As we approach the end of the year, many individuals are reminded of how quickly time passes. For most, closing out 2025 offers a welcome opportunity to reset, refocus, and prepare for a productive year ahead. Before officially welcoming 2026, it is important to take time to evaluate your financial picture and ensure that key planning items are addressed. The following considerations can help position you for a strong start to the new year.
Maximize Your Retirement Contributions
Year-end is an ideal time to review your retirement savings strategy. If you participate in an employer-sponsored plan, confirm that you are contributing enough to receive the full employer match—one of the simplest ways to enhance long-term savings. If you have already maximized the match or do not have access to one, consider increasing contributions to an IRA. Due to the SECURE Act, individuals may continue contributing to a traditional IRA beyond age 70½, as long as they have earned income, and depending on your income, these contributions may be tax-deductible.
If you are required to take a Required Minimum Distribution (RMD), make sure it is taken before year-end. RMDs were waived in 2020 and 2021 but are fully reinstated for 2022 and beyond. Missing an RMD can result in a significant 25% penalty, making timely planning essential.
Evaluate Whether a Roth Conversion Is Appropriate
A Roth IRA can provide long-term, tax-free growth and distribution flexibility. For individuals who do not qualify for direct Roth contributions, a “backdoor” Roth conversion—contributing to a traditional IRA and converting those funds—may be worth exploring. However, this strategy increases taxable income for the year and is not appropriate for everyone. Your financial advisor can help determine whether a conversion aligns with your broader goals and tax strategy.
Review Your FSA and HSA Balances
Flexible Spending Accounts (FSAs) typically follow a “use-it-or-lose-it” structure, so review your balance and use remaining funds on eligible expenses before year-end. Health Savings Accounts (HSAs) roll over annually and offer unique tax advantages, making them valuable long-term savings tools. This is also a good time to review 2026 contribution plans and anticipate upcoming medical expenses, such as orthodontics, vision care, or planned procedures.
Update Your Estate Planning Documents
Uncertainty in recent years has prompted many individuals to revisit their estate plans. Ensure that your medical and financial POAs are up-to-date and that the individuals named still carry your wishes. Also, review your Last Will and Testament. Even with beneficiary designations in place, a will helps to prevent unintended gaps and ensures your final intentions are honored.
Reassess Your Financial Goals
Financial planning is ongoing. Revisit the goals you set at the beginning of 2025 and evaluate your progress. If adjustments are necessary, your advisor can help refine your strategy to reflect changes in priorities, market conditions, or personal circumstances.
Prepare for Upcoming Life Events
Finally, review your insurance coverage, benefits elections, and major life events expected in 2026. Whether you anticipate changes related to employment, family, real estate, or education expenses, proactive planning provides clarity and confidence as you enter the new year.
As always, do not hesitate to seek professional guidance. Sound financial decisions come from informed analysis and thoughtful planning. The family at Rundahl Financial Consultants wishes you and your family a blessed Christmas season and a prosperous New Year.