As another year draws to a close, it’s easy to let December slip by in a blur of holiday planning and travel.

But for investors with substantial portfolios, the final weeks of the year represent a critical window to make strategic decisions that could significantly impact your taxes and retirement security for years to come.

Strategic planning now could help you reduce your tax burden, optimize your portfolio, and position yourself for a stronger financial future in 2026.

Here are five strategies you may want to consider.

Quick Summary: Your Action Items Before December 31

  • Rebalance if your portfolio drifted from target allocation.
  • Harvest losses to offset capital gains.
  • Complete Roth conversions if you’re in a lower tax bracket.
  • Take your RMD if you’re 73+ to avoid a 25% penalty.
  • Make charitable gifts via QCD (70½+) or bunch donations.

Let’s break each one down in detail so you can determine if any apply to your situation.

1. Portfolio Rebalancing

If strong market performance pushed your 60/40 portfolio to 70/30, you’re now taking on more risk than you originally intended. December is an ideal time to rebalance because you can coordinate it with other tax moves like tax-loss harvesting.

For example, a $750,000 portfolio that drifted from 60/40 to 70/30 may require moving roughly $75,000 from equities to fixed income. This is a significant adjustment that demands careful execution across your taxable and tax-deferred accounts.

The complexity comes in deciding where and how to rebalance.

Should you make the adjustment in taxable accounts or tax-deferred accounts? Should you use new contributions to shift your allocation, or do you need to actually sell positions? Can you time these sales to offset other gains?

Each of these decisions interacts with the other planning moves on this list. These aren’t easy questions to answer on your own, and getting the sequencing wrong could cost you thousands in unnecessary taxes or missed opportunities.

This is where working with a holistic advisor who understands how these pieces fit together becomes invaluable.

2. Tax-Loss Harvesting

Tax-loss harvesting involves selling investments at a loss to offset your capital gains dollar-for-dollar. If your losses exceed your gains, you can offset up to $3,000 of ordinary income and carry any remaining losses forward indefinitely.

The complication comes from the wash-sale rule, which prohibits you from buying back the same (or substantially identical) investment within 30 days before or after the sale.

If you violate this rule, the IRS disallows the loss. For investors with a $500,000 equity position, being out of the market during that 30-day window introduces timing risk that needs careful consideration.

3. Roth Conversions (December 31 Deadline)

If you’re considering converting traditional IRA funds to a Roth IRA, you must complete the conversion by December 31 for it to count toward 2025 taxes.

This tactic can be especially valuable for retirees who are in lower tax brackets now than they expect to be in the future.

However, converting too much can push you into a higher bracket or trigger increased Medicare premiums.

For example, a married couple with $100,000 in taxable income has room to convert additional funds before hitting the next tax bracket. The challenge is that calculating the optimal conversion amount requires factoring in all your income sources and understanding how the conversion affects Social Security taxation.

4. Required Minimum Distributions (December 31 Deadline)

Anyone 73 or older who misses their Required Minimum Distribution will face a 25% penalty on the amount that should have been withdrawn.

For someone with a $1 million IRA, that’s a potential $10,000 penalty. But taking your RMD isn’t just about avoiding the penalty. It also helps you time the distribution tax-efficiently and know what to do with the funds once you receive them.

On another note, traditional and Roth IRA contributions have until April 15, 2026, to count toward 2025, so those don’t require immediate year-end action.

5. Charitable Giving Strategies

Donors age 70½ or older can contribute up to $108,000 directly from their IRA to charity through a Qualified Charitable Distribution (QCD).

This option allows the distribution to count toward your RMD without being included in your taxable income, often making it more valuable than taking the distribution and then donating the cash separately.

The December 31 deadline is firm, and your check must clear by before the year ends.

For those who don’t itemize, there’s another approach worth considering. With the standard deduction at $30,000 for married couples, many retirees no longer receive a tax benefit from charitable donations.

“Bunching” multiple years of giving into one year can help you exceed the standard deduction threshold. For example, if you typically give $15,000 annually to charity, you might consider contributing $45,000 in one year to maximize your tax benefit.

Donor-Advised Funds make this option even more flexible by letting you take the deduction immediately while distributing the funds to charities over time.

Bringing It All Together: The Bucket Plan® Framework

By now you might be wondering:

  • How do you actually coordinate all of these decisions?
  • Should you harvest losses before or after rebalancing?
  • Does your Roth conversion amount change if you’re doing a QCD?
  • Which account should you rebalance first?

This is where having a framework becomes essential.

At Prosperity Capital Advisors, we use The Bucket Plan® framework to help clients organize these decisions around three time horizons:

  • Now Bucket (0-2 years): Immediate spending money
  • Soon Bucket (3-10 years): Intermediate-term growth with moderate risk
  • Later Bucket (10+ years): Long-term growth and legacy assets

When you view your year-end decisions through this time-segmented lens, it becomes clearer which moves to prioritize and how to sequence them based on when you’ll actually need the money.

Ready to Coordinate Your Year-End Plan?

Coordinating these strategies can get complicated quickly, especially when one decision can significantly affect all the others.

That’s exactly why Prosperity Capital Advisors built The Bucket Plan framework and why all our advisors are trained in using it to help families like yours make sense of these time-sensitive decisions.

The December 31 deadline is closer than you think. Let’s talk about your specific situation.

Find an advisor to discuss your year-end planning priorities.

Frequently Asked Questions

Should I rebalance my investment portfolio in December?

December is a smart time to rebalance if your portfolio has drifted from your target allocation. You can coordinate this with tax-loss harvesting to minimize the tax impact. The right approach depends on how far you’ve drifted and your specific tax situation.

How does tax-loss harvesting work?

You sell investments at a loss to offset capital gains. Losses beyond your gains can offset up to $3,000 of ordinary income annually, with any excess carried forward. Just watch the wash-sale rule—you can’t repurchase the same investment within 30 days.

What is the deadline for Roth conversions and RMDs?

Both have December 31 deadlines. Complete Roth conversions by year-end for them to count toward 2025. Miss your RMD, and you’ll face a 25% penalty on the amount you should have withdrawn.