The end of year offers many great opportunities to set yourself up for success the following year, so it’s a great time to revisit your financial goals with your advisor to make some changes, identify ways to save more and check in on your progress and spending.
Here, we’ve outlined what you should know and some strategic actions to take that could help you optimize your retirement, finances and goals for the year ahead.
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1. Consider maxing out your annual retirement contributions and health savings account (HSA)
Consider increasing contributions to your employer-sponsored retirement plan and/or IRAs. Not only will contributions made now boost your retirement savings balance, but pre-tax contributions can also help lower your tax bill. If your employer plan allows, automate your annual contribution increases with your plan administrator.
2. Consider a Roth, partial Roth, or backdoor Roth conversion
If you expect to be in a lower bracket than usual, it might be a good time to consider a Roth conversion. This involves converting pre-tax retirement assets (e.g., traditional IRA or pre-tax 401(k)) to a Roth IRA or Roth 401(k). When you do so, you will owe taxes on the converted funds for the year when the conversion takes place.
If you are in a lower tax bracket, you’ll typically have a lower tax burden associated with the converted funds for that year. It’s beneficial to pay any taxes due on the conversion from money held outside your IRA account to maximize the conversion, allowing more funds to grow inside the account tax-free.
3. Consider taking your RMDs and factor them into your taxes
RMDs must be taken by the end of the year to avoid paying a 25% penalty.
- Inherited Traditional IRA: If no exception applies to you, the inherited traditional IRA account must be liquidated by the end of the 10th year following the original owner’s death including annual RMDs. This is taxed as ordinary income to you and if not properly planned for, may result in a taxable lump sum distribution.
- Inherited Roth IRA: The rules for inherited Roth IRAs are slightly different, in which the beneficiary must liquidate the account by year 10 following the original account owner’s death. There are no annual RMDs, and the distribution is non-taxable to the beneficiary.
Rules regarding inherited traditional and Roth IRAs can be complex, so please consult with your financial advisor or a qualified tax professional to ensure that you are meeting the appropriate regulatory requirements.
4. Consider charitable giving and annual gifting
If you are charitably inclined, there are a variety of ways to support your favorite organizations prior to year-end.
- Cash donations. For cash contributions, you can deduct up to 60% of your annual adjusted gross income (AGI) for gifts made to a qualifying charity prior to December 31.
- Non-cash donations. For non-cash donations (e.g., appreciated stock gifts and donations to qualifying private foundations or organizations), charitable deductions are usually limited to 30% of your AGI.
- Donor advised fund (DAF). A DAF is a giving account established at a public charity. The 501(c)(3) public charity serves as a “sponsoring organization,” which manages and administers individual DAF accounts.
- Direct donation. Another option is to donate highly appreciated, long-term assets directly to your favorite charitable organizations by listing them as the majority beneficiary.
- Gifting: You can gift up to $19,000 (per recipient) without using your federal estate and gift tax exemption. If you can gift-split with a spouse, you can gift up to a combined $38,000 per recipient per year.
Remember, charitable giving is only deductible for tax purposes if you itemize your return. If you do itemize, consider accelerating your charitable contributions because of new tax law implementations under the One Big Beautiful Bill Act (OBBBA).
5. Consider 529 education savings plan contributions
529 plans are a great way to help loved ones with educational expenses while realizing tax benefits for yourself. Single filers can contribute up to $19,000 ($38,000 if married, filing jointly) per beneficiary without impacting their federal gift tax liability.
The best way to maximize your 529 contributions in a single year is to “superfund” the account. This strategy allows you to make up to five years’ worth of contributions ($95,000 for 2025) all at once to reduce your taxable estate without it counting against your lifetime gift tax exemption.
Year-end is busy for everyone, but making time to evaluate financial goals, progress toward them and opportunities to optimize finances for the year ahead will help your chances of success, now and in the future. Set time now to discuss any of these strategic planning considerations with your financial advisor to set you on the right path for a new year.
Author: With more than 10 years’ experience in financial services, Hope Albu, senior planner, private wealth management at UMB Bank, supports Private Wealth clients as a senior planner. She collaborates closely with clients to understand their personal financial situations and to prepare and present plans that help support their unique goals. With her clients’ best interest in mind, Hope also remains current on financial and tax legislation and monitors for any potential impact. Hope began her career in public accounting and corporate tax, before pivoting toward her lifetime passion—financial planning. She has experience in all areas of planning, including equity compensation, college planning, retirement analysis, portfolio reviews and income tax planning, to develop customized, comprehensive financial plans for her clients. Hope has a Bachelor of Arts in political science and a masters in accounting from George Washington University in Washington, D.C.
