Happy Thanksgiving! As we approach the final stretch of 2025, it’s the perfect time to focus on what could save you thousands of dollars: end-of-year tax planning. If you’re in that sweet spot of being 50-60+ years old with substantial savings (we’re talking seven figures or more), this guide is specifically for you.

The difference between tax planning and tax preparation is huge.

Tax preparation is reactive. You collect your 1099s in January, hand them to your CPA, and ask how to minimize your taxes from last year. Unfortunately, there’s not much you can do at that point.

Tax planning, on the other hand, is proactive. It’s about looking at your complete financial picture and figuring out how to minimize your lifetime tax burden, not just this year’s bill.

Understanding 401(k) Contribution Limits 2025 and Deadlines

Let’s start with the low-hanging fruit: contribution limits. These are opportunities you absolutely don’t want to miss, especially with some exciting changes coming in 2025.

Employee Contribution Deadlines

For 401(k) contributions, the employee deferral deadline is December 31st. There are no extensions to this deadline. For 2025, the employee contribution limit is $23,500, plus a $7,500 catch-up contribution if you’re over 50. That means you can contribute up to $31,000 through payroll deductions, but only if you act before year-end. If you are behind, consider using end of year bonus income, or even deferring most (if not all) of your final few paychecks. This assumes you have some cash on the sideline to use for the holidays!

The total contribution limit for 2025 is $70,000, including employer matching and profit-sharing. The catch-up contribution is the same at $7,500. If you are using Mega-Backdoor Roth 401k contributions or perhaps you are self employed using Solo 401k or SEP IRA, you can really juice up your savings over and above the employee deferral limits.

IRA Contributions: More Flexibility

Unlike 401(k) employee contributions, IRA contributions can be made up to the tax filing deadline. For 2025, you can contribute $7,000 to a traditional or Roth IRA. Note: That’s a combined limit, not per account, plus $1,000 catch-up if you’re over 50.

This flexibility is valuable when you’re not sure about your modified adjusted gross income or whether you’ll need to do a backdoor Roth conversion.  Your modified adjusted gross income will determine whether or not that IRA contribution is deductible for you and whether you are eligible to contribute to a Roth IRA.

Solo 401(k) vs SEP IRA: Self-Employed individuals

If you’re self-employed, you have some powerful options. A SEP IRA allows contributions of 25% of earnings up to $70,000 for 2025, and you can delay opening the account until your filing deadline.

However, I’m seeing more clients choose Solo 401(k)s these days. The real advantage is that you’re not limited by the 25% of earnings rule for the employee portion.

With a solo 401(k), you can contribute the full $23,500 employee contribution regardless of your income level, then add employer matching and profit-sharing to reach that $70,000 maximum. Plus, many solo 401(k)s offer the mega backdoor Roth option, allowing after-tax contributions that can be converted to a Roth immediately.  You must enroll in the Solo 401(k) before the calendar year is over, but you can delay funding the account until you file your tax return.

The Super Catch-Up: A Game-Changer for 2025

Here’s something exciting: if you’re turning 60, 61, 62, or 63 in 2025, you qualify for a “super catch-up” contribution. This adds an extra $3,750 to your regular catch-up, bringing your total catch-up to $11,250.

That means if you’re in this age range, you can contribute $34,750 to your 401(k) in 2025 ($23,500 regular + $11,250 super catch-up). No surprise, the IRS decided to make this complicated, and this benefit disappears when you turn 64.

Smart Tax Bracket Management Strategies

Effective tax planning starts with understanding your current and future tax brackets. This is where the real strategy comes in.

Legislative Changes

It’s official, OBBBA (One Big Beautiful Bill Act) was passed in July, making the current TCJA tax brackets permanent! This means you probably don’t need to panic about converting everything to Roth before 2025 is up.  With that said, some key considerations directly impact all of you, whether you are planning for or already in retirement. 

Tax Brackets are Permanent

Sure, nothing is ever set in stone.  However, it will now require NEW legislation to change the current tax brackets.  Originally, the 2017 Tax Cuts were set to expire after 2025.

Friendly reminder: Never implement planning strategies based on what you THINK policy makers will do to the tax code.  Regardless, you can now rest easy knowing that the tax brackets are set at:

• 0%
• 10%
• 12%
• 22%
• 24%
• 32%
• 35%
• 37%

Standard Deduction Inflated

There was a slight uptick in the original 2025 standard deduction amounts.  For singles, you are eligible for a $15,750 standard deduction.  For married filing jointly, you are eligible for a $31,500 standard deduction. 

Senior Bonus Deduction

If you turn 65 or older before year’s end, you are now eligible for an additional $6k as a BONUS deduction.  This is in ADDITION to the standard deduction, but also IN ADDITION to the current bonus deduction of $2k for singles and $1,600 each for married filing jointly.  Therefore, a married couple could theoretically receive a tax deduction up to  $46,700 for 2025!  With that said, the new bonus deduction is NOT permanent.  After 2028, this goes away.  Additionally, there are income phaseouts, so if you earn too much, you might not receive any or all of that senior bonus deduction. 

Charitable Giving Incentives

Currently, if you do not itemize your deductions, giving to charity does NOT provide you with any tax incentive.  Of course, if you do give to charity, reducing your taxes is probably not the ONLY reason you do so.  However, starting in 2026, for those taking the standard deduction, you can still take a $1k tax deduction for singles and $2k for married filing jointly for making charitable donations.  Therefore, if you are making some smaller donations and typically don’t itemize, make sure to keep those receipts for 2026 and beyond so you can take advantage of this tax deduction.

Healthcare Tax Credits

Prior to 2021, only those taxpayers whose Modified Adjusted Gross Income was between 100% and 400% of the Federal Poverty Line could be eligible for tax credits when purchasing a health insurance policy on the exchange.  However, in 2021, COVID relief enhanced those tax credits even if your income exceeded 400% of the Federal Poverty Line.  Starting in 2026, we will revert to the old rule, making it that much more important for “early retirees” to dial in their modified adjusted gross income before becoming Medicare eligible.  Here is a video on my YouTube channel that highlights how these tax credits work for early retirees.  I do assume a scenario for 2025 with the “gradual phase out” of the credits, but it still may be helpful to understand how it is calculated.  👇
Will I Receive Tax Credits for (ACA) Health Insurance?

Smart Roth Conversion Strategies for Long-Term Savings

Roth conversion strategies can be incredibly powerful, but they’re not right for everyone. In my practice, it’s about a 50-50 split on whether conversions make sense.

The Sweet Spot for Conversions

The best time for Roth conversion strategies is typically in early retirement, after you’ve stopped working but before required minimum distributions begin at age 73 or 75 (depending on your birth year). And even better, before Social Security begins. This gives you a window of potentially 5-10 years+ to fill up lower tax brackets through conversions.  I call this the Roth Conversion Window. 

Required Minimum Distributions: Plan Ahead

Once required minimum distributions kick in, it becomes much harder to manage your tax brackets. You might find yourself pushed into the 24% or 32% bracket immediately, with little room for strategic conversions.

This is why many of my clients in their late 60s to mid-70s say, “I wish I had started these conversions earlier in retirement.” The key is planning well before you hit that RMD age.

Current vs. Future Tax Brackets

If you’re currently in the 22% or 24% bracket but expect to drop to the 10% or 12% bracket in early retirement, that’s a strong argument for pre-tax contributions now. You can then do Roth conversions during the Roth Conversion Window when your tax bracket drops.   

Conversely, if you expect to stay in similar tax brackets throughout retirement (maybe you have a pension or significant investment income), you might consider a smoother Roth Conversion schedule, if that makes sense for your long-term plan.

Your Long-term Plan is the Key

In my humble opinion, Roth Conversions have almost become a little TOO mainstream.  When this happens, you might be led to believe that they’re right for you, when in fact they are NOT.  The key is asking yourself, who am I planning for beyond me? 

If it’s just you, you probably don’t care as much about who pays how much in taxes when you die.  If you’re goal is to leave a significant legacy to your adult children who are financially successful in their own right, you might care more about the tax impact of that legacy. 

And what about spouses?  If your spouse is likely to outlive you by 10-15 years, how would switching to single filing status impact their tax situation?  Are you charitably inclined? 

So yes, reducing your lifetime tax bill is important.  However, who else are you planning for?  That will be at the center of the Roth Conversion decision. 

Qualified Charitable Distributions (QCDs)

If you’re over 70½, you can donate up to $108,000 directly from your IRA to qualified charities in 2025 (increasing to $115k in 2026). This distribution isn’t included in your taxable income and reduces your required minimum distributions dollar for dollar.

Here’s a practical example: Let’s say your Required Minimum Distribution (RMD) is $50,000 and you typically donate $10,000 to charity. Instead of taking the full RMD and donating cash, do a $10,000 QCD. Now your taxable RMD is only $40,000, potentially saving you $2,000-$3,000 in taxes.

Donor Advised Funds: Bunching Strategy

If your charitable donations don’t usually get you over the standard deduction threshold, consider “bunching” multiple years of donations into a donor-advised fund (DAF). You can contribute multiple years’ worth of donations in one year, potentially unlocking itemized deductions, then distribute the money to charities over time.  There is no set deadline for when the money needs to come out of the DAF.

The money in the donor-advised fund grows tax-free, and you can even name a successor to continue the charitable giving after you’re gone.

Donating Appreciated Securities

Instead of donating cash, consider donating appreciated stocks or other securities. You can deduct the full fair market value (up to 30% of your adjusted gross income) while avoiding capital gains taxes on the appreciation.

Advanced Strategies: IRMAA and ACA Considerations

Managing Medicare Surcharges

Your 2024 tax return will determine your Medicare Part B and Part D premiums for 2026. These Income-Related Monthly Adjustment Amounts (IRMAA) can add hundreds of dollars monthly to your Medicare costs.

Review the IRMAA brackets for your filing status and see where your income falls. Sometimes a small Roth conversion can push you into a higher IRMAA bracket, or a charitable deduction can keep you in a lower bracket, saving significant money on Medicare premiums. Of course, when we are closing out 2025, you are thinking about IRMAA for 2027. We currently do not have the brackets set for 2027. However, using some conservative inflation assumptions could be a decent benchmarking tool. I would still provide yourself a buffer if you are cutting it close to the next IRMAA tier.

Asset Location: What Goes Where

For real estate, it’s about LOCATION, LOCATION, LOCATION!  For your investment portfolio, Asset Location is about owning the right investments in the right accounts. In taxable accounts, hold tax-efficient investments like index funds or individual stocks you plan to hold long-term. In tax-deferred accounts (401ks, traditional IRAs), hold tax-inefficient investments like REITs, bonds, or actively managed funds that generate significant distributions.  Be careful with sitting on TOO MUCH cash in a high-yield savings or money market account.  Taxable interest could be your worst enemy. 

Proper Asset Location can help reduce your current taxable income while maximizing the tax-deferred growth in your retirement accounts.

Annual Gifting and Estate Planning

Don’t forget about the annual gift tax exclusion: $19,000 per recipient for 2025.  This is per donor, so married couples can give $36,000 to each recipient without filing any gift tax returns.

This strategy removes assets (and their future growth) from your estate while providing immediate benefits to your beneficiaries.  Will your beneficiaries find more utility in their ultimate inheritance today?  Or when they are 65? 

Health Savings Accounts: The Triple Tax Advantage

If you have access to an HSA, the contribution limits are $4,300 for self-only coverage and $8,550 for family coverage in 2025, with an additional $1,000 catch-up if you’re over 55.

HSAs offer a triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. And even after age 65, you can withdraw for any purpose (paying ordinary income tax, like a traditional IRA).  However, the best bang for your buck is to reimburse yourself tax-free for medical-related expenses. 

Taking Action: Your Next Steps

Effective end-of-year tax planning requires looking at your complete financial picture. Project your 2025 tax bracket and compare it to what you expect in 2026 and beyond. Consider your retirement timeline, expected income sources, and long-term goals.

Remember, tax planning is personal. What works for your neighbor might not work for you. The strategies that make sense depend on your income, tax brackets, retirement timeline, and overall financial goals.

As we head into 2025, take advantage of the opportunities available now.

• Max out those contribution limits before December 31st
• Consider strategic Roth conversions if you’re in a low-income year
• Don’t forget about charitable strategies if you’re charitably inclined.

The key to successful tax planning strategies is taking action before the year ends. These strategies can help set the stage to drastically reduce your lifetime tax bill, putting thousands of dollars back in your pocket during retirement. 

At Imagine Financial Security, we help individuals over 50 with at least $1 million in savings navigate complex retirement decisions. If you are looking to

• Maximize your retirement spending
• Minimize your lifetime tax bill
• Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.