Year-End Money Moves: Your Checklist Before December 31

If you're still working

Check your 457, 403(b), or 401(k) contributions

Contributions to workplace retirement plans generally have to come out of your paycheck by the end of the calendar year. Unlike an IRA, you usually can't make a 2026 contribution to your 457 plan in March 2027.

For 2026, the limits are:

• $24,500 in employee contributions to a 401(k), 403(b), or governmental 457 plan
• An extra $8,000 in catch-up contributions if you're 50 or older, for a total of $32,500
• An extra $11,250 instead of $8,000 if you turn 60, 61, 62, or 63 this year, for a total of $35,750, if your plan allows it

If you have access to both a 403(b) and a 457 plan, which is common for school district employees, the limits for those two types of plans are generally separate. That can let some people save well beyond a single plan's limit. It's worth confirming how your plans work with your benefits office.

There are only a few paychecks left in the year after mid-November. If you want to increase contributions for 2026, now is the time to contact your payroll or plan provider.

The special 457 catch-up

Governmental 457 plans have a unique feature. In the three years before your plan's normal retirement age, you may be able to use a special catch-up that lets you contribute up to double the normal limit, which works out to $49,000 for 2026. It's based on contribution room you didn't use in earlier years, and it has specific rules, including that you generally can't combine it with the age-50 catch-up in the same year.

If you're a few years from retirement and have been under-saving, this is worth asking about.

The new Roth catch-up rule for higher earners

Starting in 2026, if your wages from your employer were more than $150,000 in 2025, any age-based catch-up contributions you make have to go in as Roth contributions, meaning after-tax. That applies to 401(k), 403(b), and governmental 457 plans.

If your plan doesn't offer a Roth option, you may not be able to make catch-up contributions at all until it does. The special pre-retirement 457 catch-up isn't subject to this Roth requirement.

This won't affect most public employees. But for higher earners, especially those with a lot of overtime or those in senior positions, it's worth checking.

The overtime deduction

This one matters a lot for first responders.

Under the 2025 tax law, eligible workers can deduct qualified overtime pay from their federal taxable income for 2025 through 2028. For 2026:

• The maximum deduction is $12,500, or $25,000 if you're married filing jointly.
• It starts phasing out when modified adjusted gross income is over $150,000, or $300,000 for joint filers.
• You can claim it whether you itemize or take the standard deduction.
• If you're married, you have to file jointly to claim it.

Here's the important part. The deduction only covers the "premium" portion of overtime that the federal Fair Labor Standards Act requires, basically the extra half in time-and-a-half. Not the whole overtime paycheck. And overtime paid because of a union contract or a state rule, beyond what federal law requires, may not qualify.

That matters for public safety employees, because overtime for police and fire is often calculated under special federal rules and under collective bargaining agreements. Some of what you're paid as overtime may qualify, and some may not.

Starting with 2026, employers are supposed to report qualified overtime separately on your Form W-2, in box 12 with code TT. That makes it easier to see the number. When your W-2 arrives in January, look for it.

It's also worth knowing that the deduction doesn't reduce Social Security or Medicare taxes on your overtime, and it doesn't change your withholding automatically. For most people, the benefit shows up at tax time, not in each paycheck.

Use your FSA money

If you have a health care flexible spending account through work, check your balance and your plan's deadline. Many FSAs are use-it-or-lose-it, though some plans offer a grace period or a small carryover. Money left over after the deadline can be forfeited.

Review your withholding

If your income changed this year, from overtime, a raise, a second job, or a spouse's job change, your withholding may be off. A quick check now can prevent an unpleasant surprise in April. The IRS has a withholding estimator online.

If you're retired or getting close

Required minimum distributions

If you're old enough to be required to take money out of traditional IRAs or retirement plans each year, the deadline for most people is December 31. Missing it can mean a penalty on the amount you didn't take.

The age when RMDs start depends on your birth year. For many people now, it's 73. For people born in 1960 or later, it's 75. That later age applies to a lot of people currently in or near DROP.

If this is your first required distribution, you generally have until April 1 of the following year. But waiting means taking two distributions in one year, which can push your taxable income up.

Qualified charitable distributions

If you're 70½ or older and you give to charity, you may be able to donate directly from your IRA through a qualified charitable distribution. The money goes straight to the charity, it can count toward your required distribution, and it isn't included in your taxable income.

That can matter for more than just income tax. Lower income can also help with Medicare premiums and the taxation of Social Security benefits.

Watch your income for Medicare and health insurance

Your income this year can affect costs down the road.

• Medicare premiums. Income above certain levels increases your Part B and Part D premiums. Medicare generally looks at income from two years earlier, so 2026 income affects your 2028 premiums.
• ACA subsidies. If you're retired and under 65 and buying insurance on the marketplace, your income can decide whether you qualify for a subsidy at all. I wrote about the subsidy cliff in a separate post.

If you're planning a large IRA withdrawal, a Roth conversion, or selling investments with big gains, it's worth thinking about how that income could ripple into those costs before you do it.

The senior deduction

If you're 65 or older, there's a temporary additional deduction of up to $6,000 per eligible person for 2025 through 2028. It phases out at higher incomes, starting at $75,000 of modified adjusted gross income for single filers. It's on top of the regular standard deduction and the existing extra deduction for people 65 and older.

It doesn't make Social Security tax-free on its own. But for many retirees, it lowers overall taxable income.

If you're in DROP or leaving it soon

DROP decisions have their own timing, and year-end can be a natural moment to review them.

If your DROP participation ends soon, it's worth knowing that your DROP account stops earning interest based on when participation ends, not when you're paid. How you take your DROP payout, whether as a lump sum, a rollover, or a combination, can have very different tax results for the year. A lump sum taken as cash is generally taxable in the year you receive it. A direct rollover generally isn't taxed until you withdraw the money later.

That choice can also affect things like Medicare premiums two years out and, for people retiring before 65, eligibility for health insurance subsidies. If your DROP exit is coming in the next several months, the year-end period is a good time to map out how the payout fits into your tax picture for both this year and next.

Common year-end mistakes

A few mistakes come up almost every year.

Assuming the IRA deadline applies to your 457. It doesn't. Workplace plan contributions generally have to come out of paychecks by December 31.

Missing an RMD. Especially when someone has accounts at several institutions, or inherited an IRA with its own distribution rules.

Triggering a wash sale by accident. Selling a fund at a loss in a taxable account while an automatic purchase of the same fund happens in an IRA can disallow the loss.

Forgetting about next year's costs. A large withdrawal or Roth conversion in December can raise Medicare premiums two years later or affect health insurance subsidies. The tax bill isn't the only cost.

Leaving beneficiary forms outdated. This is the one that causes the most heartbreak, and it takes ten minutes to fix.

For everyone

Tax-loss harvesting

If you have investments in a taxable brokerage account that are worth less than you paid, selling them can create a capital loss. That loss can offset capital gains, and up to $3,000 a year of losses beyond your gains can generally offset ordinary income. Leftover losses can carry forward to future years.

There's a catch called the wash sale rule. If you buy the same or a substantially identical investment within 30 days before or after the sale, the loss is generally disallowed. That includes purchases in other accounts, including a spouse's.

Tax-loss harvesting only applies to taxable accounts. It doesn't help inside an IRA, a 457, or other tax-deferred accounts. And it generally defers taxes rather than eliminating them.

Think about capital gains timing

If you have investments with gains in a taxable account, the timing of a sale can matter. Holding an investment for more than a year generally qualifies gains for lower long-term capital gains rates. Some people with lower income in a given year may even fall into the 0% long-term capital gains bracket.

Charitable giving

If you give to charity, a few things are worth knowing for 2026. The tax law made changes that start this year, including a new deduction for some charitable gifts by people who don't itemize, and new limits for people who do. How those rules affect you depends on your situation. If you're planning a larger gift, it's worth talking to your tax professional about timing before year-end.

Review your beneficiaries

This one has nothing to do with taxes, and it might be the most important thing on the list.

Check the beneficiaries on your 457 plan, 403(b), IRAs, life insurance, and FRS benefits. Life changes, like marriage, divorce, births, and deaths, can leave outdated beneficiaries in place. Beneficiary designations generally override what your will says.

For FRS members, entering DROP voids prior beneficiary designations, so anyone who entered DROP needs to make sure new designations are on file.

Use your remaining health benefits

If you've already hit your health insurance deductible or out-of-pocket maximum for the year, it may make sense to schedule care you've been putting off before January 1, when those amounts reset. That depends on your plan and your health needs.

Check your open enrollment windows

A few important deadlines fall in this window:

• Medicare open enrollment ends December 7.
• ACA marketplace open enrollment for coverage starting January 1 ends December 15 on HealthCare.gov.
• Employer benefits open enrollment usually falls in the fall. If you missed yours, you may have to wait until next year unless you have a qualifying life event.

Open a Trump Account if your child qualifies

If you have a child born in 2025 or later, and you haven't opened a Trump Account and elected the $1,000 government deposit, the end of the year is a good reminder. You can also file IRS Form 4547 with your tax return.

Plan your IRA contribution

Unlike workplace plans, you have until the tax filing deadline, April 15, 2027, to make a 2026 IRA contribution. For 2026, the limit is $7,500, or $8,600 if you're 50 or older, subject to income limits for Roth IRAs and deductibility rules for traditional IRAs. You don't have to do it by December 31. But it's worth putting on your calendar.

A simple year-end calendar

By early December:

• Confirm your final 457, 403(b), or 401(k) contributions with payroll.
• Take any required minimum distributions.
• Complete tax-loss harvesting, if it applies to you.

By December 7:

• Finalize Medicare plan changes.

By December 15:

• Finalize ACA marketplace coverage for January 1.

By December 31:

• Use remaining FSA funds, if your plan requires it.
• Make charitable gifts you want counted for 2026.
• Review beneficiaries.

By April 15, 2027:

• Make any 2026 IRA contributions.
• File your return, and claim the overtime or senior deductions if you qualify.

What I'm not going to do

I'm not going to tell you which of these moves to make. Some will save you money. Some won't apply to you at all. A couple could backfire if they don't fit your situation.

I'm also not going to pretend taxes are simple. The 2025 tax law added several new deductions that are temporary, have income limits, and come with their own rules. That's exactly why it's worth reviewing with someone who knows your whole picture.

What I will say is this. When it comes down to it, most year-end mistakes aren't bad decisions. They're decisions that never got made because the deadline slipped by. A single hour in November can be worth a lot in April.

The short version

• Workplace plan contributions generally must come out of your paycheck by December 31. The 2026 limit is $24,500, plus catch-ups.
• Higher earners over $150,000 in 2025 wages must make catch-up contributions as Roth starting in 2026.
• The overtime deduction can be worth up to $12,500 ($25,000 joint), but only the FLSA-required premium counts.
• Retirees: take RMDs by December 31, and consider how your income affects Medicare and ACA costs.
• Review tax-loss harvesting, charitable giving, and your beneficiaries.
• IRA contributions for 2026 can be made until April 15, 2027.

If you want help sorting out which of these apply to you, or how they fit into your retirement plan, I'm glad to go through it with you.

Frequently asked questions

What is the 457 contribution limit for 2026?

For 2026, you can contribute up to $24,500 to a governmental 457 plan, plus an $8,000 catch-up if you're 50 or older, or $11,250 instead if you turn 60 to 63 this year and your plan allows it. The special pre-retirement catch-up can allow up to $49,000 in certain cases.

Can first responders deduct overtime pay?

Eligible workers can deduct qualified overtime compensation, up to $12,500 or $25,000 for joint filers, for 2025 through 2028, with a phase-out above $150,000 or $300,000 of income. Only the premium portion required by the Fair Labor Standards Act counts, so some overtime paid under contracts or other rules may not qualify.

When is the RMD deadline?

For most people, required minimum distributions are due by December 31. Your first RMD can generally be delayed until April 1 of the following year, but then you'd take two distributions in that year.

What is the wash sale rule?

If you sell an investment at a loss and buy the same or a substantially identical investment within 30 days before or after the sale, the loss is generally disallowed for tax purposes.

Can I still make a 2026 IRA contribution in 2027?

Yes. You generally have until the tax filing deadline, April 15, 2027, to make an IRA contribution for 2026.

Educational content only. Not individualized investment, tax, or legal advice. Figures are for 2026 unless noted. Benowitz Wealth Management is a brand of Joy Financial Group LLC, a Florida state-registered investment adviser. Consult a qualified tax professional regarding your specific situation.

Neither Joy Financial Group LLC nor Benowitz Wealth Management is affiliated with, endorsed by, or employed by the Florida Retirement System, the Florida Division of Retirement, the State Board of Administration of Florida, MyFRS, or any government agency. FRS members may obtain free, unbiased guidance from the MyFRS Financial Guidance Line at 1-866-446-9377.