While there’s almost never a bad time to make a good move, here are five money moves to make before the end of the year. Most of these financial planning steps are driven by tax considerations and other law-related time constraints, and they all have a year-end deadline.
Your Investments: Use Losses to Offset Gains
With the upward performance of the stock market over the past several years, it’s likely that if you have sold any equity investments this year, you realized a capital gain at the time of the sale. If so, you’ll owe capital gains tax when you file your income tax return. With recent stock market volatility, though, you may have some holdings that are worth less than you paid for them. You may want to consider selling these losers, so that the capital losses offset your capital gains, thus lowering or eliminating your capital gains tax bill.
Consider this cautiously, though. Long-term gains and losses are treated differently from short-term gains and losses. Unknowingly commingling the two can cause headaches. Also, don’t let the tax tail wag the dog: don’t let short-term considerations negatively affect your long-term plan. Consult your advisor to make sure you are operating within your financial plan.
Your Retirement Accounts: Max Out Savings
Retirement accounts like 401(k) plans and IRAs have annual savings limits. If you save below the limit in one year, you can’t save over the limit next year to make up for it. Because these accounts are tax-advantaged, that means you may miss out on tax savings if you don’t max out your retirement savings. For employer-based plans like 401(k) plans, you only have until December 31 to contribute for the year. (For IRAs, you have until April 15 of next year.)
Remember these limits:
- 401(k) if under age 50: $23,500 (2025)
- 401(k) if age 50+, but not between 60 and 63: $31,000 (2025)
- 401(k) if age between 60 and 63: $34,750 (2025)
- IRA/Roth IRA if under age 50: $7,000 (2025)
- IRA/Roth IRA if age 50+: $8,000 (2025)
But there are further limitations. If you are eligible to participate in an employer retirement plan, your ability to contribute to an IRA may be limited. It may be further limited based on your income. Additionally, other retirement plans like 403(b) and 457 plans have more complicated limits based on your age. Consult your advisor to help avoid going afoul of the limits.
Your Taxes: Approach Roth Conversion With Caution
Converting savings from traditional IRA accounts to Roth IRA accounts can be a way to avoid taxes in the future. But it comes with a cost: you have to pay taxes now on the amount you convert. When you make a conversion, you increase your taxable income. As your taxable income rises, you may lose eligibility for certain tax credits and deductions. Careful planning with your advisor can help you avoid this.
Your Healthcare: Deplete Your Flexible Spending Account
A flexible spending account (FSA) can be a great way to save for in-year healthcare costs. With an FSA, you make pre-tax contributions to the account, and then you use the account to make tax-free withdrawals to pay for eligible healthcare expenses. Basically, you get to earn income and never pay taxes on it, as long as you use the money for eligible healthcare expenses.
However, FSAs are “use it or lose it.” Most plans require you to spend the money by December 31 or it disappears, never to be seen again. If you have a large chunk of money sitting in an FSA and you are in danger of forfeiting it, consider using it for longer-term/higher-cost items, like prescription glasses, 90-day supplies of expensive prescription drugs, hearing aids, etc.
Your Charitable Giving: Give This Year…Or Not
Due to recent tax law changes, considerations around charitable giving are a little more complicated.
If you itemize your tax deductions, beginning in 2026, you will only be able to deduct charitable contributions to the extent they exceed 0.5% of your adjusted gross income (AGI). For example, in 2026, if your AGI is $100,000 and you donate $1,000, you’ll only be able to deduct $500. But if you make the same contribution in 2025, you’ll be able to deduct the full $1,000.
If you do not itemize your tax deductions, you may want to wait until next year. This is because, beginning in 2026, everyone will be eligible for a $1,000 deduction ($2,000 for married couples filing jointly) even if they don’t itemize. From a tax standpoint, you may be better off waiting until 2026.
Of course, you have many other considerations when making charitable gifts. Tax consequences may be of little or of major concern, depending on your situation and outlook. Be sure to vet your options with your financial advisor.
While all of these money moves to make before the end of year may be important, you should not consider them on their own. Instead, these financial planning steps should be considered as part of your overall financial plan. If you’re ready to start making your own financial plan, so you can be ready for the end of the year and for years to come, schedule a complimentary consultation or contact us to find out how we can help you with financial planning and wealth management, including investment management.