Smart Year-End Financial Moves for Retirees

As the year winds down, retirees have a valuable opportunity to make strategic financial moves that can reduce taxes, fine-tune investment plans, and set up a stronger start to the new year.

Here are several key year-end financial moves for retirees to consider before December 31.

1. Take Your Required Minimum Distributions (RMDs)

If you’re age 73 or older, don’t forget to take your Required Minimum Distribution (RMD) from your IRAs or 401(k)s before the end of the year. Missing your RMD can lead to a 25% penalty on the amount you should have withdrawn, even if it’s unintentional.

If this is your first year taking RMDs, remember that you can delay your first one until April 1 of the following year. However, doing so may result in taking two RMDs in one year, potentially pushing you into a higher tax bracket.

2. Review Your Medicare Enrollment

Medicare open enrollment runs each year from October 15 to December 7. This is your chance to:

• Compare Part D prescription drug plans

• Review Medicare Advantage coverage

• Ensure your plan still fits your health and budget needs

Even small changes in premiums, deductibles, or coverage can have a big impact on your healthcare costs in retirement.

3. Run a Year-End Tax Projection

A year-end tax projection is one of the most valuable tools retirees can use to make informed financial decisions before December 31.

By reviewing your projected income, deductions, and investment activity, you can make sure you have withheld enough in taxes, while also identifying opportunities to fill up your tax bracket strategically.

Here’s how it helps:

• You can decide how much room you have left in your current tax bracket, which helps with Roth conversions, capital gain harvesting, or taxable withdrawals from IRAs or annuities.

• You can see if your income is approaching the Medicare IRMAA thresholds (Income-Related Monthly Adjustment Amount), which increase your Medicare premiums two years later.

For example. let’s say a married couple’s retirement income for 2025 is projected to be around $220,000. For 2025, the next IRMAA threshold begins after $266,000 for married filers.

In this case, the couple might choose to use the extra $46,000 to:

• Convert additional funds from their IRA to a Roth IRA,

• Realize long-term capital gains, or

• Take taxable withdrawals from annuities

This strategy allows the couple to “fill up” the income space between $220,000 and $266,000 without crossing into the next IRMAA tier and stay within the 24% tax bracket. The couple takes advantage of today’s lower tax rates and stays under the next IRMAA threshold, helping to manage both taxes and Medicare premiums.

Running a year-end projection can help find the balance between paying a little tax now to avoid paying much more later.

4. Harvest Capital Gains and Losses

After running your year-end tax projection, it’s a great time to review your portfolio for capital gains or losses and make strategic moves to manage your taxable income.

If your income is on the higher end, selling investments at a loss can offset gains taken earlier in the year, helping to reduce your tax bill. This strategy, known as tax-loss harvesting, can also help rebalance your portfolio without increasing your taxes.

If your income is lower this year, you may have an opportunity to harvest long-term capital gains tax-free. For 2025, the 0% long-term capital gains bracket applies to taxable income (after deductions) up to:

• $96,700 for married couples filing jointly

• $48,350 for single filers

That means if your taxable income, including any realized gains, stays below those limits, you’ll pay no federal tax on long-term capital gains.

5. Rebalance Your Portfolio and Review Cash Reserves

Markets shift throughout the year, which can leave your portfolio out of balance. Rebalancing helps realign your investments with your risk tolerance and long-term goals.

It’s also a good time to check your cash reserves. Retirees should have enough cash or conservative investments to cover at least one to two years of living expenses, so they don’t have to sell investments in down markets. As previously discussed, tax loss harvesting can help you potentially rebalance your portfolio and rebuild cash reserves with minimal to no tax implications.

6. Consider Charitable Giving Through Your IRA

If you’re charitably inclined and age 70½ or older, you can use a Qualified Charitable Distribution (QCD) to donate directly from your IRA to a qualified charity, up to $108,000 per individual.

A QCD counts toward your RMD but does not increase your taxable income, making it a powerful way to give back and reduce your tax burden at the same time.

7. Gift to Family Members Before Year-End

Lastly, if you are looking to support children or grandchildren, the annual gift tax exclusion allows you to give up to $19,000 per person in 2025 without using any of your lifetime exemption. A married couple could give up to $38,000 ($19,000 per spouse).

This can be a great way to help with education, home purchases, or investments, while reducing the size of your taxable estate over time.

Final Thoughts

Year-end planning isn’t just about checking boxes. It’s about being intentional with your money. By taking RMDs on time, reviewing Medicare coverage, and using smart tax and investment strategies, you can reduce your tax bill, stay ahead of IRMAA penalties, and start the new year with confidence.

- Steve Balch, CFP®

As a Financial Advisor, I help retirees create tax-efficient retirement income strategies and stay ahead of important deadlines.

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Frequently Asked Questions About Year-End Planning for Retirees

When do I need to take my Required Minimum Distribution (RMD)? If you’re 73 or older, your RMD must be taken by December 31 each year. If this is your first RMD, you can delay it until April 1 of the following year. However, this means taking two distributions in one year, which could result in higher taxes.

What is the Medicare open enrollment period? Medicare open enrollment runs from October 15 to December 7. During this time, you can switch Medicare Advantage plans, change prescription drug coverage, or return to Original Medicare.

Should I do a Roth conversion before year-end? Roth conversions must be completed by December 31 to count for that tax year. Converting early can reduce future RMDs and create tax-free income in retirement, but it’s important to review your tax projection first.

How much can I gift to family members in 2025? In 2025, you can gift up to $19,000 per person without triggering the gift tax. This allows you to support family members and reduce your taxable estate.

What is a Qualified Charitable Distribution (QCD)? A QCD allows those aged 70½ or older to donate directly from their IRA to a qualified charity, up to $108,000 per individual. It counts toward your RMD and is excluded from taxable income, helping you lower your tax bill while supporting causes you care about.

What is tax-loss harvesting? Tax-loss harvesting involves selling investments at a loss to offset capital gains. This strategy can reduce your taxable income for the year and help rebalance your portfolio.

How often should I rebalance my portfolio? At least once a year, and ideally before the end of the year. Rebalancing ensures your investments align with your goals and risk tolerance. It’s also a good time to check that you have sufficient cash reserves (typically 1–2 years' worth of expenses) for stability in retirement.