As the sun begins to set on 2025, it’s the perfect time to take stock of your financial progress and start planning for 2026. The following year-end financial planning checklist highlights key areas to review with your advisor to ensure you’re on track and prepared for the year ahead.
1. Contribute To Your Tax Advantage Accounts
Are you taking full advantage of your employer plan retirement accounts? If not, consider increasing contributions to max out your employer matches. Boosting contributions to an IRA could offer you tax advantages as well.
2. Fund Your Loved Ones Education & Take Advantage of The Grants Tax Deductions
Setting up a 529 College Savings Plan is always a welcome gift when investing in your child, grandchild, niece, or nephew. You can allow your funds to grow tax-deferred for several years and they can be withdrawn tax-free to pay for qualified education expenses. 529 plans with NextGen offer multiple grants. You could open an account with automatic funding or contribute the max amount and receive additional funds through the grants. Enroll before the end of the year to receive NextGen matching grants.There are also benefits to grandparent owned 529 plans.
3. Consider Annual Gifts To Loved Ones & Charitable Gifts
A Qualified Charitable Distribution allows individuals aged 70½ or older to donate directly from specific retirement accounts to qualified charities without recognizing the distribution as taxable income. Such distributions can help you manage your required minimum distributions (RMDs). Additionally, the Secure Act 2.0 changed the age of RMDs to 73. The maximum annual limit for QCDs is currently set at $108,000 for 2025, an amount that adjusts for inflation yearly as 2026 will be $115,000. Therefore, staying updated on the annual cap is essential, as it can influence your donation strategy.
4. Take Advantage of Marginal Tax Rates
When on the tax bracket threshold, ask your advisor if you can be put in the lower bracket by deferring some income to 2026. If you itemize, discuss the possibility of accelerating deductions such as medical expenses or charitable donations into 2026 (rather than paying for deductible items in 2025), which may have the same effect.
5. Rebalance Your Portfolio & Turn Any Losses Into Tax Gains
Ask your advisor to review capital gains and losses with you to reveal any tax planning opportunities; for example, you may be able to harvest losses to offset capital gains.
- Make sure your risk tolerance aligns with your financial goals.
- You can offset the taxes to capital gains by selling off poor-performing investments at a loss.
- Can deduct up to $3,000 in capital losses against ordinary income if those losses exceed gains.
- Be careful: There are distinctions between short and long-term capital gains/losses. Check with your advisor to see if this strategy applies to your account.
6. Don't Forget Your Required Minimum Distributions (RMDs)
- Do Not Forget: there is a 25% penalty on the amount not taken out.
- The RMD starting age is now 73. Anyone born before 12/31/1951 will have to take out an RMD.
- Use these funds to help pay for living expenses, reinvest in a taxable investment account, or consider a QCD if you don’t need the funds.
IRS regulations require you to begin withdrawing a minimum amount of money from your retirement account(s) each year by April 1 of the calendar year following the year you turn age 73. After that, RMDs must be taken each subsequent calendar year by December 31. Calculating the correct RMD amount(s) across one or multiple retirement accounts is complicated. You can be vulnerable to hefty tax penalties if you miscalculate or fail to take RMDs from one or more qualified plans.
7. Adjust Withholdings
Are you looking at an estimated tax penalty? If you may be subject, consider asking your employer (via Form W-4) to increase withholding for the remainder of the year to cover any shortfalls. The most significant advantage of this is that withholding is considered to be paid evenly throughout the year instead of when the dollars are taken from your paycheck. This strategy can also make up for low or missing quarterly estimated tax payments.
8. Consider A Roth Conversion
Evaluate converting all or some of your pre-tax Traditional IRA to an after-tax Roth IRA (read more in our recent note on this topic). You will be required to pay taxes on the amount converted, but some reasons it might make sense are:
- Income tax rates are likely going higher.
- You can pay taxes using cash outside of your Traditional IRA.
- Legacy planning: Non-spouse beneficiaries are now required to withdraw the entire account balance within 10 years of inheriting an account. Roth funds will come out tax-free, while Traditional IRA funds will be taxable income to the beneficiary.
9. Review Estate Documents & Insurance Coverage
Now is an excellent time to review your beneficiary designations and update estate plans to make sure they align with your goals and account for any life changes or other circumstances. Below are items that should be done on an ongoing basis:
- Check trust funding
- Update beneficiary designations
- Take a fresh look at trustee and agent appointments
- Review provisions of powers of attorney and health care directives
- Review documents to ensure you have a full understanding
Looking Ahead To 2026
Each person's tax situation is unique, and inflation adjustments for tax brackets announced by the IRS for 2026 mean people may have more taxable income before being bumped into a higher tax bracket, which may affect some tax decisions. As always, check with a tax professional regarding any tax-related decisions. Remember that this checklist is not necessarily all-encompassing, but it is important to consider keeping your financial plan in mind even during the holiday season. If you have any questions or would like personalized guidance on these topics, schedule a call with a financial advisor today.
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Check Out Our 2025 Year-End Financial Planning Checklist
Neither Cetera Advisors LLC nor its representatives may give legal or tax advice. Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer's official statement and should be read carefully before investing. Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state's 529 Plan.