As the calendar winds down, now is the perfect time for a quick financial year-end check, ensuring you maximize savings opportunities, minimize taxes, and avoid costly mistakes before the clock strikes midnight. Here are key items to consider before December 31:
Maximize Retirement Contributions
If you haven’t already, make sure you’ve contributed as much as you can this year to your retirement plans. For employer-sponsored plans (like 401(k)s), the contribution deadline is generally December 31, so now is the last chance to boost your tax-advantaged savings for the year. Depending on your income, age, and plan limits, maximizing your contribution can lower your taxable income and strengthen your long-term retirement outlook.
Make Charitable Donations or “Bunch” Them
If you plan to make charitable gifts, complete them before December 31 so they can count toward this year’s taxes. As part of a tax-efficient strategy, you might consider “bunching” multiple years’ worth of donations in one year or giving appreciated securities. If you’re also required to take withdrawals from retirement accounts, charitable giving can be both generous and tax-smart.
Take Required Minimum Distributions (RMDs), If Applicable
For those age 73 and older, annual required minimum distributions from traditional IRAs and many workplace retirement accounts must be taken by December 31. Failing to take your full RMD can result in a significant tax penalty—currently 25% of the amount not withdrawn, potentially reduced to 10% if corrected promptly. If you recently reached the age when RMDs begin, remember that while your first RMD can sometimes be delayed until April 1 of the following year, all subsequent RMDs are due by December 31.
Consider a Roth Conversion
If you believe your income or tax rate may be higher in the future, doing a partial or full conversion from a traditional IRA to a Roth IRA could be beneficial. Because Roth accounts grow tax-free and are not subject to RMDs during your lifetime, converting now may help reduce taxable withdrawals later or provide long-term advantages for estate planning. As always, it’s wise to evaluate the tax impact before moving forward.
Review Other Year-End Opportunities
Beyond retirement accounts and charitable giving, this is a good time to review other potential year-end moves such as tax-loss harvesting, rebalancing investments, or contributing to education savings accounts. These steps will vary depending on your goals, but an annual review helps ensure you’re not missing opportunities that could improve your financial position going into the new year.
Review Flexible Spending Account (FSA) Balances
If you have a healthcare or dependent care FSA through your employer, check to see how much remains in your account. Many FSAs are “use it or lose it,” meaning unused funds may be forfeited after December 31 unless your plan offers a carryover or grace period. Scheduling eligible medical appointments, purchasing qualified health items, or submitting outstanding receipts before year-end can help you avoid losing those dollars.