As 2025 wraps up, now is the time to make sure your retirement contribution and tax planning strategies are optimized before December 31.
Maximize Your 2025 Retirement Contributions
- 401(k) / 403(b) / 457 Plans: Confirm you’ve contributed up to the annual limit for 2025. If your personal cash flow permits, allocate additional amounts through your final paychecks if you have not already contributed the annual limit for 2025.
- Traditional & Roth IRAs: IRA contributions can still be made up to the April filing deadline, but planning early helps avoid surprises and allows for strategic Roth conversion decisions.
- Self-Employed Plans: SEP IRAs, SIMPLE IRAs, and Solo 401(k) contributions may offer significant tax savings. Ensure your plan documents and elections are properly established for the 2025 tax year.
Consider Roth Strategies Before Year-End
- Roth Conversions
- Convert Traditional IRA funds to a Roth IRA.
- Pay taxes now to avoid/reduce required minimum distributions (RMDs) later and potentially lower your lifetime tax burden.
- Conversions must be completed by December 31.
- Backdoor Roth IRA
- High-income earners may still contribute to a Roth IRA through the backdoor strategy by making nondeductible IRA contributions and then converting them.
- If you have existing pre-tax IRA balances, the pro-rata rule may cause unintended taxable income—plan accordingly.
- Mega Backdoor Roth (If Your Plan Allows)
- Some employer plans support large after-tax contributions and in-plan Roth conversions.
- Check with your HR or plan administrator before year-end.
Big Change Coming: Roth Catch-Up Rule Starts in 2026
The IRS has finalized regulations under SECURE 2.0 that will impact how certain participants save for retirement.
This means:
- If you earn more than $150,000 in Federal Insurance Contributions Act (FICA) wages from your employer in the prior year (2025), and
- You make age 50+ catch-up contributions, then
- Those catch-up contributions must be made as Roth (after-tax) starting in 2026.
Important:
- There is no option to opt out of the requirement for qualifying wage earners.
- In the short term, high earners will lose the ability to reduce their taxable income through pre-tax catch-up contributions, thereby increasing their tax liability today.
- Employers must update payroll systems—plan now to prevent disruptions in 2026.
What to do now:
- Review projected 2025 wages to anticipate rule applicability.
- Evaluate whether pre-2026 is a window for pre-tax catch-up contributions.
- Plan ahead for cash flow and tax withholding adjustments.
Additional Year-End Reminders
- Review RMD requirements if you are age 73 or older.
- Check beneficiaries on retirement accounts for accuracy.
- Evaluate tax withholding on distributions.
- Confirm employer plan notices regarding contribution limits or plan updates.
As always, Fiske Advisory, a Springline company, is here to help with any questions or planning related to these changes. For more detailed information or additional questions, please email info@fiskeco.com or call us at 954.236.8600.
The tax guidance shared here reflects the most up-to-date information available at the time of writing. Because tax laws and regulations can change, we encourage you to verify with your tax advisor that these details are still current before making any decisions.