5 Retirement Planning Mistakes to Avoid Before Year-End 2025

The year-end is more than just a countdown to the holidays; it's the critical planning window for your financial future.

Before the calendar flips to 2026, taking action now can minimize your tax bill and maximize your wealth.

At Malecki Financial Group, we believe in empowering your financial confidence.

That's why we've outlined the top five common retirement planning mistakes we see clients make when they delay their financial housekeeping until the last minute.

Avoid these pitfalls to set yourself up for a confident, successful 2026.

Mistake #1: Failing to Maximize Your 2025 Contribution Limits

Many pre-retirees focus solely on their monthly budget but overlook the simple power of maximizing tax-advantaged savings.

If you haven't hit the limit for your key accounts, you're leaving a significant tax deduction or tax-free growth opportunity on the table for 2025.

Relevant for Year-End: Your 401(k) contributions must be processed by your employer by December 31st, 2025. While you have until the tax deadline (April 2026) for IRA contributions, getting it done now simplifies your new year.

How to Avoid It:

• Check Your 401(k): Confirm your total contributions (including employer match) for the year. If you are eligible for the catch-up contribution (age 50+), ensure you're utilizing it.
• Fund Your IRA/Roth IRA: If you haven't done so, make your 2025 contribution now.
• Don’t Forget the HSA: If you have a high-deductible health plan, funding a Health Savings Account (HSA) provides a triple tax advantage (contributions are deductible, growth is tax-free, and withdrawals for medical expenses are tax-free).

Mistake #2: Overlooking Your Required Minimum Distribution (RMD)

This is a non-negotiable year-end deadline. If you are subject to Required Minimum Distributions (RMDs) from your traditional IRA or 401(k), typically after age 73, you must withdraw the correct amount by December 31, 2025.

The penalty for failing to do so is steep: a 25% excise tax on the amount not withdrawn.

Relevant for Year-End: This is a hard, unavoidable deadline. 

How to Avoid It:

• Calculate Accurately: Use the correct IRS life expectancy tables for your age and account balance as of December 31, 2024.
• Initiate Early: Don't wait until Christmas week. Contact your custodian or financial advisor immediately to process the distribution.
• Consider a QLCP: If you are over 70.5, look into a Qualified Charitable Distribution (QCD). This allows you to satisfy all or part of your RMD by sending the money directly to an eligible charity, tax-free.

Mistake #3: Ignoring Tax-Loss Harvesting Opportunities

The end of the year is the perfect time for a tax efficiency review of your non-retirement brokerage accounts.

Market volatility in 2025 may have left you with investments that have declined in value (paper losses).

Relevant for Year-End: Tax-loss harvesting is the process of selling investments that are trading at a loss to offset any realized capital gains (and potentially up to $3,000 of ordinary income).

How to Avoid It:

• Talk to your financial advisor!

Mistake #4: Lacking a Defined 2026 Retirement Income Strategy

For retirees or those entering the Retirement Risk Zone, a major mistake is entering the new year without a clear tax-efficient withdrawal strategy.

You need a plan that dictates which accounts (taxable, tax-deferred, tax-free) you will draw from first in 2026.

Relevant for Year-End: Proactive planning minimizes your tax burden and protects your portfolio longevity. A well-defined strategy, like our approach to Advanced Time Segmentation, helps manage market sequence risk.

How to Avoid It:

• Model Your Withdrawals: Work with your advisor to project your 2026 income needs and determine the optimal mix of distributions from Roth IRAs, traditional IRAs, and taxable accounts to keep your taxable income low.
• Tax Bracket Management: Use year-end to consider a partial Roth conversion to "fill up" a lower tax bracket before 2026 starts, which could save you on future RMDs.
• Review Social Security Integration: Ensure your income strategy aligns with your planned Social Security claiming age.

And of course, talk to your advisor for more personalized recommendations for your plan.

Mistake #5: Neglecting to Review Your Beneficiary Designations

A Will and Trust are crucial, but your retirement accounts (401(k)s, IRAs, annuities) transfer to heirs based solely on the Beneficiary Designation Form.

If this form is outdated or missing, the assets will be subject to probate and may not pass to your desired beneficiaries.

Relevant for Year-End: Life changes, such as marriage, divorce, birth of grandchildren, or changes to estate law, mean your documents need an annual check-up. This simple administrative task has massive estate implications.

How to Avoid It:

• Locate the Forms: Pull up the latest beneficiary designation forms for every retirement account and life insurance policy.
• Verify Alignment: Check the primary and contingent beneficiaries against your current wishes and overall estate plan.
• Update Immediately: Ensure all forms are signed and processed by your custodian before the year ends.