Five Tax Moves Retirees Should Consider Before Dec. 31
Now is the prime time to start thinking about optimizing your Roth conversions, RMDs, capital gains, Medicare premiums and charitable giving before the end of the year.

For me, the dread of tax season truly arrives when I start receiving 1099s, W-2s, 1098s, etc., in February. It’s time to gather everything, fill out a painful spreadsheet and write a check to my CPA. The fourth quarter, on the other hand, is fun. This is when you can be strategic. A tax puzzle emerges with, sometimes, very favorable, or very unfavorable, results. The fourth quarter is for tax planning, not tax reporting.
I realize that I’m in the minority in thinking that tax planning is fun. However, the things you do before Dec. 31 are typically what save you the bigger dollars. And saving bigger dollars is fun for everyone.
Here are five things retirees should consider before Dec. 31:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Roth conversions ‘in the valley’
The valley is the period between when you retire and when your income streams increase again from Social Security and required minimum distributions (RMDs). The earlier you retire, the more you can live off cash, and the longer you delay Social Security benefits, the bigger this opportunity becomes.
Essentially, during your working years, the largest drivers of your taxable income are your wages and any other business income. When you retire, your taxable income, and thus your tax rates, fall. When you turn on Social Security and start taking distributions from retirement accounts, it pops back up. Hence, “the valley.”
During this time, you can move money from pre-tax retirement accounts into Roth IRA accounts and pay taxes at your current rate. If you think your current rate is lower than your future rate will be, you should work with a professional to evaluate this strategy.
2. Realizing capital gains
If you’d had a crystal ball and invested $1 million at the bottom of the market in 2009, closed your eyes and woken up today, you’d have over $6 million. Few people were that fortunate. However, it is fair to say that the longer you’ve held on to your stocks in taxable accounts, the larger the unrealized gains.
As in the strategy above, you may have a tax valley in your retirement years that allows you to sell some of those winners without paying taxes. Most people understand that we have different income tax brackets. Most people don’t know that we have different capital gains tax brackets. Most people will pay 15% federal capital gains. However, if you fall into the 10% or 12% income tax bracket, you pay 0% capital gains. Once again, consult with your tax professionals to see what is a viable strategy for you.
3. Evaluate Medicare thresholds
I work with several retired CPAs, and for some reason, the IRMAA letters they get drive them up a wall. IRMAA is an acronym that stands for income-related monthly adjustment amount. In plain English, it makes your Medicare Part B coverage more expensive, sometimes significantly so, if you cross certain income thresholds.
The premium is derived from your gross (not taxable) income two years prior. So, as we evaluate our client planning for year-end, we are thinking about 2025 premiums. Unlike most insurance policies, if you pay the highest premium of $560 a month vs. the lowest premium of $165 a month, you don’t get any more insurance. It pays to stay below the adjustment thresholds.
4. Take RMDs/fund retirement accounts
RMDs represent something you must do. Funding retirement accounts is something you can do. Ironically, you can both take money out of and put it in the same account in the same year. The IRS imposes required minimum distributions from your pre-tax accounts at certain ages, based on the year you were born. You can figure out your RMD age with the table below:
DOB/birth year | First RMD |
---|---|
6/30/49 or earlier | 70½ |
7/1/49-12/31/50 | 72 |
1951-1959 | 73 |
1960+ | 75 |
So, first you must ensure that you take your RMD by Dec. 31. There is an extension in your first year until April 1 of the following year, though this rarely makes sense from a tax perspective.
While you may have to take RMDs, you may still be able to lower your taxable income by contributing to retirement accounts. This seems ironic in an article for retirees. The form we see it take most often is through consulting work, post-retirement. For example, let’s say you are 73 and have $1 million in retirement accounts and had $50,000 in net self-employment income. You could offset almost your entire RMD by funding a solo 401(k).
5. Consider qualified charitable distributions (QCDs)
The deadline for all charitable giving is Dec. 31. This is why more money is donated on Dec. 31 itself than even on Giving Tuesday (the first Tuesday after Thanksgiving in the U.S.). A general rule for those who are 70½ or older is to give from your IRA first, appreciated stock second, cash last. Just like all things in personal finance, what you do should be personal to you.
Giving from your IRA directly allows you to reduce your gross income, not just your taxable income. As noted above, reducing your gross income may reduce your Medicare premium. So, if you are just a few bucks above a threshold, you may give enough to bring you back below it.
related content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
-
Eli Lilly Stock Rises After Profit, Outlook Top Expectations
Eli Lilly stock is higher Thursday after the pharma giant beat fourth-quarter profit expectations and issued strong 2025 guidance. Here's what you need to know.
By Joey Solitro Published
-
Trump Wants You Out of the IRS, But You'll Have to Wait Until May
IRS Some IRS employees won’t be able to resign using the buyout offer until the end of tax season.
By Gabriella Cruz-Martínez Published
-
The Best ROI? Investing in Yourself This Year
If personal growth is something you invest in only after taking care of all other priorities, it's time to turn that mindset on its head. Here's how to start.
By Frank J. Legan Published
-
The Four Worst Mistakes to Make When Selling Your Business
From ignoring potential buyers to failing to consider what you'll do once you've stopped working, here are the key mistakes to avoid when selling a business.
By Evan T. Beach, CFP®, AWMA® Published
-
Five Strategies to Defer Capital Gains in Real Estate Investing
These powerful strategies, from timing your sales during low-income years to leveraging qualified opportunity zones, can defer capital gains taxes on your real estate investments.
By Daniel Goodwin Published
-
Retirement Income Planning for Unfunded Health Care Costs
Retirement income plans often don't include late-in-life health or long-term care expenses. Here's how to cover for the unplanned withdrawals to pay for those.
By Jerry Golden, Investment Adviser Representative Published
-
Federal Employees Buyout Offer: Five Things to Consider
Federal workers have a constellation of retirement benefits, and assessing them can get complicated fast. Here are five high-stakes decisions to focus on.
By Ben Kautz, CFP® Published
-
Insurance Bad Faith After Natural Disasters: What to Know
Understanding the basics of insurance claims after catastrophic losses is important, especially if you encounter insurance bad faith. Here's what to do if that happens.
By H. Dennis Beaver, Esq. Published
-
What the Great Wealth Transfer Means for Financial Advisers
Clients depend on their financial advisers to encourage them to tackle estate planning and guide them through complex strategies and potential family disputes.
By Doug Sherry, JD Published
-
Five Reasons Not to Give Your Child Power of Attorney
When drawing up powers of attorney, older parents will most likely name adult children as their representatives. But is that always the smart choice?
By Peter Newman, CFA Published