The final weeks of the year are often filled with holiday plans, travel, and family gatherings. Yet December is also an important time to review retirement accounts. Tax-deferred account checkups help confirm contributions, distributions, and beneficiary information are in order before the year ends. These reviews connect directly to your broader retirement income and financial strategy.
Why Year-End Checkups Matter
Tax-deferred accounts such as traditional IRAs, 401(k) plans, and certain annuities carry rules that influence taxes, retirement income, and legacy planning. Because many deadlines fall on December 31, waiting until the new year can mean missed opportunities or penalties. Conducting tax-deferred account checkups before year-end provides an opportunity to address these details with clarity.
Key Items to Review
A year-end checkup typically focuses on a few essential areas:
- Contributions: Confirm whether you contributed as much as you intended and whether you are eligible to contribute more before the deadline.
- Required Minimum Distributions (RMDs): If you are subject to RMDs, verify they are taken on time to avoid penalties.
- Beneficiary Designations: Review and update beneficiaries to reflect any changes in your family or wishes.
- Investment Allocation: Assess whether your account remains aligned with your retirement goals, especially after market changes.
These steps help confirm your accounts remain consistent with your financial strategy.
The Connection to Retirement Income
Tax-deferred account checkups are not only about compliance. They also tie directly to your retirement income strategy. For example, the timing and size of distributions affect your taxable income. Contribution levels influence the resources available in future years. Reviewing these accounts helps balance today’s needs with tomorrow’s income planning.
Avoiding Common Pitfalls
Some of the most common oversights include missing an RMD deadline, forgetting to update beneficiaries after major life events, or assuming contribution limits were reached without checking. Others may overlook the impact of taking large distributions in a single year, which can affect taxes and Medicare premiums. A year-end review can help catch these issues before they create complications.
Tax Considerations
Distributions from tax-deferred accounts are generally taxable, which makes planning an important part of the process. Strategic withdrawals may help spread income across multiple years, and contributions may reduce taxable income depending on eligibility. Reviewing accounts in December allows time to coordinate with tax planning for the current year.
Working With Professionals
Because tax-deferred account checkups involve both retirement planning and tax considerations, many families benefit from working with advisors or tax professionals. These conversations provide education on rules, highlight potential strategies, and give context for how today’s decisions connect with long-term goals.
Taking the First Step
Begin by gathering recent account statements. Review contributions, confirm whether RMDs are required and completed, and check beneficiary information. From there, decide if adjustments are needed before December 31. Even small updates can make a meaningful difference.
Closing the Year Strong
Year-end tax-deferred account checkups are a practical way to close the year strong. Reviewing contributions, distributions, and beneficiaries in December connects your accounts to your overall financial strategy and prepares you for the year ahead.
At Rise Private Wealth, we help families approach these reviews with clarity and education. Contact us today to schedule a conversation about tax-deferred account checkups and how they fit into your retirement plan.
