Year-End Retirement Tax Planning: 5 Things to Review Before December 31

Walter had always filed his taxes in April. He only thought about them at the start of April, when he saw the notation on his calendar, treating the other eleven months of the year as a kind of off-season. Walter, a 74-year-old retired postal supervisor, only realized how much that habit was costing him when a friend mentioned reviewing her retirement account withdrawals in November, specifically to avoid a tax surprise the following spring.

Walter had never thought of December as a deadline for anything financial other than late Christmas shopping. It turns out several of the most consequential retirement tax decisions of the year expire on December 31, not April 15.

Here are five areas worth reviewing before the calendar closes.

1.Required Minimum Distributions

A required minimum distribution (RMD) is the minimum amount per year you must withdraw from your IRA, SIMPLE IRA, SEP IRA, or retirement plan accounts. RMDs start once you turn age 73 (for those born in 1951-1959).

For most account holders subject to a required minimum distribution, the deadline to take it is December 31, with a one-time exception allowing a first RMD to be delayed until April 1 of the following year. Missing the deadline carries a real cost: a 25% penalty on the amount not withdrawn, reduced to 10% if corrected within two years.

Anyone turning 73 in 2026 should discuss with their financial professional whether taking the first RMD this year or delaying it makes more sense, since delaying can mean two taxable distributions landing in the same tax year.

2.Roth Conversion Considerations

Converting a portion of a traditional IRA to a Roth IRA before year-end may make sense in a year when income is temporarily lower than usual, since the converted amount is taxed at your current rate rather than a future, potentially higher one. This decision depends heavily on your current tax bracket, your expected future bracket, and how a conversion might affect Medicare’s income-related premium surcharges two years down the line. It is not a decision to make in isolation from the rest of your tax picture.

3.Investment Gains and Losses

Tax-loss harvesting remains one of the more actionable year-end moves. It involves selling an investment in a taxable brokerage account at a loss to offset gains realized elsewhere. If losses exceed gains, up to $3,000 of the net loss can generally be used to offset other income each year, with unused losses carried forward to future years.

This is worth reviewing account by account rather than assuming a portfolio’s overall performance tells the whole story.

4.Charitable Giving Strategies

For anyone 70½ or older, a Qualified Charitable Distribution (QCD) allows a direct transfer from an IRA to a qualifying charity, up to $111,000 per person in 2026, without the qualifying amount being included in taxable income.

A QCD can also satisfy all or part of an individual’s RMD for that year. This means that a retiree who makes qualified charitable donations can meet their RMD obligation without including that portion of the distribution in taxable income. The CRS uses this example: “An individual who is required to take a distribution of $5,000 in a year may elect to make a QCD of $3,000 so that the individual has to withdraw only the remaining $2,000 and include it in taxable income.”

It’s important to note that the distribution transfer must be made directly from the IRA trustee or custodian to the eligible charity and must be completed by year-end to count for that tax year.

5.The Medicare Premium Connection

When thinking about their year-end tax checklist, many people forget to put Medicare on the list. However, Medicare premiums can be affected by income-related decisions.

A Medicare recipient’s modified adjusted gross income from two years prior determines whether they pay a surcharge on Medicare Part B and Part D premiums. This is called the Income-Related Monthly Adjustment Amount (IRMAA). A large Roth conversion or an unusually large capital gain realized this year could raise Medicare premiums in 2028, which is exactly the kind of two-year lag that makes year-end tax planning different from ordinary tax filing.

Why This Belongs in One Conversation, Not Five

“Each of these five tax planning items affects how you evaluate the other four—which is exactly why they need to be looked at together rather than crossed off a list one at a time,” says Scott Ente, Senior Vice President, Investments at David Lerner Associates.

“A Roth conversion can change your RMD math. Your RMD can affect whether a QCD makes sense. Your capital gains affect your Medicare premium two years out. None of this works well as five separate decisions made in isolation.”

For most year-end tax moves, December 31 is a completion deadline, which means withdrawals, conversions, trades, and donations must actually be finalized by the end of the year to count for 2026, not just requested or in progress. November is a good opportunity to look at these considerations before the deadline hits, so there is time to make the most out of potential tax savings.

What Walter Did Before December 31

Walter’s review turned up a modest tax-loss harvesting opportunity in his brokerage account and confirmed his RMD timing made sense given his current income. He also learned about the QCD option for the first time and used it to direct part of his RMD to a local charity he had supported informally for years, without adding to his taxable income. None of them required a dramatic strategy shift. It required treating December as a deadline worth paying attention to, rather than eleven months of preamble before tax season finally arrived.

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Material contained in this article is provided for information purposes only. It is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. These materials are provided for general information and educational purposes, based on publicly available information from sources believed to be reliable. We cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

The subject of this article is fictitious and created for illustrative purposes only. It is based on events of a similar nature and should not be interpreted as a direct depiction of any specific individual, organization, or incident. Any resemblance to actual persons, living or deceased, or actual events is purely coincidental.

David Lerner Associates does not provide tax or legal advice.