Year-End Financial Moves: What to Do Before December 31

What financial moves actually have a December 31 deadline?

Four moves are true December 31 deadlines: completing a Roth conversion for the current tax year, taking your Required Minimum Distribution, harvesting tax losses, and making payroll-based 401(k) and HSA contributions. Miss the date and the opportunity is gone for the year. A few others, like IRA and HSA contributions, run until the April tax-filing deadline.

The reason year-end matters is simple: most of these levers are tied to the calendar year your income lands in. By late in the year you can finally see your real taxable income, which means you can size a Roth conversion or a charitable gift to the dollar instead of guessing. I look at this window with clients every fall, because the same move made on December 30 versus January 2 can land in two different tax years.

Should you do a Roth conversion before year-end?

A Roth conversion moves money from a pre-tax IRA or 401(k) into a Roth, and you pay income tax on the amount converted this year in exchange for tax-free growth and withdrawals later. December 31 is the cutoff because a conversion counts in the year you complete it. The art is filling the rest of a low tax bracket without spilling into the next one.

The lower-income years between your last paycheck and the start of Required Minimum Distributions are the sweet spot. There is a catch worth knowing: conversions raise your income, and Medicare looks back two years to set your premiums, so a large conversion at 63 can raise your IRMAA surcharge at 65. I walk through that trade-off in detail in the Roth conversion window before 62 and IRMAA.

Before you convert, it helps to see the tax on a specific amount. You can model a conversion against your own bracket to find the number that fills the bracket without overshooting.

Hypothetical illustration only, not a projection of actual results. Figures assume the stated inputs and returns, which are not guaranteed; your outcome depends on your contributions, investment returns, tax rates, and time horizon. Past performance does not guarantee future results.

Have you taken your RMD? The deadline with a real penalty

If you are 73 or older, your Required Minimum Distribution must be out of the account by December 31, and this is the one year-end deadline with teeth. Miss it and the penalty is 25% of the shortfall, cut to 10% if you fix it promptly. That is down from the old 50% penalty under SECURE 2.0, but it is still the most expensive box to leave unchecked. See the IRS RMD FAQs for the mechanics.

One nuance: your very first RMD can be delayed to April 1 of the following year, but doing that stacks two RMDs into one tax year, which often pushes you into a higher bracket. Inherited IRAs have their own timing under the 10-year rule. If you are unsure of the amount, you can estimate your RMD here.

If you give to charity, there is a better way to satisfy the RMD. A qualified charitable distribution sends money straight from your IRA to a charity, counts toward the RMD, and is excluded from your taxable income entirely. I cover the full mechanics in qualified charitable distributions from an IRA.

Is it worth harvesting tax losses before December 31?

Tax-loss harvesting means selling an investment that is down to realize the loss, then using that loss to offset capital gains and up to $3,000 of ordinary income per year. Losses beyond that carry forward indefinitely. It only works in a taxable brokerage account, and the sale has to settle by December 31 to count this year.

The rule to respect is the wash-sale rule: if you buy the same or a substantially identical security within 30 days before or after the sale, the loss is disallowed. The usual fix is to hold cash for 31 days or move into a similar but not identical fund to stay invested. For a concentrated position in company stock, harvesting losses in the rest of the portfolio can help fund a diversification sale with less tax drag.

Are you maxing the accounts that reset on January 1?

Contribution limits do not roll over. Whatever room you leave unused in your 401(k) or HSA at year-end is gone for good. For 2026, the elective deferral limits are:

A few account-specific notes. The 401(k) deadline is your last paycheck of the year, so if you want to max out, you may need to raise your deferral percentage in November to catch up. The HSA is the most tax-advantaged account there is (deductible going in, tax-free growth, tax-free for medical costs), and you have until the April deadline to finish funding it; confirm the current limit on the IRS HSA page. An FSA is the opposite: it is usually use-it-or-lose-it, so spend the balance before your plan year closes.

If a big Roth conversion or year-end bonus is changing your income, it is also worth a two-minute check on your withholding so you are not surprised in April.

For AT&T employees: the November segment-rate window

If you are an AT&T employee weighing a pension lump sum, year-end carries a second deadline that has nothing to do with taxes. The lump-sum value is set using IRS segment rates, and the plan locks in a rate from a specific fall lookback for the next plan year. When rates rise, the lump sum falls, so the timing of when you retire relative to that reset can change the payout by a meaningful amount.

This is not a reason to rush an irreversible decision, but it is a reason to run the numbers before the window closes. You can estimate your lump sum here, and I walk through the timing in AT&T pension segment rates and lump-sum timing.

Charitable giving: bunching, appreciated stock, and donor-advised funds

With the higher standard deduction, many people no longer itemize every year, which quietly erases the tax benefit of their giving. Bunching fixes that: you combine two or three years of gifts into one year, itemize that year, and take the standard deduction in the off years. A donor-advised fund makes bunching practical, because you take the full deduction the year you fund it and grant the money to charities over time.

The other move is what you give. Donating appreciated stock you have held over a year, rather than cash, lets you deduct the full market value and skip the capital-gains tax you would owe if you sold it. For anyone holding concentrated company stock, this is one of the cleaner ways to trim the position. I cover the mechanics in donor-advised funds for high earners.

Your year-end checklist, by deadline

A short version to work down before the year closes:

• By your last paycheck: raise your 401(k) deferral if you are short of the limit.
• By December 31: take your RMD (or satisfy it with a QCD), complete any Roth conversion, harvest tax losses, and make charitable gifts for this tax year.
• By December 31 (plan-specific): spend down your FSA.
• Before you retire, if AT&T: check the segment-rate window against your lump sum.
• By the April filing deadline: finish IRA and HSA contributions for the year.

None of this requires an advisor to execute. Where I add the most value is sequencing: deciding how large a Roth conversion should be given your bracket, your future RMDs, and your Medicare surcharges, all at once, so one move does not quietly cost you on another.

Frequently asked questions

What are the most important year-end financial deadlines?

December 31 is the hard deadline for a Roth conversion to count in the current tax year, for taking your RMD, for tax-loss harvesting, and for payroll-based 401(k) and HSA contributions. IRA and HSA contributions can still be made until the April filing deadline.

What happens if you miss your RMD by December 31?

The penalty is 25% of the amount you failed to withdraw, reduced to 10% if you correct it promptly, down from the old 50% penalty under SECURE 2.0. RMDs begin at age 73.

Why do a Roth conversion at year-end instead of earlier?

A conversion counts as income in the year you complete it, so December 31 is the cutoff to use this year brackets. Year-end is also when you can see your full taxable income and fill a bracket precisely rather than guessing in the spring.

Can you still lower your taxes after December 31?

A few moves remain: prior-year IRA and HSA contributions run until the April deadline. But the largest levers, Roth conversions, RMDs, tax-loss harvesting, and 401(k) deferrals, all close on December 31.