5 Retirement Planning Moves to Make Before 2027
We are fast approaching the end of the year. Yes, it is almost September, and the holidays are right around the corner! Time is flying!
As the year comes to a close, it’s easy to focus on the holidays and lose track of your finances. But for those approaching or already in retirement, the final few months of the year can be an important time for year-end financial planning.
There are several retirement planning decisions that have a December 31 deadline. Once that deadline passes, some opportunities are gone for good. It is also much easier to make informed decisions when you have a clearer picture of your income, taxes, and spending for the year.
With that in mind, here are five retirement planning moves to review before the calendar turns to 2027.
1) Review Your Tax Bracket
Understanding your tax bracket can lead to important planning opportunities and help ensure you aren't paying more in taxes than necessary.
If you recently retired and your income is lower than usual, it may be a good time to take advantage of a lower tax bracket. One way to do this is through a Roth conversion, where you convert money from a traditional IRA to a Roth IRA and pay income taxes on the amount converted today.
For example, if your income has dropped after retiring, you may be able to convert some of your traditional IRA to a Roth IRA while staying within a lower tax bracket. You are essentially choosing to pay taxes now rather than potentially paying taxes at a higher rate in the future.
We often tell our clients that tax planning isn't necessarily about lowering your tax bill in the current year. Instead, it is about looking at the bigger picture and finding ways to minimize the amount of taxes you pay over your lifetime.
A year-end review is a good opportunity to look at your projected income for the year and determine whether a Roth conversion makes sense for you.
2) Make Sure Your RMD is Taken
Once you reach the applicable age, you are required to start taking Required Minimum Distributions (RMDs) from most pre-tax retirement accounts each year.
For most people who are already subject to RMDs, the deadline is December 31. There is an exception for your first RMD, which can generally be delayed until April 1 of the following year. However, delaying your first RMD means you will generally have to take two RMDs in that following year.
If you fail to take your RMD by the deadline, the amount you should have withdrawn can be subject to an IRS penalty. That makes it important to review your RMD and make sure it is taken on time.
RMDs are generally taxable as ordinary income, so they can have a meaningful effect on your overall tax picture. It is wise to review your RMD every year and consider whether you should have taxes withheld from the distribution so you aren't surprised by a large tax bill when you file your return.
For some retirees, an RMD provides income they need to fund their lifestyle. For others, the money may not be needed for living expenses. If you don't need your RMD to cover your expenses, there may be other planning opportunities to consider, including charitable giving through a Qualified Charitable Distribution.
3) Consider a Qualified Charitable Distribution
If you are charitably inclined, a Qualified Charitable Distribution (QCD) can be a great way to give to charity in a tax-efficient manner.
A QCD allows eligible IRA owners to make a charitable donation directly from their IRA to a qualifying charity. The distribution can count toward your RMD while generally being excluded from your taxable income.
This is valuable because a QCD can reduce your Adjusted Gross Income (AGI) as opposed to taking a taxable IRA distribution and then making a charitable contribution separately.
Your AGI can affect other areas such as Medicare premiums through Income-Related Monthly Adjustment Amounts (IRMAA).
If you are already planning to give to charity, a QCD may allow you to satisfy part or all of your RMD while keeping that income out of your AGI.
The important thing is to plan ahead. The distribution generally needs to be made directly from your IRA to the qualifying charity, and you should allow enough time for the transaction to be completed before year-end.
4) Review Your Investment Portfolio
The end of the year is a great time to sit down and review your investment portfolio.
Throughout the year, the market moves and some investments may have gone up while others have gone down. As a result, your portfolio may no longer be invested according to your target allocation.
If your portfolio has drifted from its target allocation, year-end can be a good time to rebalance your investments and get everything back in line with your financial plan.
For investments held in a taxable account that have declined in value, you may also have an opportunity to harvest investment losses and use them to offset capital gains, subject to the applicable tax rules.
Travis wrote a great article about this topic last October:
Your investment portfolio should also be reviewed in the context of your retirement income needs. If you know you will need a large amount of money early next year, it may make sense to make sure those funds aren't exposed to more market volatility than necessary.
5) Build Your 2027 Retirement Income Plan
Each year, it is important to look at your expenses and determine where your income will come from to fund your lifestyle.
For those approaching retirement, you might be used to having a consistent paycheck come in every month that you can rely on. In retirement, you may not have that same paycheck anymore. Instead, you'll likely rely on a combination of Social Security, pensions, and withdrawals from your investment and retirement accounts.
Before 2027 begins, consider how much you expect to spend and where that money will come from.
If you have any large expenses coming up, make sure you have money set aside to cover them. Depending on your situation, this might mean keeping some funds in cash or fixed-income investments so you aren't forced to sell stocks during a market downturn to pay for an expense.
Having a retirement income plan in place can also help you avoid making spending decisions based solely on short-term market movements.
The goal isn't to predict what the stock market will do next year. It's to know that you have a plan for where your income will come from regardless of what the market does.
Don't Wait Until December
You don't have to wait until December to start thinking about these five items.
The earlier you review your financial plan, the more time you have to identify opportunities, make adjustments, and coordinate with your financial advisor, CPA, or other professionals.
As we approach the end of 2026, take some time to ask yourself:
Am I taking advantage of the tax planning opportunities available to me?
Have I completed my RMD?
Should I consider a QCD?
Is my investment portfolio still aligned with my goals?
And do I have a clear plan for my retirement income in 2027?
A year-end review can help you answer these questions and start the new year with greater confidence.
Owen Lahr, CFP®
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