12 Retirement Moves You Must Make Before December 31st (Or Regret It Forever)

The difference between a comfortable retirement and a stressful tax season often comes down to what you do in the final 30 days of the year.

Most people wait until April to think about taxes but that is a mistake because the best strategies are off the table by then. December 31st is the hard deadline for the most powerful wealth building tools available to you.

If you miss this date the IRS does not offer a second chance and you will simply pay more than you should. In this guide you will learn a prioritized list of 12 critical financial moves that help you keep more of your hard earned money.

1. Max Out Your 401(k) Contributions

The clock is ticking loudest on this specific move because you generally cannot write a personal check to fund a 401(k) account.

You must contribute strictly through payroll deductions before the year ends so you need to contact your payroll department immediately to adjust your withholdings. Every dollar you contribute to a traditional plan reduces your taxable income for the current year and lowers what you owe the IRS right now.

It is one of the most effective ways to build wealth while simultaneously keeping your current tax bill as low as possible.

• The standard contribution limit for 2025 is $23,500
• Workers age 50 and older can add a catch up contribution of $7,500 for a total of $31,000
• Those aged 60 to 63 have a new higher super catch up limit of $11,250

2. Execute a Roth Conversion

A Roth conversion involves moving money from a Traditional IRA which is tax deferred into a Roth IRA which offers tax free growth.

You pay taxes on the transfer now so you never have to pay them again which is a smart move if your income was lower than usual this year.

You can convert just enough money to fill up your current low tax bracket without tipping over into a higher one. This strategy requires precise calculation because you cannot undo the move once it is completed.

• The deadline to complete the conversion for the 2025 tax year is December 31
• You should have cash outside the retirement account to pay the tax bill
• This strategy works best if you expect your future tax rate to be higher than it is today

3. Satisfy Your Required Minimum Distributions

The IRS requires individuals age 73 or older to withdraw a specific amount of money from their retirement accounts every year. They want their tax revenue and they will penalize you severely if you fail to take the money out on time.

You could lose up to 25 percent of the amount you failed to withdraw if you miss the deadline. It is critical to check your accounts now because processing times can slow down significantly during the holiday season.

• The deadline for taking your distribution is December 31
• The penalty for missing this withdrawal is up to 25 percent of the unwithdrawn amount
• Waiting until April 1 if it is your first year can cause a double tax trap in 2026

4. Harvest Investment Losses

This strategy allows you to use investment losses to lower your overall tax bill which is effectively free money from the government.

If you have investments in a taxable brokerage account that have lost value you can sell them to offset capital gains you made elsewhere.

If your losses are bigger than your gains you can use a portion of that excess loss to offset your ordinary income like wages or pension payments. This is a vital tool for keeping your taxable income low during market volatility.

• You can use up to $3,000 of excess loss to offset ordinary income
• You cannot buy the same or substantially identical stock within 30 days of the sale
• Losses in a retirement account like an IRA cannot be used for this strategy

5. Slash Taxes with a Qualified Charitable Distribution

This is a powerful strategy for retirees age 70½ or older who want to support charities while lowering their taxes. You can donate money directly from your IRA to a qualified charity which counts toward your required minimum distribution but does not count as taxable income.

By keeping your adjusted gross income low you might avoid surcharges on your Medicare premiums known as IRMAA. This is far more tax efficient than withdrawing the money yourself and then writing a check to the charity.

• The 2025 limit for these distributions is $108,000
• The funds must go directly from the IRA custodian to the charity
• This move lowers your Adjusted Gross Income which can protect your Medicare rates

6. Utilize the Annual Gift Tax Exclusion

Giving money to children or grandchildren while you are alive can be a very smart estate planning move that reduces your future taxable estate. The IRS allows you to give a specific amount of money to as many people as you want without needing to file a gift tax return.

This benefit resets every year so you cannot save up the allowance to use it later. You must write the checks or transfer the funds before the year ends to take advantage of this exclusion.

• You can give up to $19,000 per recipient in 2025 without reporting it
• Married couples can combine their allowances to give $38,000 per recipient
• The recipient does not owe income tax on the gift they receive

7. Top Off Your Health Savings Account

The Health Savings Account is often called the ultimate retirement vehicle because it offers a triple tax advantage that no other account can match. Money goes in tax deductible grows tax free and comes out tax free if used for qualified medical expenses.

Unlike a Flexible Spending Account you keep this money forever and there is no deadline to spend the balance. It effectively acts as a dedicated IRA for your future healthcare costs which will likely be your biggest expense in retirement.

• The 2025 contribution limit for individuals is $4,300
• The 2025 contribution limit for families is $8,550
• Account holders age 55 and older can contribute an extra $1,000

8. Drain Your Flexible Spending Account

Flexible Spending Accounts are generally strict use it or lose it arrangements that require you to spend your balance before the plan year ends.

While some employers allow a short grace period or a small carryover amount most plans will confiscate your remaining funds on January 1st.

You should review your balance immediately and schedule appointments or purchase eligible items now. Leaving money in this account is essentially giving a donation back to your employer.

• The maximum carryover amount for 2025 is $660 if your plan allows it
• You can spend funds on glasses dental work and first aid supplies
• Check your plan document to see if you have a grace period into next year

9. Maximize State Tax Breaks with a 529 Plan

529 plans are excellent tools for education savings but they also offer immediate tax benefits for the account owner in many states. Over 30 states offer a state income tax deduction or credit for contributions made to these plans.

Most states require the contribution to be postmarked or received by December 31 to count for the current tax year. This is a simple way to lower your state tax bill while helping a grandchild or even yourself pay for future education.

• Contributions must usually be made by December 31 to claim the state deduction
• You can change the beneficiary to another family member if needed
• Earnings grow tax free if used for qualified education expenses

10. Review Capital Gain Distributions

Mutual funds often pay out capital gains distributions in December which can create a nasty tax surprise for unsuspecting investors. If you buy into a mutual fund right before this payout date you will receive a taxable check and the share price will drop by that same amount.

You end up paying taxes on profit you did not actually earn which is often called phantom tax. It is usually smarter to wait until January to invest new lump sums into actively managed funds.

• Buying in late December can result in immediate tax liability
• This issue primarily affects taxable brokerage accounts rather than IRAs
• Check the fund website to see their estimated distribution dates

11. Check Your Tax Withholding

The United States operates on a pay as you go tax system which means you must pay taxes on income as you earn it throughout the year. If you sold a house or had a surprisingly good year in the market you might have underpaid and could face a penalty.

You can avoid this by ensuring you meet the safe harbor requirements set by the IRS. You can fix a shortfall by making an estimated payment or withholding more from a December pension payment.

• You are safe if you pay 90 percent of your 2025 tax liability
• You are safe if you pay 100 percent of your 2024 tax liability
• High earners must pay 110 percent of their prior year tax to be safe

12. Bunch Your Itemized Deductions

The standard deduction has become very high in recent years making it difficult for many people to claim itemized deductions like charity and property taxes.

A smart strategy involves grouping two years worth of donations into a single tax year to exceed the standard threshold. You would make your 2025 and 2026 charitable gifts all in December 2025 to maximize the write off.

In the following year you would simply take the standard deduction which saves you more money over the two year period.

• The 2025 standard deduction is approximately $15,000 for singles
• The 2025 standard deduction is approximately $30,000 for married couples
• This strategy works best for charitable giving and property tax payments