Smart Money Moves to Make Before Year End

The last weeks of the year are a good time to clean up your financial life. A little attention now can boost your retirement savings, trim your future tax bill and set you up to start next year in better shape.

Here are practical year-end actions to consider, especially if you are focused on retirement and taxes.

Max out retirement contributions

Check how much you've contributed so far to your retirement plans. If your budget allows, consider increasing the amount for the remainder of the year.

Contributions to traditional 401(k)s and similar plans are pre-tax, which can reduce your taxable income for this year. If you also contribute to a traditional IRA, depending on your income, those contributions may be deductible as well.

Even if you can't reach the maximum allowable contribution, a small bump to your savings rate now can make an outsized difference due to compounding over time.

Use your FSA and consider boosting your HSA

If you have a flexible spending account (FSA), check your remaining balance and make sure you aren't leaving money unspent that may be forfeited. You may still have time to schedule medical or dental appointments or purchase eligible items.

If you have a health savings account, year-end is a good time to increase contributions. HSAs are powerful long-term savings tools because contributions are pre-tax, the account grows tax-free and withdrawals for eligible medical expenses are not taxed.

Take required minimum distributions if obligated

If you're 73 or older, you may have to take required minimum distributions from certain retirement accounts before Dec. 31.

If you don't, you may be subject to penalties. If you don't need the income and you give to charity, you may want to consider making charitable donations directly from your IRA, which may help reduce taxable income.

Review investments for tax-efficient gains or losses

Look over your taxable investment accounts and consider whether tax-loss harvesting makes sense for you this year. Selling losing investments can offset gains from other investments, and you may be able to deduct up to $3,000 of any remaining losses against your regular income.

Conversely, if you're in a lower tax bracket for 2025 than usual, it may make sense to harvest gains by selling investments that have increased in value, locking in the gain while paying a lower tax rate.

Consider a Roth conversion or backdoor strategy

If your income is lower than normal this year or you expect higher tax rates in retirement, a Roth conversion may be beneficial. That means transferring money from a traditional IRA to a Roth IRA and paying the tax now, so that future withdrawals may be tax-free.

If you are a high-income earner and unable to contribute directly to a Roth due to income limits, a backdoor Roth strategy may be an option. It works like this:

1. You contribute to a traditional IRA (allowed regardless of income).

2. Shortly afterward, convert that contribution into a Roth IRA.

This works because while Roth contributions have income limits, conversions do not.

Make charitable gifts

If you itemize deductions, charitable contributions made before the end of the year can lower your tax bill for 2025.

Even if you don't itemize, some strategies such as donations from retirement accounts may reduce taxable income in other ways. If supporting charities is already part of your financial plan, the end of the year is a good time to execute those gifts.

Review your broader financial picture

This is also a good time to take stock of your overall financial health:

• Check whether your emergency fund is still adequate.

• Review your insurance coverages.

• Make sure your beneficiaries are up to date on retirement and financial accounts.

• If your income, marital status or family situation changed this year, update documents such as your estate plan or medical directives.

Takeaway

The end of the year is a checkpoint, not a crisis. Even if you simply increase your retirement contribution a bit, use up your FSA balance or make one tax-smart investment move, you'll be stepping into next year more prepared and financially secure.

Finally, the above are general ideas, not personal tax or investment advice. Before you act, check with a tax professional or financial adviser who understands your situation.