Year-End Financial Planning Strategies for High Earners

There’s still time to make impactful tax decisions that could improve your financial position before the end of the year. 

Evaluate Retirement Contributions

As a high earner, you may be surprised to discover the significant opportunities that are still available for year-end retirement funding. Here’s a quick overview of 2025 retirement account contribution limits that you can make before year-end:

• 401(k), 403(b), 457 plans:
  Contribute up to $23,500 ($24,500 in 2026); there is an additional $7,500 ($8,000 in 2026) catch-up if age 50+
• Traditional IRA / Roth IRA:
  Up to $7,000 ($7,500 in 2026); an additional $1,000 ($1,100 in 2026) catch-up if age 50+
• SEP IRA (Self-Employed):
  The lesser of 25% of compensation or $70,000 (The lesser of 25% of compensation or $72,000 in 2026)
• SIMPLE IRA:
  Up to $16,500 ($17,000 in 2026); additional $3,500 ($4,000 in 2026) catch-up if age 50+
• Defined Benefit Plans:
  Contribution limits vary based on plan design and actuarial factors, often well above $100,000 for high earners.

If your income exceeds these limits, a backdoor Roth IRA contribution may be a suitable option. This involves contributing to a traditional IRA and then converting that amount to a Roth IRA. While the contribution itself isn’t deductible, future growth and withdrawals in the Roth can be tax-free, which can be an appealing strategy if you expect to be in a higher tax bracket during your initial retirement years.

A common year-end question among high earners is: “Does it make sense to convert part of my traditional IRA to a Roth?” The answer depends on your current tax bracket, expected future income, and estate planning goals. Converting before year-end allows you to prepay taxes on the converted amount now, in exchange for tax-free growth and tax-free withdrawals when you are retired. Roth IRAs also have no required minimum distributions (RMDs), giving you more control over when you withdraw funds and how your heirs inherit those assets in the future.

Understanding your total taxable income for the year is a critical first step. This includes wages, bonuses, rental income, dividends, and capital gains. By projecting your year-end income, a Birmingham financial advisor working with your CPA can determine the best contribution levels or conversions to avoid triggering higher tax brackets or phaseouts.

Optimize Charitable Giving

If charitable giving is part of your wealth strategy, here are the three most popular charitable giving strategies to consider for year-end tax planning. They can be especially valuable for you as a high-income earner looking for ways to reduce your tax burden.

Donor-Advised Funds (DAFs)

A Donor-Advised Fund allows you to make a sizable charitable contribution now, receive an immediate tax deduction, and distribute funds to the nonprofits of your choice over time (universities, hospitals, medical research). Some benefits of a DAF include: 

• Deduct the full contribution in the current tax year.
• Donate appreciated securities instead of cash to avoid capital gains taxes.
• Continue growing your charitable assets tax-free within the DAF.
• Ideal for “bunching” donations by combining multiple years of giving into one tax year.

Qualified Charitable Distributions (QCDs)

If you’re age 70½ or older, you can donate up to $108,000 in 2025 directly from your IRA to a qualified charity. Married couples filing jointly can donate $216,000 combined in 2025. Some benefits include: 

• Counts toward your Required Minimum Distribution (RMD).
• The distribution is excluded from taxable income, reducing both income and Medicare surcharge exposure.
• Keeps your Adjusted Gross Income (AGI) lower, which can have ripple effects on other tax credits or deductions.

Charitable Giving of Appreciated Assets

Donating long-term appreciated securities, such as stocks or mutual funds held for more than a year, can be a more tax-efficient way to make a cash donation. Benefits you may experience include: 

• Avoid capital gains tax on the appreciation.
• Provides a charitable deduction equal to the fair market value of the asset.
• Enables larger giving without increasing your out-of-pocket cost.

Year-end is a good time to review your portfolio’s performance and alignment with your broader goals, not just your taxes.

Are your investments still aligned with your goals, risk tolerance, and timelines? After a year of market fluctuations, your portfolio may have drifted from its intended allocations. Your BCR Wealth Strategies investment management team can help rebalance it to restore your intended strategy and manage your exposure to investment risk more effectively.

Tax-loss harvesting is strategically realizing losses in a way that reduces taxes on previously realized gains or providing a tax write-off while maintaining your allocation. However, these tactics should be integrated into your comprehensive wealth management plan, rather than being made as a series of one-off decisions. For instance, harvesting long-term gains can make sense in a year when your income is temporarily lower, allowing you to realize profits at more favorable tax rates.

You should also consider holding appreciated investments for more than a year, so you qualify for long-term capital gains rates. Using tax-efficient ETFs, municipal bonds, and other vehicles can help reduce ongoing tax liabilities in taxable accounts, in particular for high earners subject to the 3.8% net investment income tax.

For many high-income professionals, the final quarter of the year can bring bonuses, restricted stock units (RSUs), or other forms of financial rewards. While this income can be substantial, it can also create unexpected tax consequences if not managed strategically. 

At BCR Wealth Strategies, we help clients anticipate these scenarios, coordinate with their tax professionals, meet safe harbor rules, avoid penalties, and invest the assets.

Year-end is the right time to review how your cash bonus and equity compensation align with your broader financial planning and tax strategies.

• Manage Your Withholding to Avoid Surprises: Bonuses are typically taxed at a higher flat rate (currently 22% federally for supplemental income up to $1 million, and 37% for amounts above that threshold). However, this withholding may not match your actual marginal tax rate, especially if your total income places you in a higher bracket.

Example: Let’s say you earn a $400,000 salary and receive a $100,000 year-end cash bonus. Your employer withholds 22%, or $22,000, for federal taxes. But your total income now pushes you into the 35% federal bracket, meaning you’ll owe an additional $13,000 at tax time. To avoid that surprise, you can:

• Adjust your Form W-4 to increase withholding before the end of the year to avoid potential tax issues.
• Make an estimated tax payment to the IRS in December.
• Review your full-year income projection with your advisor and CPA.
• Understanding How RSUs Are Taxed: Restricted Stock Units (RSUs) are a frequent part of many executive equity compensation packages. They generally vest over a set period and are taxed as ordinary income once vested, using the fair market value of the shares at that time to determine the taxable amount.
• Example: Suppose you receive 2,000 RSUs that vest on December 15th when the company’s stock is trading at $50 per share. That $100,000 stock bonus is added to your taxable income for the year. If the stock later rises to $75 and you sell, the $25 increase per share would be taxed as a capital gain. If your RSUs are set to vest late in the year, it may make sense to review the timing with your employer’s HR or payroll department. In some cases, deferring the vesting date (if allowed) could shift the taxable event into the following year, when you may be in a lower bracket.

• Evaluate the 83(b) Election for Company Stock: When you receive restricted stock awards (RSAs), different from RSUs, you may be eligible to file an 83(b) election within 60 days of the grant date. This allows you to recognize the stock’s value at the time of grant rather than when it vests.

• Why it matters:
  • If the company’s stock value is low at the time of the grant but expected to grow, paying tax early on a lower amount can significantly reduce your long-term tax burden. 
  • Example: You receive 10,000 shares of restricted stock valued at $1 each. You file an 83(b) election and pay income tax on $10,000 now. Five years later, when the shares are worth $10 each, your taxable event is complete, and you’ll only pay capital gains tax on the appreciation ($9 per share) when you sell.
  • If you had not filed the election, the entire $100,000 value at vesting would be taxed as ordinary income, a far more expensive outcome for most high earners.
• Coordinate Timing with Other Income and Deductions: Year-end planning involves considering the big picture, including all your alternatives. If you’re receiving a large bonus or have RSUs vesting this year, it could push you into a higher tax bracket, affect your Net Investment Income Tax (NIIT), or reduce itemized deductions through income phaseouts. You may be able to offset this by: 
• Maxing out retirement contributions before year-end (401(k), IRA, or defined benefit plans).
• Bunching charitable gifts into a Donor-Advised Fund (DAF) to increase deductions.
• Harvesting investment losses to offset capital gains. 
• Example: If your RSUs vest in December and you expect an additional $200,000 in income, contributing to a Donor-Advised Fund or making a Roth conversion could strategically manage your taxable income for the year.

At BCR Wealth Strategies, our Birmingham financial planners help clients analyze these trade-offs within the context of their broader wealth management plan, rather than just as a series of one-time tax decisions.

• Integrate Your Bonus and Equity into Long-Term Planning: Bonuses and stock-based compensation can create concentrated stock positions that increase portfolio risk. Instead of letting these assets keep accumulating without a plan, consider how they fit within your overall investment management strategy:

  • Example: If your RSUs or stock options represent 25% or more of your net worth, it may be time to diversify. Selling some shares when they vest, despite the tax implications, can help reduce risk and fund other goals, such as retirement contributions or family trusts.

  • A financial advisor in Birmingham can help you develop a sales strategy that strikes a balance between diversification and tax efficiency.

• Manage Withholding and Safe Harbor Rules: Bonuses can also be subject to higher withholding rates, but that doesn’t always match your actual tax obligation. Review your total year-to-date withholdings to confirm whether you’ll meet IRS safe harbor rules and avoid penalties. Adjusting withholding now can prevent surprises on April 15th.

• Understand the 83(b) Election: If you’ve received company stock or equity grants, the 83(b) election may be a valuable option. Filing this election within 60 days of the grant date allows you to:

• Recognize income based on the stock’s fair market value at the time of the grant, and not after you vest.

• Pay ordinary income tax when the value is low, then benefit from long-term capital gains treatment on future growth.

• Start the holding period immediately, accelerating access to long-term tax rates.

• The 83(b) election may not be right for everyone, especially if the company’s future value is uncertain. Still, it can be an effective way to reduce future tax exposure for high-growth equity compensation.

While tax and investment decisions often dominate year-end reviews, comprehensive financial planning should take a broader view that supports your family’s financial security and legacy.

Financial planning doesn’t stop once you’ve maxed out your retirement accounts or finalized your charitable contributions. Comprehensive, holistic wealth management should extend across every facet of your financial life, from risk and healthcare to legacy and lifestyle.

Here are several key areas to consider as a high earner, as part of your fourth quarter or year-end financial review.

1. Risk Management and Insurance Planning

Insurance should be an integral part of a comprehensive financial plan. As your wealth grows, so do the potential risks - you have more to lose. Review your coverages annually to ensure they continue to align with your lifestyle, assets, risk exposure, and other potential liabilities.

• Life Insurance: Determine whether existing policies are sufficient to cover income replacement needs, estate taxes, or business succession goals. As a high earner, you may also want to explore permanent life insurance as part of a legacy or a tax-efficient wealth transfer strategy.
• Disability Insurance: If your income is your largest asset, protecting it is even more critical. Review both employer-provided and supplemental policies to ensure they reflect your current earnings.
• Umbrella Liability Coverage: This is one of the most overlooked tools for high-net-worth families. A personal umbrella policy can provide several million dollars of additional protection beyond home and auto insurance, a cost-effective safeguard against potential lawsuits or accidents.
• Property and Specialty Coverage: Ensure adequate protection for second homes, valuable collectables, or other assets that may not be fully covered under standard policies.

Hypothetical Example: A Birmingham business owner with multiple rental properties may find that increasing their umbrella coverage from $1 million to $5 million adds less than $1,000 per year to premiums, yet offers significantly more protection for their families and heirs.

2. Healthcare and Long-Term Care Planning

Even high earners can underestimate the financial impact of rapidly rising healthcare costs, particularly in retirement and late in life. Rising medical costs, Medicare premiums, and long-term care expenses can erode savings much faster than expected.

• Health Savings Accounts (HSAs): If you have a high-deductible health plan that covers you, consider fully funding a Health Savings Account (HSA), up to $4,300 for individuals and $8,550 for families in 2025, with an additional $1,000 catch-up for those age 55 and older. An HSA provides a rare triple tax advantage: your contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are completely tax-free.
• Medicare Planning: If you’re approaching retirement at age 65, timing your Medicare enrollment and reviewing potential IRMAA surcharges (income-related premium adjustments) is crucial. Year-end tax moves can affect these costs two years down the road.
  
• Long-Term Care Insurance: Evaluate whether self-funding or long-term care insurance fits your family’s situation. These decisions are easier and more affordable when made in your 50s rather than your 70s.

3. Estate and Legacy Planning

Estate planning is more than drafting a will; it’s about maintaining control over how your wealth benefits future generations and the charities of your choice.

• Review Estate Documents: Wills, powers of attorney, and healthcare directives should reflect your current wishes and family dynamics.
  
• Update Beneficiaries: Ensure all accounts, including IRAs, 401(k)s, life insurance, and brokerage accounts, have the correct beneficiaries and allocations. Outdated designations can unintentionally override your estate plan.
  
• Trust Strategies: Consider establishing revocable or irrevocable trusts to manage wealth transfers more efficiently, reduce estate taxes, and protect inheritances for heirs.
  
• Lifetime Gifting: Leverage the current high estate and gift tax exemption, which was increased in 2025 to $15,000,000 a year per individual or $30,000,000 for married couples.

4. Tax-Efficient Investment and Withdrawal Planning

Beyond simple portfolio management, consider how your assets are structured across multiple accounts. The location of your investments in particular accounts can not only impact allocation but also influence your long-term tax efficiency.

• Asset Location: Hold income-producing investments (like bonds or REITs) in tax-deferred accounts and growth-oriented assets in taxable accounts where long-term capital gains rates apply on realized gains.
  
• Withdrawal Strategy: If you’re retired, coordinate withdrawals between taxable, tax-deferred, and tax-free accounts to manage your annual tax liabilities.
  
• Tax-Loss Harvesting: Use market volatility to realize losses that offset gains and reduce taxable income while keeping your portfolio on track through reinvestment.

5. Education and Family Support Planning

If helping children or grandchildren is part of your legacy, year-end is a good time to revisit education funding, gifting, and family financial structures.

• 529 College Savings Plans: Contributions grow tax-free when used for qualified education expenses. Some states, with state income tax, offer a state income tax deduction for contributions up to a certain amount.
  
• Gifting Strategies: You can give up to $19,000 per recipient (or $38,000 per couple) annually without triggering gift tax reporting. Strategic gifting can help reduce future estate tax liabilities while funding important family goals.
  
• Trusts for Younger Generations: Consider education or incentive trusts that promote responsible wealth transfer, striking a balance between support and a structure you control.
  

Example: A couple gifts $38,000 each to their three grandchildren’s 529 plans in December, locking in a $114,000 reduction in their taxable estate for the year while funding future tuition costs.

6. Business or Practice Planning

For entrepreneurs, professionals, executives, and business owners, year-end is the right time to review entity structure, succession planning, and deferred compensation.

• Entity Review: Determine whether your S-Corp, LLC, or partnership structure continues to provide optimal tax treatment.
  
• Deferred Compensation: Explore setting up or revisiting non-qualified deferred compensation plans to manage income recognition and retirement funding.
  
• Buy-Sell and Succession Planning: Ensure valuation, funding mechanisms, and ownership agreements are updated to reflect current realities.
  

Example: A Birmingham medical professional nearing retirement collaborates with BCR Wealth Strategies and their CPA to adjust S-Corp salary and profit distributions, striking a balance between payroll tax savings and retirement contributions.

7. Lifestyle and Philanthropic Alignment

Finally, financial success is most rewarding when it supports a purposeful life. Reassess your spending, travel, and charitable goals annually to ensure your wealth is in alignment with what matters most to you and your family.

At BCR Wealth Strategies, we often help clients integrate philanthropy and family experiences into their financial plans, not as afterthoughts, but as intentional parts of a well-rounded life strategy.

When your financial life includes multiple moving parts, such as investments, taxes, insurance, and estate planning, it’s easy for each professional (planner, investment advisor, CPA, attorney) to work in isolation from each other. 

That’s where a coordinated wealth approach becomes essential. Without one, even well-intentioned strategies can create conflicts, inefficiencies like conflicting advice or duplicate fees, missed tax opportunities, or unnecessary risk exposure.

At BCR Wealth Strategies, we serve as your financial quarterback, the central point of contact who brings all aspects of your financial life together. Our team collaborates directly with your other advisors to make sure every decision aligns with the pursuit of your overall wealth plan. Whether it’s timing a Roth conversion, structuring a trust, or updating insurance coverage, we examine how each piece fits into your broader long-term objectives.

This coordinated business model helps simplify complexities and ensure that no meaningful opportunity slips through the cracks. Instead of juggling multiple advisors who may not be communicating with each other, you have a single, unified strategy led by a dedicated team focused on your best interests. 

For high earners and families with substantial assets, this approach can be the difference between a collection of good ideas and a truly integrated plan designed to preserve, grow, and transfer your wealth to multiple generations.

At BCR Wealth, we make coordination the core of our wealth management process.

While year-end planning is critical, the most successful financial outcomes come from ongoing collaboration throughout the year.

• Adapt to Market Changes: Markets fluctuate, and so will your portfolio. A disciplined investment management process, such as the one we use at BCR Wealth, focuses on fundamentals and diversification, rather than being swayed by short-term noise. Regular reviews help ensure your portfolio continues to align with your goals and risk profile.

• Adjust to Life’s Transitions: Major life events such as the sale of a business, a death in the family, or an inheritance, can change your financial priorities overnight. Having a dedicated financial advisor in Birmingham who knows your entire situation means adjustments can be made quickly and efficiently. 
• Keep Taxes in Focus All Year: Tax planning shouldn’t just happen in December. Coordination between your CPA and financial advisor throughout the year helps you identify opportunities as they arise, whether that’s realizing capital losses, timing charitable gifts, or making estimated tax payments more strategically.

If you have multiple investment accounts, stock options, real estate, and business interests, each with its own unique tax implications and complexities, working with a fiduciary wealth management team like BCR Wealth Strategies can add significant long-term value.

Our advisors provide:

• Comprehensive financial planning to connect taxes, investments, and long-term goals
• In-house investment management tailored to your objectives and risk tolerance
• Coordination with CPAs and estate attorneys to make your decision-making more efficient
  

With over two decades of experience serving clients across Birmingham and beyond, BCR Wealth helps simplify the financial decisions that matter most, so you can focus on what matters most to you: Family, career, business, legacy.

Want to learn more about our year-end tax planning strategies? Connect with us.