Three Tax Planning Moves Worth Reviewing Before Year-End

As the year winds down, certain financial decisions quietly become time-sensitive. While good planning does not stop on December 31, the tax code does. Miss a deadline, and opportunities disappear or penalties show up.

This time of year is a natural checkpoint. Below are three areas worth reviewing before year-end. You may not need to act on all of them, but if you are nearing or already in retirement, each one has the potential to affect both your taxes and your long-term plan.

Required Minimum Distributions: The Deadline Matters

Most of your working life is spent saving and building. In retirement, the focus shifts to how and when money comes out, and those decisions matter more than many people expect.

If you are subject to Required Minimum Distributions, December 31 is a hard deadline. Missing an RMD can trigger an IRS penalty equal to 25 percent of the amount that should have been withdrawn.

RMDs apply to traditional IRAs, 401(k)s, and other tax-deferred retirement accounts. Under current law, RMDs generally begin at age 73, with that age scheduled to increase to 75 in 2033.

The math behind an RMD is straightforward. The planning around it rarely is.

You need to decide which accounts to draw from, how withdrawals interact with Social Security or pension income, and what that income does to your overall tax picture. If this is your first RMD year, delaying the distribution until April 1 of the following year may sound appealing, but it can result in taking two distributions in one calendar year and pushing income higher than expected.

Charitable giving can also be part of the conversation. Qualified Charitable Distributions allow certain IRA withdrawals to go directly to charity, satisfying the RMD without increasing taxable income.

One often overlooked opportunity is the period before RMDs begin. In some cases, taking planned withdrawals earlier, while tax rates are lower, can reduce future tax pressure once RMDs become mandatory.

Roth Conversions: Paying Taxes on Your Terms

Roth conversions can be a powerful planning tool, but only when they are used intentionally. A conversion moves money from a traditional IRA to a Roth IRA. You pay taxes now in exchange for tax-free growth and withdrawals later.

There are no income limits on Roth conversions. Even if you cannot contribute directly to a Roth IRA, this option may still be available to you.

The key question is whether paying taxes now makes sense in the context of your overall plan. Many retirees are surprised to find that their income does not drop as much as expected. RMDs, Social Security, and pensions can add up, sometimes pushing tax brackets higher later in retirement.

Roth assets also provide flexibility. They are not subject to RMDs during your lifetime, which can help smooth income and taxes over time.

That said, converting too much in a single year can create unnecessary tax drag. Timing matters, and so does the length of time the money can remain in the Roth and grow tax-free.

It is also important to be aware of Medicare implications. Higher income from conversions can increase Medicare Part B and Part D premiums through IRMAA surcharges. This does not mean conversions should be avoided, but it does mean they should be coordinated carefully.

Tax-Loss Harvesting: Turning Volatility Into a Tool

Tax-loss harvesting applies to taxable investment accounts and is often overlooked until the end of the year.

The idea is simple. Investments that are at a loss can be sold to offset gains realized elsewhere. Losses offset gains dollar-for-dollar. If losses exceed gains, up to $3,000 can be used to offset ordinary income each year, with remaining losses carried forward.

This can be especially valuable if you have realized short-term gains, which are taxed at ordinary income rates.

One important rule to keep in mind is the wash-sale rule, which prevents you from selling an investment at a loss and immediately buying it back. In many cases, you can replace the position with a similar investment to maintain market exposure while still capturing the tax benefit.

It is also worth noting that tax-loss harvesting applies only to taxable accounts. IRAs and 401(k)s do not generate taxable gains or losses.

Each of these strategies can stand on its own. The real value comes from coordinating them in a way that supports your long-term goals.

Lowering this year’s tax bill is helpful, but not if it creates larger problems down the road. Thoughtful planning looks beyond December 31 and focuses on income sustainability, flexibility, and peace of mind.

Year-end is simply a checkpoint. It is a chance to step back, take stock of what has changed, and make sure your plan still fits the life you are living today.