As the year winds down, it’s a great time to take stock of your finances and make a few strategic adjustments that can meaningfully improve your after-tax results.
For retirees and those nearing retirement, small decisions made before December 31 can have an outsized impact on lifetime taxes, portfolio longevity, and peace of mind.
Below are several important areas to review with your financial advisor as you close out the year.
Tax-Loss Harvesting
Review Your Portfolio: Look for positions in taxable accounts that have declined in value.
Realize Strategic Losses: Selling investments at a loss can offset realized capital gains and up to $3,000 of ordinary income per year.
Reinvest Thoughtfully: Avoid the “wash-sale” rule by waiting 30 days (or using a similar—not identical—fund) before buying back in.
Required Minimum Distributions (RMDs)
Age Matters: If you’re 73 or older, confirm that all RMDs are withdrawn from IRAs, 401(k)s, and other qualified plans before year-end to avoid a steep 25% penalty.
Check Accuracy: Your advisor or custodian can calculate the correct amount based on your December 31 balances from the prior year.
Give Strategically: Consider using a Qualified Charitable Distribution (QCD) to satisfy part or all of your RMD while reducing taxable income.
Roth Conversion Opportunities
Run the Numbers: Partial Roth conversions can make sense in lower-income years or before RMDs begin.
Balance Today vs. Tomorrow: Converting now may reduce future taxes and improve flexibility for heirs.
Mind the Brackets: Coordinate conversions with other income sources to avoid unexpectedly higher tax brackets or IRMAA surcharges on Medicare.
Income Tax Optimization
Charitable Contributions: Bunch donations into one year, donate appreciated securities, or fund a Donor-Advised Fund (DAF) to maximize deductions.
Itemize vs. Standard Deduction: Evaluate which approach offers the better tax outcome—especially if you’ve paid high state and local taxes or made large gifts.
Timing Matters: Accelerating deductions or deferring income can help manage your effective tax rate over multiple years.
Maximize Tax-Advantaged Contributions
401(k) and IRA Limits: Contribute the maximum allowed for the year ($23,500 + $7,500 catch-up for 401(k)s; $7,000 + $1,000 catch-up for IRAs).
Health Savings Accounts (HSAs): If eligible, contribute up to $4,300 (single) or $8,550 (family) + $1,000 catch-up. HSAs offer triple tax benefits: deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses.
Roth 401(k) Contributions
Plan for the Future: If you expect higher income or tax rates in retirement, Roth 401(k) contributions can build a valuable source of tax-free withdrawals later on.
Mix It Up: A combination of pre-tax and Roth accounts provides flexibility when planning future withdrawals.
Other Key Considerations
Flexible Spending Accounts (FSAs): Use remaining balances before year-end (some plans allow a brief grace period).
Tax Credits: Review eligibility for education, EV, or energy-efficiency credits.
Estate Planning: Confirm beneficiary designations, update your will or trust, and ensure your documents reflect current wishes.
Bracket Management: Work with your advisor to manage taxable income—especially when taking distributions or realizing gains—to keep you in a favorable tax bracket.
Coordinate with Your Advisor
Each financial situation is unique. Year-end planning is most effective when it’s coordinated across investments, income sources, and charitable goals.
At Mayfair Financial, we integrate tax-aware investing with retirement income planning—helping clients make confident, data-driven decisions that balance today’s tax savings with tomorrow’s growth.
The content is developed from sources believed to be providing accurate information. The information in this material is for educational purposes only and is not intended as tax, investment, or legal advice. It may not be used to avoid any federal tax penalties. Please consult legal, investment, or tax professionals for specific information regarding your situation. Mayfair Financial and FMG Suite developed and produced this material to provide information on a topic of interest. FMG is not affiliated with the named state-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.