Year-End Tax Moves for Retirees: RMD Deadline, Roth Conversions, and QCDs

Why Year-End Planning Matters

Tax planning isn't just a once-a-year exercise you do in April when you file your return. By April, the year is over — all the opportunities to shift income, defer expenses, or reposition investments have passed. The real action happens in October, November, and December, when you still have time to act and the full picture of your income for the year is becoming clear.

Here are eight moves to review and execute before December 31:

1 Get a Tax Projection

Before making any moves, you need to know where you actually stand. Pull together your year-to-date income, withholding, estimated tax payments, deductions, and any unusual income events (asset sales, Roth conversions, etc.). Use a tax planning tool or work with your tax advisor to project your likely taxable income and tax bracket for the year.

This projection is the foundation for every other decision. It tells you how much room you have in your current bracket, whether a Roth conversion makes sense, whether you should harvest losses or gains, and whether you're at risk of underpayment penalties.

2 Max Out 401(k) and Other Employer Plan Contributions

Contributions to employer-sponsored plans (401(k), 403(b), TSP) must be made through payroll before December 31. There is no way to make 2025 contributions in 2026 for these accounts. In 2025:

• Employee contribution limit: $23,500
• Catch-up contribution (age 50–59 and 64+): +$7,500
• Special catch-up (age 60–63, per SECURE 2.0): +$11,250

If you haven't hit your limit, check whether you can increase your payroll deferral percentage for your final pay periods of the year. Even a few additional paychecks of deferred income can reduce your taxable income for the year and grow tax-deferred.

3 Check Withholding and Make a Catch-Up Estimated Payment

If your tax projection shows you're going to owe significantly more than you've withheld or paid in estimated taxes, you may face an underpayment penalty. The safe harbor rule allows you to avoid the penalty by paying 100% of last year's tax liability (110% if last year's AGI exceeded $150,000) before year-end.

If you're an employee, you can adjust your W-4 to have more withheld from your remaining paychecks. If you're self-employed or receive income without withholding, the Q4 estimated tax payment deadline is January 15 — but making a larger December payment ensures the payment is timely and properly credited.

4 Harvest Capital Losses (or Gains)

Review your taxable brokerage accounts for positions with unrealized gains and losses. Year-end is prime season for tax-loss harvesting — intentionally selling positions at a loss to offset capital gains realized elsewhere in the year.

• Capital losses offset capital gains dollar-for-dollar.
• Net capital losses (losses exceeding gains) can offset up to $3,000 of ordinary income per year.
• Excess losses carry forward to future tax years — they don't disappear.

Conversely, if your income is low enough to put you in the 0% long-term capital gains bracket ($47,025 single / $94,050 married in 2025), consider intentionally selling appreciated positions to realize gains tax-free and reset your cost basis upward. You can immediately repurchase the same security — the wash sale rule only applies to losses, not gains.

All trades must settle by December 31 to count for the current tax year. Check your brokerage's settlement cutoff dates, usually 2–3 business days before year-end.

5 Execute Roth Conversions Before Year-End

If your income is lower than expected this year — or if you have a rare window with significant deductions — consider converting a portion of traditional IRA assets to Roth before December 31.

The Roth conversion must be completed in the calendar year to apply to that year's taxes. Use your tax projection to identify how much you can convert without crossing into the next bracket, triggering IRMAA thresholds (if you're on Medicare), or losing ACA subsidies (if you're pre-Medicare and on the Marketplace).

Remember: pay the tax on the conversion from non-retirement funds to preserve the full converted amount inside the Roth IRA and maximize the long-term compounding benefit.

6 Make Charitable Contributions

Cash donations and donations of property to qualified charities must be completed by December 31 to count as a deduction for the current tax year. Key points:

• Cash donations by check must be mailed and postmarked by December 31 (not received, but postmarked).
• Credit card donations are deductible in the year charged, even if the bill isn't paid until January.
• Donations of appreciated securities: initiate the stock transfer at least 2–3 weeks before year-end to ensure settlement in time.
• Qualified Charitable Distributions (QCDs) from IRAs for those 70½+: the distribution must be received and forwarded to the charity by December 31 to count toward that year's RMD.

If you're contributing to a Donor-Advised Fund, the contribution date (not the grant date) determines the tax year for your deduction.

7 Take Your Required Minimum Distribution

If you are age 73 or older and have traditional IRAs or employer retirement accounts, you must take your Required Minimum Distribution by December 31. Missing an RMD results in a steep 25% excise tax on the amount not withdrawn (reducible to 10% if corrected promptly under IRS correction procedures).

Exception: if this is your first RMD year (you turned 73 in 2025), you have until April 1, 2026 to take it — but taking it before December 31, 2025 may be preferable to avoid stacking two RMDs in 2026 and potentially jumping a bracket.

If you're charitably inclined and at least 70½, consider satisfying your RMD through a QCD — you'll meet the distribution requirement without adding taxable income.

8 Fund an HSA (If Eligible) and Review FSA Balances

If you have a High-Deductible Health Plan (HDHP) and are eligible to contribute to a Health Savings Account (HSA), contributions can be made until April 15 of the following year — but there's no reason to wait. HSA contributions are triple-tax-advantaged: deductible, grow tax-free, and withdraw tax-free for qualified medical expenses.

Flexible Spending Accounts (FSAs), on the other hand, typically operate on a use-it-or-lose-it basis. Check your remaining FSA balance and plan to spend it before year-end on eligible expenses — including glasses, dental work, prescription refills, and many over-the-counter items. Some plans allow a grace period through mid-March or a $660 rollover (check your plan's specific rules).