Retirees Must Act Now: Year-End Checklist for Financial Health

URGENT UPDATE: As the year draws to a close, retirees are urged to finalize critical financial decisions. With the deadline for Medicare open enrollment approaching on December 7, it’s essential to review your healthcare coverage options now. This window offers a vital opportunity to reassess prescription drug and Medicare Advantage plans, ensuring your healthcare needs are met in 2025.

Retirement planning requires immediate attention, particularly in evaluating your portfolio spending rate. Retirees should calculate their 2025 withdrawal rate by dividing their portfolio balance at the year’s start by estimated spending, including taxes. Adhering to the 4% guideline is a good starting point, but those further in retirement may safely increase their withdrawal percentage up to 7% if their spending horizon is shorter.

Additionally, required minimum distributions (RMDs) must be taken by those aged 73 and over by December 31. This year, consider using your RMDs not just to comply with tax laws but as a chance to clean up your portfolio. Unwanted stocks in your IRA can be liquidated for RMDs, streamlining your investment strategy.

As you prepare for the upcoming year, assess your cash reserves. It’s recommended to hold a liquid buffer equivalent to at least six months and no more than two years of withdrawals. This strategy protects against market downturns, particularly in volatile times like 2022 when both stocks and bonds fell simultaneously.

Retirees should also tie charitable contributions into their financial plans. If you are over 70.5 years old, consider utilizing qualified charitable distributions (QCDs) to donate appreciated assets from your IRA without incurring taxes. The QCD limit has been adjusted for inflation, now standing at $108,000 for 2025, allowing you to satisfy RMD requirements while supporting your favorite charities.

Tax-loss selling may not be as beneficial now compared to previous years, but it can still offer advantages. Investors with individual stocks can sell underperforming positions to offset capital gains or up to $3,000 in ordinary income.

As we approach the year’s end, retirees must act swiftly to ensure financial stability and compliance with tax regulations. Review your portfolio, assess healthcare needs, and strategically plan charitable giving to optimize your financial health as 2025 approaches. Share this information to help fellow retirees navigate these crucial year-end tasks effectively.