A Checklist for Retirees to Finish This Year

When it comes to portfolio and financial plan maintenance, I believe that a good once-annual review is plenty, providing the opportunity to rebalance, attend to tax matters like tax-loss selling and required minimum distributions, and tie charitable giving in with your portfolio strategy.

Last week, I shared a fourth-quarter checklist for people who are still working and saving for retirement. This week, let’s talk about the items that retirees should have on their checklists as the year winds down.

Revisit Your Portfolio Spending Rate

If you’re retired, one of the best ways to assess whether your plan is on track is to check in on your spending. To arrive at your 2025 withdrawal rate, divide your portfolio balance at the beginning of the year by whatever amount you expect to spend this year, including taxes. Is that spending rate reasonable given how your portfolio has performed and where you are in your retirement? The 4% guideline is a decent starting point for people who are just embarking on retirement, and we corroborated that it’s a decent baseline in our 2024 retirement spending research. But you can and should consider taking a higher withdrawal percentage if you’re further along in your retirement and have a shorter spending horizon. In our 2024 research, for example, we found that a spending rate of nearly 7% was safe for a balanced portfolio over a 15-year (rather than 30-year) spending horizon. If you’re using a dynamic approach to your in-retirement spending, the fact that stocks have enjoyed robust gains thus far this year may also allow you to give yourself a “raise.”

Reassess Your Healthcare Coverage

Open enrollment for Medicare is underway from now until Dec. 7, providing an opportunity to revisit your prescription drug (Part D) coverage as well as your Medicare Advantage coverage if you’ve gone that route rather than opting for traditional Medicare.

Assess Your Total Portfolio’s Asset Allocation

The next step in the process is to assess your portfolio’s asset allocation using our X-Ray functionality, available if you have a portfolio stored on Morningstar.com. Compare your portfolio’s current asset allocation to your targets and take stock of any divergences: Categories that have grown beyond your target allocations for them—likely US stocks in many portfolios—are areas that you could peel back on. In turn, those overages could be useful in a number of instances: if you need to take required minimum distributions, identify assets for charitable giving, or tee up cash for the year ahead, for example. If you’re keeping the proceeds from trimming appreciated holdings in your portfolio, you could use them to plump up asset types that haven’t performed as well—for example, bond holdings and smaller-cap and value stocks. Just be sure to take the tax impact into account, particularly if you’re selling appreciated holdings from your taxable account.

Take Required Minimum Distributions

If you’re age 73 or over, Dec. 31 is your deadline for taking required minimum distributions from tax-deferred retirement accounts. If you identified areas to cut back on in the preceding step, you can lighten up on those securities/asset classes to help meet your RMDs. I also like the idea of using RMDs as an impetus for a bit of portfolio cleanup. For example, if you have a basket of individual stocks in your IRA but they’re also-rans or you don’t really have time to monitor them, they’d be excellent fodder for your RMDs.

Tee Up Liquid Reserves for the Year(s) Ahead

It’s also wise to take time at year-end to assess your cash reserves. Do you have a cash buffer equal to at least six months’ and not more than two years’ worth of portfolio withdrawals? Holding such a cushion does have an opportunity cost, but it can also keep you from having to sell from your long-term assets when they’re in a downturn. (Remember when both stocks and bonds fell at once in 2022?) If you’re of RMD age, you can use those distributions to refill your cash bucket. If you’re not of RMD age, use tax-efficient withdrawal sequencing to determine which account to pull from.

Take Stock of Charitable Giving

If you usually make gifts to charity around year-end, see if you can’t tie in your portfolio. If you’re over age 70½, you can use qualified charitable distributions to lift appreciated positions from your IRA without a tax bill. (Just be sure to mind your p’s and q’s, as Ed Slott outlines here.) The maximum QCD amount had been stuck at $100,000 for several years, but it’s now indexed for inflation and is up to $108,000 in 2025. Any QCD amounts up to the limit will satisfy your required minimum distribution amounts, too.

If you’re not age 70½, you have fewer levers to benefit from charitable giving, taxwise, especially if your household doesn’t itemize its deductions. (More households are apt to start itemizing again thanks to the increase in the cap on state and local taxes, called SALT, in 2025.) One idea is to consider bunching your household’s charitable contributions into a single year—ideally, one in which you’re expecting a high tax bill and could use the offsetting deductions—to get over the itemized deduction threshold. You can make the charitable gift to a donor-advised fund to obtain the deduction, then take your time doling out the funds to charity.

Investigate Tax-Loss Selling

Stock performance has been strong, and bonds have been decent, too. That means that most investors are unlikely to have a lot of losing positions in their portfolios as 2025 winds down. Therefore, tax-loss selling is unlikely to be as lucrative an activity as it was at the end of 2022. But individual-stock investors and/or investors using the specific share identification method for tracking cost basis may also be able to find losing positions. By selling and realizing the loss, you’re able to offset capital gains elsewhere in your portfolio or, if your losses exceed your gains, offset up to $3,000 in ordinary income.