Year-End Tax Moves for Near-Retirees: Lock In Savings Before December 31
If you’re within five years of retirement, October–December is your prime window to reduce lifetime taxes. Why? You still control your income, you can fill the right brackets on purpose, and you can set up next year’s withdrawals to avoid bracket creep, IRMAA surcharges, and higher taxes on Social Security. Here are the high-impact year-end moves to consider now.
Map your 2025 tax position before 2024 ends
Calculate your “headroom” to the top of your current bracket (e.g., 22%/24%). If you’re below it, you may have room for strategic Roth conversions or capital gain harvesting.
Run a no-action RMD projection: If you did nothing, what would your first RMD be at 73? Would that push you into a higher bracket or IRMAA?
Check IRMAA thresholds: Medicare uses a two-year lookback on MAGI. A $1 overshoot can increase premiums for a full year.
Year-end action list (pick 2–4 that fit)
Planned Roth conversion: Convert IRA dollars up to your target bracket ceiling. Coordinate with capital gains, bonuses, and deductions to avoid accidental spikes.
Capital gains harvest in taxable: Realize gains in the 0% or 15% bracket (where applicable). Pair with loss harvesting to control MAGI and Net Investment Income Tax exposure.
Charitable strategies: • 70½+? Use Qualified Charitable Distributions (QCDs) to give directly from IRAs and reduce taxable income (and future RMDs). • Not 70½ yet? Consider bunching donations this year and using a donor-advised fund to maximize itemization and flexibility.
Social Security coordination: If you plan to convert IRA dollars in the next 12–24 months, delaying benefits can keep provisional income lower and reduce taxes on your benefits.
Portfolio cleanup: Shift tax-inefficient mutual funds in taxable accounts to more tax-efficient holdings before “distribution season” in Nov/Dec.
Withholding tune-up: If you convert this year, adjust withholding or make an estimated tax payment to avoid penalties.
Avoid these year-end gotchas
The December pile-up: Conversions + mutual fund distributions + a one-time bonus can push you over IRMAA and make more SS taxable later. Sequence carefully.
The “almost there” trap: Being $500 under your bracket top? Great. Being $500 over can cascade into higher marginal rates when SS taxation and credits phase-outs kick in.
The missed deadline: Custodians can get swamped in December. Put requests in early to avoid missing the calendar-year cutoff.
30-minute worksheet sprint
Step 1: List accounts by tax type (taxable, traditional, Roth) and current balances.
Step 2: Note your 2024 taxable income to date and your bracket top.
Step 3: Choose one maneuver: • Convert $X IRA to Roth (staying within bracket) • Harvest $X gains and offset with $Y losses • If 70½+, schedule $X in QCDs
Step 4: Set a “no-spike” line: target MAGI that stays below IRMAA threshold and your bracket ceiling.
Step 5: Put a date on the calendar to execute (and a backup date a week earlier).
Bring it together
Year-end planning is where smart savers become smart withdrawers. A coordinated strategy across accounts can lower lifetime taxes and make your money last longer. Start with your bracket map and RMD estimates, then pick one or two moves to complete before December 31.
**This content is for educational purposes and not tax advice. Consult your tax professional.
