MARGARET GILES and CHRISTINE BENZ of Morningstar
As 2025 winds down, here are some moves to help you finish the year strong financially. Morningstar’s director of personal finance and retirement planning, Christine Benz, discusses strategies.
This interview has been edited for length and clarity.
Benefits of Rebalancing Your Portfolio
Q: What are the benefits of portfolio rebalancing, and who most needs to do it?
A: The main benefit of rebalancing is risk reduction. You trim securities that have performed really well, presumably ones with higher valuations today. And you redirect the money into securities where returns have lagged, but valuations might be more attractive. It’s also important to rebalance on an ongoing basis as you get closer to your spending target.
As retirement approaches, we need to spend that money, so you want to de-risk your portfolio and build safer asset reserves. Investors age 50 and above really need to take notice of rebalancing. It’s time to take some winnings and build safer assets that you could access if you needed to spend from your portfolio. Moving money into high-quality bonds removes risk and takes advantage of current attractive yields.
Why Investors Saving for Retirement Should Check Their International Allocation
Q: What do you recommend for people who are still working and saving for retirement?
A: They should rebalance as well, but their main consideration should be their U.S. versus non-U.S. exposure. Most investors are underallocated in international stocks. Consider your style diversification as well, paying attention to underperforming areas.
Review your retirement contributions, to see if you can boost or even max out your company retirement plan for the year. People over 50 can make catch-up contributions, and there are special catch-up contributions this year for people between 60 and 63. You can contribute to IRAs and HSAs until the tax filing deadline.
How to Use RMDs to Help With Rebalancing
Q: How can people over 73 connect their RMDs with portfolio rebalancing?
A: Required minimum distributions must be taken on time, but they can also help meet your rebalancing. By using appreciated securities to meet your RMD, you de-risk your portfolio, satisfy the IRS’ obligations, and may free up assets to supply your cash flow needs for next year.
Why Investors Should Check Their Insurance Coverage
Q: Is it also a good time to look at your insurance coverage?
A: Whether you are doing open enrollment for employer-provided health care or for Medicare, it’s important to shop around. Take stock of what has changed in your situation, and in the plans on offer. This is particularly important for employer-provided plans, which change frequently. Married couples often select whichever spouse’s plan looks better and most affordable, but sometimes it’s more cost-effective for each partner to be covered by their own company’s plan.
How Qualified Charitable Contributions Can Help With RMDs
Q: How can charitable donations connect with RMDs and lessen your portfolio risk?
A: Investors with highly appreciated holdings in taxable accounts should consider giving appreciated assets directly to charity or sending them to a donor-advised fund. You can disburse from the donor-advised fund to charities over multiple years. Donating removes a highly appreciated asset from your portfolio, which can lessen risk, and removes the tax liability associated with that holding. You won’t owe taxes on donated funds, and you could get a tax deduction.
People age 70 and a half and older can use the qualified charitable distribution to donate part of an IRA to charity. The amount donated is not taxable to you, and it will satisfy your RMD. If you’re not yet subject to RMDs, it will at least shrink the amount of your IRA that will be subject to RMDs.
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This article was provided to The Associated Press by Morningstar. For more personal finance content, go to https://www.morningstar.com/personal-finance
Margaret Giles is a senior editor of content development for Morningstar.
Christine Benz is director of personal finance and retirement planning for Morningstar.
Related Links
- 1. IRS Adds New Reporting Code for Charitable IRA Gifts
https://www.morningstar.com/retirement/irs-adds-new-reporting-code-charitable-ira-gifts
- 2. A Checklist for Retirees to Finish This Year
https://www.morningstar.com/retirement/checklist-retirees-finish-this-year
- 3. Trump Savings Accounts: The Hidden Tax-Reporting Challenge
https://www.morningstar.com/personal-finance/trump-savings-accounts-hidden-tax-reporting-challenge
