Nov 30, 2023 By Gary Boatman 4 min read

This week we are going to discuss some financial things you should consider before the end of the year. As you read this, there are only about five weeks left and many financial companies work with skeleton crews during the holiday. This means time is of the essence, and any financial considerations should be undertaken as soon as possible.

First, make sure you have taken required minimum distributions from qualified accounts. Qualified accounts are things such as IRAs, 401(k)s and other pre-tax accounts. Failure to do so will cause a 25% penalty. Before changes in Secure Act 2.0, the penalty was 50%. That is one of the highest penalties in the IRS code. Remember the Secure Act 2.0 also changed the age for required minimum distributions (RMDs) to the year you reached your 73rd birthday. It does not matter if your birthday is Jan. 1 or Dec. 31, you must withdraw money and pay taxes.

You also should have completed your selection of Medicare supplement policies by Dec. 7. People on Advantage plans have some options until the end of March. Make sure your choices match your health profile. Making the right choice can lower your out-of-pocket health care expenses.

People with large qualified balances might want to consider whether to do a Roth conversion. This is when you convert some pre-tax money to a Roth by paying the tax now. This might be a good strategy if you believe tax rates will increase in the future. Also, it is beneficial if you estimate you have some unused room in your tax bracket. An example of this might be that you are married and filing jointly and your taxable income is $75,000. You would have $6,050 left in the 12% tax bracket. If you are never going to earn less, why not convert this to a Roth? It may never be cheaper taxwise.

You may want to do some charitable giving. Whether you get a tax deduction depends on if you itemize or not when filing your tax return. Most people do not itemize. If you are making contributions that are tax deductible or not, be sure you are giving to a reputable charity. Most are registered with the IRS as 501(c)(3). You can also check websites such as Charity Navigator. People over 70 ½ who have large qualified balances that they do not need, might want to consider qualified charitable distributions (QCD). This allows you to give some pre-tax money to charities with money that taxes have not been paid on. While you do not get a deduction, it can lower future taxable RMDs. It is important to note, you can do QCDs at 70 ½ even though you do not need to start RMDs until age 73.

Make sure you have completed planned contributions to your 401(k) and IRA. If you get a match from your employer, be sure you have contributed enough to get the maximum. Free money is hard to beat. Try not to have all of your savings in qualified accounts. Having some in Roth’s and post-tax accounts helps to eliminate tax time bombs when retiring.

It may be a good time to see if you need to reallocate your investments. Not all of them grow at the same rate of return, so this is a good time to check your portfolio. Your risk tolerance may have changed because you are a year older, or some other facet of your life has changed. You may also be able to do some tax harvesting to lower your tax bill.

Space does not allow a complete list of things to review, but the above is a good starting point. Finances are always changing so the process is not a set-it-and-forget-it situation. Make sure your plan is stress tested.

To help your family take advantage of all the opportunities, we have developed a 57-point check list of last-chance steps to consider before Dec. 31. To get a copy, please email gary@BoatmanWealthManagement.com.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”