Against the Clock: 10 Financial Actions to Complete Before December 31
It may be getting cold outside, but when it comes to financial moves, freezing up can lead to a lot of extra time and effort down the road.
Before the clock strikes midnight on December 31, there are key financial actions you can make to minimize taxes, strengthen savings, and ensure your investment strategy remains on track. It’s also an ideal moment to review your financial goals, check for potential oversights, and identify opportunities for improvement.
Here are ten essential financial steps to wrap up 2025 with confidence and prepare for a successful 2026.
1. Review Your Investment Portfolio in Detail
Start by taking a close look at how your portfolio performed throughout 2025.
Compare your asset mix (stocks, bonds, and cash equivalents) against your original targets. Market volatility during the year may have altered your allocations, and rebalancing before year-end can help restore your intended risk level.
“Go beyond performance numbers and evaluate the quality and diversification of your holdings,” says Michael Norton, Senior Vice President, Investments at David Lerner Associates, Inc.
“Think of it as looking under a financial microscope—evaluating sector exposure, international balance, and fees associated with your investments. This review ensures your strategy remains consistent with your long-term objectives rather than short-term market trends.”
Your investment counselor can also help identify underperforming assets that may no longer serve your goals.
2. Maximize Retirement Contributions While You Can
If you participate in a 401(k), 403(b), or IRA, confirm that you’re contributing as much as possible before year-end. The annual contribution limit for employees in 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan is $23,500. The annual IRA contribution limit remains at $7,000 for 2025.
Taking advantage of the full amount can significantly enhance your retirement savings. These contributions also reduce your taxable income for the current year, creating a double benefit.
If you are age 50 or older, do not forget to use catch-up contributions. The catch-up contribution limit for employees aged 50 and older who participate in most 401(k), 403(b), governmental 457 plans & the federal government’s Thrift Savings Plan is $7,500 for 2025. If you are age 60–63 in 2025, the higher 401(k) catch-up limit is $11,250.
This is an additional amount allowed by the IRS to help those nearing retirement boost their savings. Even small increases now can compound meaningfully over time. For those with Roth accounts, review your contribution strategy to ensure it aligns with your expected tax bracket in retirement.
3. Use Flexible Spending Account (FSA) Funds Wisely
FSAs are tax-advantaged benefits structure that operate under the “use it or lose it” rule, meaning unused funds may be forfeited when the year ends.
The health FSA contribution cap is $3,300 for 2025, with a $660 carryover if your plan allows it. Check your balance early and plan how to spend remaining dollars. Consider scheduling medical appointments, updating eyeglasses, or purchasing eligible health-related items such as first-aid supplies and prescriptions. Some employers provide a short grace period into the next year, but it’s better not to rely on it.
For families, remember that dependent care FSAs also follow similar rules. Paying for qualifying childcare or after-school expenses before year-end ensures that valuable funds do not go to waste.
4. Evaluate and Optimize Charitable Giving
Charitable donations are one of the most effective ways to give back while reducing taxable income. Review your contributions for 2025 to ensure all are properly documented. If you plan to make additional gifts, confirm that donations are made to IRS-recognized 501(c)(3) organizations.
You may also consider advanced giving strategies. For example, donating appreciated stock allows you to avoid capital gains tax while still claiming the full value as a deduction. Setting up or contributing to a donor-advised fund enables you to make a large donation now and distribute funds to charities over time.
If you’re 70½ or older, a Qualified Charitable Distribution (QCD) from your IRA can satisfy required minimum distributions (RMDs) while excluding the amount from taxable income.
4.Check Tax Withholding and Estimated Payments
A year-end review of your tax situation can prevent unpleasant surprises during filing season. Compare your current withholding amounts against your projected tax liability. If you received a large refund last year, you may be overpaying throughout the year; if you owed money, you might need to increase withholdings or make an estimated payment.
For self-employed individuals or those with investment income, ensure your quarterly tax payments are up to date. Making an additional payment before December 31 can help avoid penalties and interest. Reviewing these details now keeps you compliant and helps smooth your cash flow into the next year.
5.Use Tax-Loss Harvesting to Manage Gains
If some investments underperformed this year, consider realizing those losses to offset capital gains.
Tax-loss harvesting can help reduce your taxable income and keep your portfolio efficient. For example, selling a declining stock can offset gains from another investment that performed well. You can reinvest the proceeds in a similar (but not identical) security to maintain your market exposure.
Before acting, consider discussing your plan with an investment counselor to ensure it fits within IRS wash-sale rules and aligns with your long-term objectives. When executed carefully, this strategy can provide measurable tax benefits without derailing your investment growth.
5. Review and Update Insurance Coverage
Major life events such as marriage, the birth of a grandchild, or retirement may require changes to your insurance coverage. Review your life, health, disability, and property policies to ensure they still meet your needs. Check that beneficiaries on all policies are current and reflect your intentions.
It is also worth reviewing long-term care insurance and umbrella liability coverage. These policies can protect your wealth and reduce future risks. Small policy updates today can prevent significant complications later.
6. Confirm Required Minimum Distributions (RMDs)
If you are age 73 or older, you must take your RMDs from eligible retirement accounts by December 31 (or April 1 for your first RMD) to avoid a 25% penalty on the amount not withdrawn. Even if you don’t need the income, completing this step is critical for compliance. You can also use your RMD for charitable purposes through a Qualified Charitable Distribution, which may lower your taxable income.
If you turned 73 this year and took your first RMD by the April 1, 2025, deadline, be sure to complete your second distribution by year-end. Coordinating these withdrawals with your investment counselor ensures they are managed efficiently and strategically.
7. Update Your Estate Planning Documents
A comprehensive financial review includes revisiting your estate plan.
Check that your will, trusts, and power of attorney documents remain accurate. Update beneficiary designations on accounts and review the structure of any trusts. If your family or assets have changed significantly in 2025, your documents should reflect those updates.
Even small changes such as adjusting guardianship for minors or updating healthcare directives can make a major difference for your loved ones. Consider storing your updated documents in a secure, easily accessible location.
8. Set Clear, Achievable Financial Goals for 2026
Before the year ends, take time to plan what you want to accomplish in 2026.
Identify short-term goals, such as increasing savings contributions, and long-term goals, such as preparing for retirement or a major purchase. Write them down and set specific milestones to track progress throughout the year.
Your investment counselor can help you translate these objectives into a concrete action plan. By entering the new year with measurable goals, you are more likely to stay on track and achieve meaningful results.
Conclusion
Completing these ten year-end financial actions can help you end 2025 on solid ground and begin 2026 with renewed confidence. Taking time now means fewer surprises later and a smoother path to achieving your goals.
If you want help prioritizing which year-end financial actions will make the greatest impact, speak with us at David Lerner Associates. We can review your financial plan, assess your tax efficiency, and help you prepare for a financially stronger 2026.
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. David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s circumstances. Each taxpayer should seek independent advice from a tax professional based on his or her circumstances.