As the year draws to a close, retirees and those nearing retirement have a unique opportunity to reassess their financial strategies and make impactful tax moves before December 31. With several key deadlines and new provisions taking effect in 2025, now is the time to optimize your retirement income, minimize tax liability, and position your assets for long-term success.
At Target Retirement Solutions, we help retirees and pre-retirees navigate the complexities of year-end tax planning, including retirement account management, charitable giving, and leveraging new opportunities like the pooled employer plan Bloomingdale retirees count on.
1. Maximize Retirement Plan Contributions
If you’re still working or have access to a workplace retirement plan, consider maximizing your contributions before the December 31 deadline. For 2025, the limits are:
- 401(k)/403(b)/457 elective deferral: $23,500
- Catch-up contributions (age 50): $7,500
- IRA contribution: $7,000 (deadline: April 15, 2026)
- IRA catch-up (age 50+): $1,000
For those participating in a pooled employer plan in Bloomingdale, check with your plan administrator for any specific deadlines or contribution limits. These plans can offer streamlined administration and cost savings, making them an attractive option for small businesses and their employees.
2. Consider a Roth Conversion
A Roth conversion can be a powerful tool for retirees, especially if you expect to be in a higher tax bracket in the future. By converting funds from a traditional IRA or 401(k) to a Roth account, you pay taxes now and enjoy tax-free withdrawals later.
Important: Roth conversions must be completed by December 31, 2025, to count for the 2025 tax year. This timing also allows you to access the converted funds penalty-free five years from the conversion date.
3. Take Required Minimum Distributions (RMDs)
If you’re age 73 or older, you must take your 2025 RMD by December 31, 2025 (except for your first RMD, which can be delayed until April 1, 2026). Failing to take your RMD can result in a hefty penalty.
For those with a pooled employer plan in Bloomingdale, confirm with your plan provider how RMDs are handled, as rules may vary slightly from traditional plans.
4. Make Qualified Charitable Distributions (QCDs)
If you’re 70½ or older, you can make a Qualified Charitable Distribution (QCD) directly from your IRA to a qualified charity. In 2025, the QCD limit is $108,000.
QCDs can satisfy your RMD and reduce your Adjusted Gross Income (AGI), potentially lowering your tax bill and reducing Medicare premiums.
5. Review Your Health Savings Account (HSA)
HSAs remain a valuable tool for retirees. For 2025, the contribution limits are:
- Self-only: $4,300
- Family: $8,550
- Catch-up (age 55+): $1,000
You have until April 15, 2026, to make 2025 HSA contributions.
6. Prepay State and Local Taxes (SALT)
Starting in 2025, the SALT deduction limit is $40,000 for those who meet income requirements. If your state allows it, consider prepaying your fourth-quarter property taxes before December 31 to maximize your deduction.
7. Leverage the Additional Standard Deduction for Seniors
In 2025, individuals over 65 are eligible for an additional standard deduction of $6,000 ($12,000 if married filing jointly and both spouses are over 65). This enhanced deduction is available through 2028 and can significantly reduce your taxable income.
8. Explore Donor-Advised Funds (DAFs)
For those with higher incomes or large charitable goals, consider contributing to a Donor-Advised Fund (DAF). You can front-load several years of charitable giving in a single year, potentially reducing your tax bill and simplifying future donations.
9. Review Your Estate Plan
With several tax provisions set to change in 2026, now is a good time to review your estate plan. Consider strategies like bunching deductions, accelerating income, or making gifts to take advantage of current exemptions.
10. Stay Informed About Pooled Employer Plans
The pooled employer plan in Bloomingdale is gaining popularity as a cost-effective retirement solution for small businesses and their employees. These plans offer simplified administration, lower fees, and access to professional investment management. If you’re considering a new retirement plan or looking to optimize your current one, a pooled employer plan may be worth exploring.
Final Thoughts
Year-end tax planning is about more than just chasing deductions—it’s about managing timing, rates, and thresholds with precision. By reassessing your retirement accounts, charitable giving, and estate plan before December 31, you can set yourself up for a more secure and tax-efficient future.
At Target Retirement Solutions, we’re here to help you navigate these decisions and make the most of every opportunity.
Ready to optimize your year-end tax strategy? Contact Target Retirement Solutions today for a personalized consultation and discover how we can help you make the most of your retirement years.
