💰 Finish Strong: 6 Financial Power Moves to Make Before the Year Ends
The year 2025 is quickly winding down, and now is the critical time to put your financial house in order. Morningstar’s Director of Personal Finance and Retirement Planning, Christine Benz, shares essential strategies to optimize your portfolio, retirement savings, and taxes before the clock runs out.
Here are six high-impact financial moves you should consider making right now:
1. Rebalance Your Portfolio for Risk Control
The Move: Review your asset allocation (stocks vs. bonds) and bring it back in line with your target percentages.
Why It Matters: The main benefit is risk reduction. You trim securities that have performed exceptionally well (which may now be overvalued) and redirect those funds into areas that have lagged (which may offer more attractive valuations).
Who Needs This Most? Investors aged 50 and above who are nearing retirement. As retirement approaches, you need to de-risk. Taking some winnings and moving them into safer assets, like high-quality bonds, takes advantage of currently attractive yields and builds a cash reserve for future spending.
2. Check Your International Exposure
The Move: For those still working and saving, review your equity allocations, specifically your U.S. versus non-U.S. exposure.
Why It Matters: Most investors are underallocated in international stocks. Rebalancing your international exposure provides better style diversification and ensures you capture potential growth in underperforming areas of the global market.
3. Max Out Retirement Contributions (and Catch-Ups)
The Move: Scramble to contribute as much as possible to your retirement accounts before the year-end deadline.
Why It Matters: Every dollar contributed now is a dollar saved tax-advantaged.
Company Plans (401(k), etc.): Try to boost or max out your contributions.
Catch-Up Contributions: If you’re over 50, you can make additional catch-up contributions. Note the special, increased catch-up limits this year for people between 60 and 63.
IRAs and HSAs: You have until the tax filing deadline in April 2026 to make contributions for the 2025 tax year.
4. Strategically Use RMDs for Rebalancing
The Move: If you are age 73 or older, use your Required Minimum Distribution (RMD) to execute a rebalancing move.
Why It Matters: You must take your RMD on time. By selling appreciated securities to satisfy your RMD, you achieve three goals simultaneously:
You de-risk your portfolio by trimming high-performing assets.
You satisfy the IRS obligation.
You generate the cash flow needed for the coming year.
5. Review and Shop Your Insurance Coverage
The Move: Take stock of all your insurance plans—health, life, and others—during the open enrollment period.
Why It Matters: Health plans (especially employer-provided and Medicare) change frequently.
Employer Plans: Don’t assume the best plan is always the same one. For married couples, assess whether it is more cost-effective to be covered under one spouse's superior plan or if each partner should stick to their own company’s coverage.
Key Question: What has changed in your personal situation (health needs, dependents) and what has changed in the plans on offer?
6. Connect Charitable Giving and Tax Planning
The Move: Look at charitable giving options that reduce risk and provide tax benefits.
Why It Matters:
Donating Appreciated Assets (Taxable Accounts): Give highly appreciated stocks or funds directly to charity (or a Donor-Advised Fund).
7 This removes a highly appreciated, high-risk asset from your portfolio, eliminates the capital gains tax liability you would have owed on a sale, and provides you with a tax deduction.Qualified Charitable Distributions (QCDs): If you are age $70\frac{1}{2}$ or older, you can donate a portion of your IRA directly to charity. The donated amount is not taxable to you and will satisfy your RMD obligation (if you are 73 or older). If you aren't yet subject to RMDs, it still shrinks the total IRA balance that will be subject to RMDs later.