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I’ve been a CPA since 1981, and if four decades of taxes has taught me one thing, it’s this: The most expensive mistakes retirees make aren’t dramatic. They’re quiet, they happen in December, and they’re almost always avoidable.
Every year I watch people who did everything right — saved, invested, retired comfortably — hand the IRS money they never owed, just because they missed a deadline or a rule change nobody told them about.
A few of these traps are brutal. And the average 65-year-old retiring this year will spend $185,500 on health care alone throughout retirement (3) — so every dollar you hand the taxman is a dollar you’ll wish you had back.
Here are the five year-end moves I’d make sure are done before Dec. 31 — the ones I see people blow every single year.
1. Take your required withdrawal — or eat a 25% penalty
If you’re 73 or older, the IRS requires you to pull a minimum amount out of your traditional IRA and 401(k) every year. It’s called your required minimum distribution, or RMD. Miss it, and the penalty is 25% of the amount you should have withdrawn (1).
There’s a narrow escape: Fix the shortfall quickly and file the right form, and that 25% drops to 10% (1). But why give the IRS either one? Here’s how to steer clear of that 25% fine — get the withdrawal done before Dec. 31.
One trap catches first-timers. The year you turn 73, you can delay that first withdrawal until April 1 of the next year — but then you owe two RMDs in the same year, which can shove you into a higher bracket (1).
Usually it’s smarter to take the first one on time.
If you’ve got several accounts, the math gets fiddly fast, and the penalty for getting it wrong is steep. This is exactly the kind of thing worth a second set of eyes.
This is the perfect time to talk to a professional advisor, especially the fiduciary kind. There are free services that will help you find one fast. For example, SmartAsset can match you with up to three fiduciary advisors — legally required to put your interests first — who’ll handle the RMD math and spot the tax angles most people miss. They also help with everything from investment advice to Social Security claiming strategies.
Got $100K or more invested? Get matched for free in minutes.
2. Check the inherited-IRA rule that quietly changed
If you inherited an IRA from someone other than your spouse, the rules flipped, and the IRS is cracking down on inherited IRAs — a lot of people haven’t caught up. Most non-spouse heirs now have to empty the account within 10 years (4).
Here’s the part that bites. Starting in 2025, if the person you inherited from was already taking their own RMDs, you have to take a withdrawal every year during that 10-year window too — not just empty it by year 10 (4).
Skip a year, and you’re back in penalty territory.
And it’s a reminder to look at your own side of the ledger: The mess your heirs inherit is the one you leave them. Without a plan, courts decide everything, and probate can drag on for months.
A will, a trust, or both can fix that. A will starts at $199 and a trust at $499 through Trust & Will. An hour now can spare your family a very expensive year later.
3. Do your Roth conversion now — and watch your Medicare bill
A Roth conversion — moving money from a traditional account into a Roth, so it grows and comes out tax-free — is one of the best tools a retiree has. But timing is everything, and December is decision time.
Convert too much in a single year and you can push your income over a threshold that raises your Medicare premiums two years later, through a surcharge called IRMAA (income-related monthly adjustment amount). The tax-free win is real; the Medicare surprise is avoidable if you size the conversion on purpose.
This is also why a down market is a gift. Converting when your balance is temporarily low means a smaller tax bill for the same shares.
I’ve walked through the timing in why a down market is the perfect tax window for Roth conversions, and answered the question I get most in “Ask Stacy: Should I Do a Roth Conversion?”
One thing before we keep going — the financial world is louder and dumber than ever. Hot takes everywhere. Almost none of it is worth your time. I’ve spent 35+ years cutting through the noise so you don’t have to. Sign up for the free Money Talks Newsletter — 10 seconds, no spam, just the stuff that matters.
4. Give straight from your IRA if you’re charitable
If you’re 70½ or older and you give to charity, there’s a move that beats writing a check: the qualified charitable distribution, or QCD. You send money directly from your IRA to the charity — up to $111,000 this year — and it never counts as taxable income (5).
For anyone already taking RMDs, a QCD can satisfy some or all of that required withdrawal without adding a dime to your taxable income. It’s a rare win that helps a cause and cuts your tax bill at once.
Most people who’d benefit have never heard of it.
5. If you’re still working, mind the earnings limit — and the account you’re ignoring
If you claimed Social Security early and you’re still working, watch the earnings test. In 2026, if you’re under full retirement age all year, the government withholds $1 in benefits for every $2 you earn above $24,480 (2).
In the year you reach full retirement age, the limit jumps to $65,160 and the withholding eases to $1 for every $3 (2).
That money isn’t gone forever — your benefit is recalculated later — but a lot of people are stunned when the checks shrink. Know the number before you pick up extra hours.
And if you’re still on a high-deductible health plan and not yet on Medicare, don’t overlook the most tax-efficient account there is. A health savings account is triple tax-advantaged: contributions cut your taxable income, growth is tax-free, and medical withdrawals are tax-free too.
Lively offers HSAs with no monthly account fees, and you can invest the balance for long-term growth. You can open one free today and shelter more income before year-end.
The move that saves the most
Here’s the one that saves more than any single item on this list: knowing these rules exist before Dec. 31, not after.
Taxes in retirement aren’t like taxes when you were working. The paycheck withholding is gone, the rules shift the moment you stop earning, and every one of these deadlines runs on the calendar, not your convenience. Miss the window and there’s usually no going back.
I’ve spent more than 40 years watching careful people overpay for one reason — nobody handed them the checklist. Now you’ve got it. Take an hour this month, run down these five, and keep the money that was yours to begin with.
Sources
1. IRS; 2. Social Security Administration; 3. Fidelity; 4. Grant Thornton; 5. IRS
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