Year-End Tax Moves for Retirees: What to Do Before December 31
Why October Is the Right Time for This Conversation
Year-end tax planning isn't a December task. By the time December arrives, some of the most valuable moves are difficult to execute, and a few are impossible to reverse.
October gives you time. Time to review your income, model your options, coordinate with your advisor, and make decisions without the pressure of a looming deadline.
Here are the moves most worth reviewing before December 31.
1. Take Your Required Minimum Distribution
If you turned 73 before 2025 (or 75 if born in 1960 or later, per SECURE 2.0), you are required to take a minimum distribution from your traditional IRA, 401(k), 403(b), and most other pre-tax retirement accounts before December 31.
Missing your RMD carries a 25% excise tax on the amount you should have withdrawn, one of the steepest penalties in the tax code. First-time RMD takers may delay until April 1 of the following year, but this creates a double-distribution year with higher tax consequences.
If you're charitably inclined, a Qualified Charitable Distribution (QCD) lets you send up to $111,000 directly from your IRA to a qualified charity in 2026. The distribution satisfies your RMD, counts as a charitable gift, and never appears as taxable income on your return. For many retirees, this is one of the most tax-efficient giving strategies available.
2. Consider a Roth Conversion
If you've retired but haven't started taking RMDs yet, you may be in one of the lowest tax brackets you'll be in for the rest of your life. Earned income is gone. Social Security may not have started. Investment income is manageable. This window, the years between retirement and the start of required distributions, is one of the best times to consider converting traditional IRA funds to a Roth IRA.
The strategy: convert just enough to fill your current tax bracket without pushing into the next one. Pay taxes on the conversion today at a lower rate. Qualified withdrawals from the Roth account in the future, including all the growth, come out completely tax-free.
A $100,000 conversion growing at 7% for 20 years becomes roughly $387,000 in completely tax-free money. The compounding effect on tax-free growth is significant over a long retirement.
One important caveat: Roth conversions count as income for IRMAA purposes, which affects your Medicare premiums two years later. This is why modeling the conversion amount carefully, and coordinating with your advisor, matters more than simply converting as much as possible. (See our guide on healthcare planning in retirement for more on IRMAA.)
Roth conversions must be completed by December 31 to count for the 2026 tax year. Unlike IRA contributions, there is no extension to April 15.
3. Review Capital Gains and Losses
If you hold investments in taxable brokerage accounts, reviewing your unrealized gains and losses before year-end gives you an opportunity to manage your tax bill.
Tax-loss harvesting, selling investments at a loss to offset gains realized elsewhere in the portfolio, can reduce the taxes owed on those gains. Losses beyond your gains can offset up to $3,000 of ordinary income per year, with any remainder carried forward to future years.
The wash-sale rule prohibits repurchasing the same or substantially identical security within 30 days before or after the sale, so planning the timing matters. Your advisor can help you identify harvesting opportunities while keeping your portfolio's overall allocation intact.
4. Max Out Your Retirement Accounts
The deadline for 2026 IRA and Roth IRA contributions is April 15, 2027, but 401(k) and 403(b) must be made through payroll by December 31. If you have room to increase contributions before year-end, open enrollment (which runs through October and November for most employers) is the time to adjust.
For 2026: the 401(k) and 403(b) limit is $24,500 ($32,500 with catch-up at 50+; $35,750 for ages 60-63). The IRA limit is $7,500 ($8,600 with the increased catch-up for 50+ under SECURE 2.0).
5. Review Your Withdrawal Strategy
If you're drawing income from multiple accounts a traditional IRA, a Roth IRA, a brokerage account, and Social Security, the order in which you take those withdrawals has real tax consequences.
Generally, spending from taxable accounts first allows tax-deferred accounts to keep growing. But the right sequence depends on your total income picture, your RMD situation, and your Roth conversion plans. There's no universal answer, which is why an annual review of your withdrawal strategy is worth building into your planning calendar.
How These Pieces Connect
The moves above don't exist in isolation. A Roth conversion affects your IRMAA calculation. A QCD reduces your taxable income. A tax-loss harvest affects your after-tax return. Getting the most out of year-end planning means looking at these decisions together rather than one at a time.
This is the kind of coordination that a fiduciary financial advisor, one who is legally required to act in your best interest, is well-positioned to help with.
Frequently Asked Questions
What is the deadline for a Roth conversion in 2026?
December 31, 2026. Unlike IRA contributions, Roth conversions cannot be extended. The amount converted by December 31 is what counts for the 2026 tax year.
Can I do a Roth conversion and still take my RMD?
Yes, but your RMD must be taken first. You cannot convert an RMD amount to a Roth IRA, the required distribution must come out as a taxable withdrawal before any conversion begins.
What is a Qualified Charitable Distribution?
A QCD is a direct transfer from your IRA to a qualified charity. It satisfies your RMD, counts as a charitable gift, and is excluded from your taxable income. The 2026 limit is $111,000 per person. You must be 70 and a half or older to use a QCD.
How do I know if a Roth conversion makes sense for my situation?
The answer depends on your current tax bracket, projected income in retirement, RMD timeline, Medicare premium status, and estate planning goals. This is a calculation worth running with your advisor before acting.
Planning Now, Paying Less Later
The best tax strategy for retirement isn't about finding loopholes. It's about making intentional decisions before the window closes.
At Menne Financial, we work with families in Simi Valley and throughout California who want their financial plan to be as tax-smart as it is thoughtful. If you'd like to talk through your year-end options, we're here.
Sources:
IRS Notice 2025-67: 2026 QCD Limit
www.irs.gov | Internal Revenue Bulletin 2025-49
IRC §408(d)(8): Qualified Charitable Distribution Rules
www.irs.gov | IRS Publication 590-B
IRC §4974 (as amended by SECURE 2.0): RMD Penalty
www.congress.gov | IRS Publication 590-B
SECURE 2.0 Act of 2022: RMD Age Changes
IRS Publication 590-A: Roth Conversion Rules
www.irs.gov/publications/p590a
IRC §1091: Wash-Sale Rule
IRC §1211(b): Capital Loss Deduction limit
