Written by Lars Lambrecht, CFP, CLU, BFA, AMPA, CDFA, CLTC, CSLP, owner of Island Time Financial Services, Inc.
2025 is almost over! December is a great time to review and reset your goals and finances for 2026. I am including some major areas to be thinking about.
Goals. This is a great time to reflect and refine your short and long-term goals. There is a popular Harvard study on goals and income. Graduates were asked if they set clear written goals and created a plan to accomplish them, and were then studied over 10 years. 84% did not have specific goals. 13% had specific goals that were not in writing. These folks were earning on average TWO times as much as those with no goals. Only 3% had written goals and a plan. This group was earning on average TEN times as the other graduates. I am not suggesting you will earn more money by writing out your goals, but the likelihood of achieving your goals starts with defining them and creating a plan. Consider setting goals for your finances, health and relationships. Short term goals are things you want to accomplish in the next year. Do you want to modify your exercise or diet? Perhaps you want to plan a regular date night or special trips for your significant other. Would you like to join a new organization or get involved in new charitable activities? Do you want to build your cash reserve? Longer term goals might include firming up retirement plans, college planning, purchase of real estate, paying off debts or a special trip.
Savings Programs. This is a great time to review how much you are saving regularly. For 2026, the savings limit for employer retirement plans is $24,500 ($32,500 if you are 50+ years old). If you are not maximizing this, consider increasing your contribution by 1% every 6-12 months. If you are earning $100,000, a 1% increase translates to approximately $15 per week. However, if you do this over 5 years, you will eventually be saving an additional 10%. Psychologically, this is a great way to “trick” yourself into saving more and more over time. It is also a good time to look at other vehicles like 529 Plans (college savings), cash reserve savings, and savings into IRAs and investments. Consider increasing your savings, but at least $25 per month. If you make more than $145,000 the rules change for 401(k) contributions, so speak with your advisor about this. IRA and Roth IRA limits increase to $7,500 in 2026 ($8,000 if you are over the age of 50). HSA limits increase to $4,400 or $8,750 (plus an additional $1,000 if you are over the age of 55).
Tax Strategies. If you are eligible to contribute to a Roth IRA or Health Savings Account, you can make contributions through April 15, 2026. If you are self-employed and don’t have a retirement plan, you can establish a SEP Retirement Plan up. Self-employed individuals can contribute to existing plans up until they file their return. Consider increasing pre-tax contributions to your work retirement plan or Health Savings Account. Charitable rules are also changing in 2026, so you may want to discuss these strategies with your advisor.
Required Minimum Distributions (RMDs). If you are 73+ years old, or if you inherited a retirement account, the IRS requires an annual RMD. If you fail to take this RMD, there is a 25% penalty tax! If you are turning 73 in 2025, you have the option of taking your first RMD by 12/31/25 or 4/1/26. However, if you take this first distribution in 2026, you will need to take two distributions. Your RMD is calculated based on your life expectancy and balance of the accounts on 12/31/24.
As always, I am happy to be a resource to answer questions in any of these areas, or provide a second opinion on your current financial plan.
Lars Lambrecht, Rehoboth resident and Certified Financial Planner, is available to answer questions or meet for a consultation. 617-947-6428
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