Finish Strong 2025: Because Money Doesn't Plan Itself

Planning for prosperity

With 2026 coming into view, this is your annual invitation to hit “pause” and take inventory of your financial life. Think back over 2025: Where did your money actually go? And did those dollars follow your values, or did they wander away like a golden retriever off its leash?

Maybe you took on a renovation, booked the kind of trip that becomes family lore, or pushed ahead on college savings. Were those choices intentional, or did life just throw something shiny at you? Did you stay on top of your budget, or did it stage a quiet rebellion?

Life shifts, too. A new job, a new baby, an empty nest, the start of retirement, any of these can tilt your financial landscape and call for a refreshed plan.

If you don’t have a plan yet, no shame. The second-best time to start one is right now. Whether you’re optimizing every dollar or sitting on a surplus, a clear plan gives you direction. It helps you spend with purpose, unlike the impulse purchases that plague so many of us.

Here’s the truth most people avoid: financial freedom isn’t about hoarding as much as humanly possible. It’s about defining what “enough” actually means for you. And that definition is nearly impossible to land without goals and a plan.

Consider this your nudge to finish the year with intention and step into the new one with clarity.

Just. get. started.

Check in on your investments

· Replenish your emergency fund

If your emergency fund took a hit this year, refill it. If you don’t have one yet, now’s the time. It’s your shock absorber. The thing that keeps a blown car transmission or a surprise medical bill from wrecking your long-term investments.

Cash yields have cooled a bit from their 2023–2024 highs, but many money market funds and short-term CDs are still hovering around ~4%. Not jackpot returns, but a whole lot better than leaving cash in a zero-interest zombie account.

· Top off retirement contributions

Maxing (or at least increasing) contributions is still one of the easiest, most boring, and most powerful wealth moves.

2025 retirement limits:

• 401(k), 403(b), and 457 plans: employee contribution limit rose to $23,500

• Catch-up (age 50+): still $7,500, for a total of $31,000; (Starting in 2025, those between ages 60-63 can contribute an enhanced catch-up of $11,250 instead of $7,500 for a total of $34,750)

• Traditional & Roth IRA: still $7,000 (+$1,000 catch-up)

• HSA contributions: $4,300 individual / $8,550 family (+$1,000 catch-up)

If you’ve got an HSA, remember it’s the trifecta of the tax code. Tax deduction going in, tax-free growth, tax-free qualified withdrawals. And yes, many HSAs let you invest the money, but research has found that only 12% of account holders invest in assets other than cash. Explore your options.

Pro-tip: If money is tight during the holidays, use the IRA extension. Contributions made up to April 15, 2026, can still count toward your 2025 limit.

Tax planning strategies for high-income earners

· Consider a mega-backdoor Roth (or its smaller sibling)

If your workplace plan allows a mega-backdoor Roth, you would first max out your normal 401(k) contributions, then contribute after-tax dollars up to the 2025 overall account limit (including employer matches) of $70,000 ($77,500 if age 50+). You’ll want to rollover those after-tax funds (“in-service distribution”) as quickly as possible to a Roth 401(k) or to a Roth IRA to minimize any tax on investment returns.

If your plan doesn’t permit after-tax contributions and in-service rollovers, the regular backdoor Roth is still a solid move: contribute after-tax dollars (up to $7,000) to a traditional IRA, then convert it to a Roth. Just watch out for the IRA pro-rata rule. If you have other pre-tax IRA balances, the conversion can generate an unexpected tax bill. (For a deeper dive on backdoor Roth conversions, see here for a post by James Baldwin.)

And if you can’t do either for 2025, why not get it set up for 2026?

· Tax-loss harvesting

Every December, the same headline shows up: “Investors are tax-loss harvesting.” But with markets again approaching new highs, most losses are probably coming from one place: individual stock picks that went sideways.

Harvesting losses can offset realized gains and up to $3,000 of regular income, but remember the wash-sale rule: don’t repurchase the same (or “substantially identical”) investment within 30 days before or after the sale.

And always ask the uncomfortable, but important question: How is it that I have losing positions in a rising market? A friendly reminder: picking individual stock winners is difficult (even for professionals) and usually humbling.

Charitable giving

· Bunch your donations

Clustering your charitable gifts into a single year can help you exceed the itemization threshold and significantly increase your deduction. This is particularly effective in 2025, since stricter limitations take effect in 2026.

· Donate appreciated assets

If you’re charitably minded and sitting on big, embedded gains, donating stocks or ETFs directly is one of the most tax-efficient moves available. You avoid the capital gain entirely and can deduct the full fair market value if you itemize.

Pro-tip: Donor-advised funds let you contribute and deduct now, but spread the actual gifting over multiple years.

Gifting to family: charity begins at home

The season of giving isn’t limited to nonprofits. Sometimes the most meaningful gifts aren’t written to a foundation. They’re handed to the people you care about most. And if you’re planning to support family financially, consider gifting appreciated assets instead of cash.

Why? Because it can be a tax win for everyone involved.

When you gift ETFs or stocks that have gone up in value, you don’t owe capital gains tax on the appreciation. The recipient takes over your original cost basis and holding period (stepping into your tax shoes). If they’re in a lower tax bracket, especially the 0% long-term capital gains bracket, selling those appreciated shares could cost them far less in taxes than it would cost you.

That’s real money kept inside the family ecosystem without any IRS drama.

A few quick guardrails to keep things tidy:

• Annual gifting exclusion: You can give up to the annual exclusion amount without filing a gift tax return ($19,000 per recipient in 2025). Married couples can effectively double that.

• Mind the kiddie tax: If you’re gifting to minors, remember that unearned income above certain thresholds can get taxed at the parents’ rate. It’s not a dealbreaker, just something to factor into the timing and amount of transfers.

Thoughtful gifting isn’t just generosity. It’s strategic. And it’s one more way to align your money with your values while keeping more of it working for the people you love.

Block out the noise

‘Tis the season for the annual “Best Stocks of 2025!” lists. These lists are to investors what dessert carts are to dieters. Tempting, flashy, and usually a trap.

Chasing last year’s winners is like buying a house because you like the color of the window trim and front door. Pretty? Sure. Smart? Not usually.

Markets rotate. Leaders become laggards. Laggards become leaders. Twelve months of performance won’t tell you who wins the marathon.

Change investments when they no longer fit your plan or investment thesis, not because a headline whispered sweet nothings in your ear.

Some of these strategies can get tricky, so talk to a professional if needed.

And remember: no one has ever found happiness in a spreadsheet. Review (or create) your plan, make smart adjustments, then get back to living your life!

As always, invest often and wisely. Thank you for reading.

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The content provided is for informational and educational purposes only. It does not constitute legal, tax, investment, financial, or other advice. You are welcome to share, quote, or use the content — including for research or machine learning — please credit Cosmo P. DeStefano and link to www.CosmoDeStefano.com.

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Originally published at www.CosmoDeStefano.com