3 Smart Tax Moves to Make Before December 31

The last few weeks of the year have a way of making people reflect a little more than usual. Many retirees look at their financial accounts and feel that familiar tug: Did everything land the way I hoped? December tends to bring clarity. You can suddenly see what went according to plan and what needs adjusting before the calendar flips. And because retirement income is so tied to timing, these final weeks often open the door to a few moves that can protect your taxes and strengthen next year’s cash flow.

A lot of pre-retirees and retirees face the same year-end pressures—Required Minimum Distributions, market changes, healthcare costs, and questions about how much income to pull. And yet December is one of the best months to tighten things up. Not with major overhauls, but with small, smart decisions that only work if they’re handled before December 31. Once the year is over, the window closes.

Here are three tax-focused steps many retirees take in December to keep their finances steady and predictable.

1. Double-Check Your Required Minimum Distributions

RMDs catch more retirees off guard than almost any other rule. Some assume their custodian already took care of it. Others think they withdrew enough earlier in the year, only to find out the total came up short. Discovering that in January can lead to penalties and a stressful start to tax season.

A quick year-end review is often all it takes to avoid those headaches. Many retirees prefer taking their RMD in smaller amounts through the year—it feels smoother and easier to budget. Others choose to take the whole amount near year-end so they know exactly where they stand. Either approach works, but the important part is confirming nothing was missed.

For retirees who don’t need the RMD for monthly spending, this is a great moment to look at alternatives. Some use a Qualified Charitable Distribution to send part of the RMD directly to a charity, keeping that amount out of taxable income. That can help lower Medicare premium surcharges and reduce overall taxes. Others choose strategies that shift the RMD into a more controlled income plan, especially when thinking about a spouse who may eventually rely on that income alone.

If there’s any question about whether your RMD was handled correctly—or if keeping the tax impact lower is a priority—it’s worth having that conversation now. After December 31, the options become extremely limited.

2. Review Potential Tax-Loss or Tax-Gain Opportunities

Markets don’t move in clean, predictable lines, and retirees often reach December feeling unsure whether their investments helped or hurt their tax picture. This month is the final chance to look at gains and losses that haven’t been realized yet—and decide if action could help soften the tax bill.

Tax-loss harvesting is one approach many retirees use. When an investment is down, selling it can generate a loss that offsets gains taken earlier in the year. This can reduce taxes, create room to reposition your portfolio, and open the door to adjusting holdings without as much tax friction.

But there’s another side retirees sometimes overlook. Some years bring lower-than-expected income—perhaps Social Security hasn’t started yet, or RMDs aren’t required until the following year. In those windows, realizing some gains can lock in profits at a gentler tax rate. Those opportunities often disappear once additional income sources push someone into a higher bracket.

Either direction—loss harvesting or gain harvesting—needs to be intentional. December is also a natural time to check whether the portfolio still matches the life you’re living now. Many retirees drift into more risk than they want simply because the markets were strong for long stretches. Others sit in overly conservative positions that don’t support income needs long term. A year-end review can help realign things in a way that eases both taxes and stress, giving you a clearer picture of where you actually stand.

The timing matters. If gains or losses aren’t realized before the year ends, they simply won’t count. A short conversation with an advisor can reveal opportunities that might otherwise slip by unnoticed.

3. Revisit Your Withholding and Project Next Year’s Income

Withholding tends to be one of those “set it and forget it” items—until it isn’t. In retirement, income can shift more than people expect. RMDs start. Medicare premiums change. Investment withdrawals adjust based on the markets or spending needs. A setup that seemed fine in spring can look completely different by December.

A lot of retirees only discover an issue when they file their return months later. Sometimes it’s a surprise bill. Other times it’s a Medicare surcharge that could have been avoided with a small tweak. These surcharges—officially called Income-Related Monthly Adjustment Amounts, or IRMAA—can add hundreds of dollars per month to your Medicare Part B and Part D premiums if your income crosses certain thresholds. A quick year-end review helps catch those shifts early.

One of the simplest and most helpful steps is projecting what next year’s income might look like. It doesn’t need to be perfect. Even a rough estimate can show whether you’ll bump into a different tax bracket, trigger extra Medicare costs, or need to adjust withdrawals. With that information, you can update withholding or estimated payments so the coming year feels smoother and more predictable.

This kind of review is especially meaningful for couples. When one spouse passes away, the surviving spouse moves into single filing, which often creates a higher tax burden on the same income. Planning for that possibility in advance—rather than reacting to it—can protect the surviving spouse from a sudden, unnecessary tax strain.

Year-end withholding adjustments aren’t exciting, but they create stability. Predictable cash flow and fewer tax surprises go a long way in keeping retirement free from avoidable stress.

A Thoughtful Finish to the Year

December has its own rhythm—family visits, travel, holiday plans—but setting aside time for a few focused financial steps can create a calmer, more confident start to the new year. These strategies don’t require major changes. They simply take advantage of the timing and give you more control over your tax picture.

If you’d like help reviewing your RMDs, looking at tax-savings opportunities, or planning next year’s income, this is a great moment to do it while the year’s still open.

For support, schedule a conversation with Barb Swiatek or call 719.597.2179. Barb can walk you through these decisions with clarity, care, and a plan that fits your retirement goals.