As the end of the year draws closer, it is a natural time to reflect and prepare, especially if you are planning for retirement or already enjoying it. Thoughtful year-end planning can help you feel confident about your financial future.
Here are some steps you can take this year to make the most of your retirement planning.
Boost Your Retirement Contributions Before Year-End
Tax planning can feel daunting, but a few thoughtful actions now can ease your tax burden and keep more of your money working for you.
- Maximize Retirement Contributions: If you are still working, consider maximizing contributions to your 401(k), IRA, or other retirement accounts. This year’s maximum contribution limits for 401(k)s are $23,000 if you are under 50, or $30,500 if 50 or older. IRAs allow up to $7,000 if you are under 50, and $8,000 if you are 50+.
Weigh the Benefits of a Roth Conversion
Strategic Roth Conversions: Converting some traditional IRA or 401(k) funds to a Roth IRA can help reduce future required minimum distributions (RMDs) and potentially lower your tax bill down the road. However, it will increase your current year income, so it typically only makes sense to convert an IRA to Roth if you are in a low tax bracket this year. Your financial advisor can help you determine how much conversion is best for you.
Make Tax-Smart Charitable Gifts
Strategic Charitable Gifts: Accelerating some of next year’s charitable gifts into this year may be beneficial for your taxes. This is for two reasons:
- The temporary increase in state and local tax (SALT) deductions may make “bunching” deductions (including charitable deductions) more impactful.
- In 2026, a new OBBBA change affecting charitable deductions will take effect: a “floor” on charitable deductions of 0.5% of adjusted gross income (AGI) for itemizers.
Use Tax-Loss Harvesting to Your Advantage
Harvest Tax Losses: Reviewing your investment portfolio for opportunities to sell investments with losses can offset gains elsewhere, lowering your tax bill. However, the rules about what you can replace the sold investments with can be tricky, so it often makes the most sense to have your investment advisor handle this task for you.
Don’t Miss Your Required Minimum Distributions
Plan RMDs: For those 73 and older, or if you have an inherited IRA, don’t forget to take your RMDs before year-end. Missing an RMD can result in hefty penalties.
Review and Update Your Estate Plan
Retirement isn’t just about managing money for today — it’s also about protecting your legacy and ensuring your wishes are clear.
- Check Beneficiary Designations: Make sure your retirement accounts, insurance policies, and financial accounts have up-to-date beneficiaries. Life changes such as marriage, divorce, or the birth of grandchildren may mean updates are needed.
- Review Your Will and Powers of Attorney: Are these documents current? Do they still reflect your wishes? If not, consulting your estate attorney for updates is a wise step.
Plan Ahead for Healthcare Costs in Retirement
Healthcare is a major consideration in retirement, and planning ahead can reduce stress down the line.
- Maximize Health Savings Accounts (HSAs): If eligible, contributing to an HSA offers triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
- Plan for Medicare: If you are approaching Medicare eligibility, review enrollment deadlines and coverage options to avoid penalties and ensure you have the coverage that fits your needs.
- Review your Medicare Choices: If you are already on Medicare, you can make certain changes during the Open Enrollment period that runs from October 15 to December 7 each year. During this time, beneficiaries can switch between Medicare Part D prescription plans and Medicare Advantage plans without underwriting. It’s essential to review and compare available plans to ensure they meet your healthcare needs and budget.
Take Charge of Your Financial Future
The end of the year is an excellent opportunity to review your retirement, estate, and healthcare plans. Assessing them now allows you to make calendar-based adjustments to help ease your tax load, protect your legacy, and support your health and income for the years ahead.
If you need help navigating your plan options, identifying opportunities, or tailoring strategies to fit your unique situation, our experienced team of retirement planners in San Diego is here to support you every step of the way.Contact us to discover how we help pre-retirees and retirees build long-term security by taking small, intentional steps today.