self-employed, contributing to a SEP IRA or Solo 401(k) reduces taxable income. Employee contributions to a 401(k) also reduce taxable income pre-tax.
After-Tax 401(k) Contributions: Some plans allow contributions beyond the annual limit using after-tax dollars. These can be immediately converted to a Roth IRA in a "mega backdoor Roth" strategy (if your plan allows).
Example: You expect $150,000 income but want to stay below the 24% federal tax bracket threshold ($206,700 for married filing jointly in 2025). A $20,000 Traditional IRA or 401(k) contribution reduces taxable income to $130,000, keeping you in the 22% bracket and saving roughly $4,000 in federal tax.
If You Expect Lower Income
In a lower-income year (sabbatical, business loss, career transition), prioritize:
Roth Conversions: A low-income year is ideal for Roth conversions because you will pay less tax on the conversion. Convert $50,000 at 12% tax ($6,000 owing) vs. converting the same amount in a high-income year at 24% tax ($12,000 owing).
Front-Load Charitable Giving: Plan charitable donations to exceed the standard deduction and itemize. A $40,000 charitable contribution might save $10,000 in taxes.
Tax-Loss Harvesting: Identify investments with unrealized losses. Sell the losing positions, recognize the loss on your tax return, then reinvest in similar (but not identical) positions. You harvest the loss for tax purposes while maintaining market exposure.
The loss can offset capital gains or up to $3,000 of ordinary income. Excess losses carry forward indefinitely.
Example: You have $50,000 in stock losses. Sell the losing positions, recognize the loss, and offset capital gains or ordinary income. Save $12,000 to $15,000 in taxes depending on your bracket.
If You Are Near a Tax Bracket Threshold
Monitor these key thresholds for your current-year income:
24% Federal Bracket (Married Filing Jointly): Taxable income between $206,700 and $394,600 (2025). Staying below $206,700 keeps you at 22% marginal rate.
Net Investment Income Tax (NIIT) Threshold: If Modified Adjusted Gross Income exceeds $250,000 (MFJ), you owe 3.8% tax on net investment income. Strategies to manage NIIT include harvesting losses and deferring income.
Medicare IRMAA Surcharges: Modified Adjusted Gross Income over $218,000 (MFJ, 2026 Tier 1 threshold) triggers higher Medicare Part B and Part D premiums. Premium brackets increase in tiers. Staying below this threshold can save $5,000 to $10,000 annually on Medicare costs.
Long-term Capital Gains Brackets: Long-term gains are taxed at 0%, 15%, or 20% depending on taxable income. The 15% bracket ends at $96,700 (MFJ, 2025). Above that, gains are taxed at 20%. Manage gains to stay in the favorable 15% bracket if possible.
2. Maximize Retirement Contributions
If you are behind on retirement savings, December is your last chance to catch up on employer plans.
2025 Contribution Limits:
| Account Type | Under 50 | Age 50+ |
|---|---|---|
| Traditional/Roth IRA | $7,000 | $8,000 |
| SEP IRA (self-employed) | Up to 25% of compensation, max $69,000 | Same |
| Solo 401(k) | $23,500 | $31,000 |
| Employer 401(k) | $23,500 | $31,000 |
| HSA (individual) | $4,300 | $5,300 |
| HSA (family) | $8,550 | $9,550 |
2026 Limits (if planning ahead):
| Account | Under 50 | Age 50+ |
|---|---|---|
| IRA | $7,500 | $8,500 |
| 401(k) | $24,500 | $32,000 |
| HSA (individual) | $4,400 | $5,400 |
| HSA (family) | $8,750 | $9,750 |
If you are 60 to 63, a special "super catch-up" contribution is available: $11,250 to your 401(k), replacing the standard $7,500 catch-up for those age years.
Action: Calculate how much you can contribute by December 31 for employer-sponsored plans (401(k), 403(b), 457). If your employer plan has changed limits, confirm deadlines with your plan administrator.
For IRAs, the contribution deadline is April 15 of the following year (the tax filing deadline). You can make 2025 IRA contributions until April 15, 2026. That said, contributing earlier means more time for tax-advantaged growth.
For a detailed breakdown of all retirement account limits, see our tax and retirement savings changes reference.
3. Plan Charitable Giving Strategically
Charitable giving can provide both personal fulfillment and tax benefits.
Standard Deduction (2025):
| Filing Status | Amount |
|---|---|
| Single | $15,000 |
| Married Filing Jointly | $30,000 |
| Head of Household | $22,500 |
If your itemized deductions (mortgage interest, property taxes, charitable contributions) do not exceed the standard deduction, you receive no tax benefit from charity.
Bunching Strategy: In years when you are close to itemizing, make a large charitable contribution to exceed the standard deduction. In other years, contribute less or nothing.
Example: Standard deduction is $30,000. You have $20,000 in itemized deductions (mortgage interest, property tax). In 2025, contribute $10,000 to charity, reaching $30,000 in itemized deductions, exactly the standard deduction threshold. Next year, contribute $0 and take the standard deduction. This approach allows you to claim charitable deductions every other year.
Donor-Advised Fund (DAF): A DAF lets you make a large contribution in high-income years, receive an immediate tax deduction, and distribute grants to charities over multiple years. This is useful for strategic tax planning and flexible giving.
4. Review Estate Planning Documents
Life changes (marriages, divorces, births, deaths, property acquisitions) affect your estate plan. Review your documents:
Will: Is it current? Does it reflect your wishes for asset distribution? Are your named executors still appropriate?
Power of Attorney: If you become incapacitated, who has legal authority over financial and healthcare decisions? Is your POA current and stored securely?
Beneficiary Designations: Life insurance, IRAs, 401(k)s, and transfer-on-death accounts pass directly to named beneficiaries, bypassing your will. Verify these are up-to-date and aligned with your overall plan.
Important: Beneficiary designations override your will. If your will says your estate receives your 401(k), but your 401(k) names an old ex-spouse as beneficiary, the ex-spouse gets the money.
Annual Gift Tax Exclusion: You can gift up to $19,000 per person per year (2025/2026) without filing a gift tax return or using your lifetime exemption. Married couples can each give $19,000 to the same person ($38,000 combined) tax-free.
If you plan to gift to family members this year, do it before December 31 to use the current year's exclusion.
5. Review Your Insurance Coverage
Year-end is ideal for an insurance review:
Life Insurance: If you have dependents, you need sufficient coverage to replace your income or cover expenses if you die. Term life insurance is typically affordable. A 35-year-old in good health might get a 20-year term policy for $50,000 to $100,000 coverage for $20 to $40/month.
Disability Insurance: Long-term disability insurance replaces income if you become unable to work. Many employer plans provide some coverage, but verify the benefit amount and waiting period.
Homeowners Insurance: Review your coverage. Have you made home improvements that increase value? Does your coverage keep pace?
Umbrella Insurance: If you have significant assets, umbrella coverage ($1M to $5M) protects against catastrophic liability claims. It is inexpensive ($100 to $300/year for $1M coverage) and invaluable if someone sues.
6. Review FSA and HSA Balances
Flexible Spending Account (FSA): FSAs are "use-it-or-lose-it." If you have unused FSA funds, spend them before year-end on eligible medical expenses (doctor visits, dental, glasses, prescriptions, over-the-counter medications).
Some employers allow a grace period (until March 15 of the next year) to spend leftover FSA funds. Check your plan's rules.
Health Savings Account (HSA): HSAs are NOT use-it-or-lose-it. Balances roll over indefinitely. If you have an HSA and an HDHP (high-deductible health plan), you can contribute $4,300 (individual) or $8,550 (family) in 2025, or $5,300/$9,550 if age 55+.
HSAs are exceptionally tax-efficient: contributions are deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. Maximize HSA contributions if possible.
7. Review and Execute Investment Rebalancing
Your portfolio allocation drifts over time. Stocks that performed well become overweight; underperformers become underweight.
Task: Review your target allocation (e.g., 60% stocks, 40% bonds). Calculate current allocation. If any position has drifted more than 5% from target, rebalance.
Tax-Efficient Rebalancing: When rebalancing, use new contributions or reinvested dividends in underweight positions rather than selling winners in taxable accounts. This minimizes capital gains taxes.
Example: Your target is 60/40 (stocks/bonds). Current allocation: 68/32 (stocks overweight). In your taxable account, direct new contributions to bonds. In your 401(k), sell overweight stocks and buy bonds. In your IRA, rebalance freely (no tax consequence).
8. Prepare for RMDs (Age 73+)
If you are 73 or older, you must take Required Minimum Distributions from Traditional IRAs and 401(k)s.
RMD Calculation: Your RMD = account balance (as of 12/31 of prior year) divided by your life expectancy factor. The IRS publishes tables. Most IRA custodians calculate this and provide worksheets.
RMD Deadline: December 31 of the year in which you turn 73 (or the year you retire, if later, for 401(k)s).
Penalty: If you miss an RMD, the penalty is 25% of the amount not withdrawn (reduced to 10% if corrected within 2 years). These penalties are severe.
Action: If you are 73+, contact your IRA/401(k) custodian in October or November for an RMD calculation. Take the distribution by December 31.
Roth IRAs: Good news: Roth IRAs have no RMD requirement during your lifetime. You can let Roth balances grow untouched throughout retirement.
Your Action Plan
- Schedule a 1 to 2 hour meeting with your financial advisor (if you have one) to work through this checklist.
- Gather documents: Last year's tax return, recent retirement account statements, insurance policies.
- Review each section above. Which actions apply to you?
- Execute decisions by December 31 for employer plans. IRA contributions have until April 15 of the following year.
- Document everything. Keep records of contributions, conversions, and gifts for tax and estate purposes.
The Bottom Line
Year-end financial planning is not complicated, but it requires intention. A few hours of work in December can save thousands in taxes, simplify next year, and provide peace of mind.
The areas that matter most vary by your situation: high earners should focus on tax-bracket management and NIIT avoidance; retirees should prioritize RMD compliance and withdrawal strategy; the self-employed should maximize SEP IRA or Solo 401(k) contributions; and those with dependents should review insurance and beneficiaries.
Work with a fee-only fiduciary advisor to ensure your plan is aligned and your tax strategy is optimized. For personalized year-end planning strategies, start a conversation.
