If you’re like the Hogan household, the month of December means one thing — Christmas! Decorations, parties, church, family time and lots of stocking stuffers! In the seasonal hullabaloo, it’s easy to forget one very important activity that must be on your to-do list: an end-of-year financial check-in.
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Before December 31, 2017, you need to make sure you’ve done everything you can to maximize your retirement savings and minimize the taxes you’ll pay in 2018. You’ve probably allowed this area to go on autopilot, but you need to take advantage of retirement options and tax write-offs you might have forgotten about. The less money Uncle Sam gets, the more money you have to fuel your retirement dream!
1. How’s Your 401(k)?
Did you know that you can increase your workplace 401(k) contribution in December to hit your yearly limit? The most you can invest through your employer is $18,000 a year (or $24,000 if you’re 50 or over). If you haven’t hit that amount, talk to the person in HR who manages your 401(k) plan. Tell them how much extra you want taken out of your last paycheck this year. You can even have your yearly bonus go into your 401(k). Just make sure you don’t blow your budget trying to hit that cap!
2. Yes, You Can Contribute to an IRA
Once you’ve maxed out your contributions to your 401(k), you’re not done! You can also put money into an IRA. There are two types — traditional and Roth — and you can put away $5,500 per year in this account (or $6,500 for age 50 and up). To find which kind of IRA would be better for your situation, talk to your investment professional. They’ll know which to choose, and they can probably help you set it up.
3. Been Blessed? Pass It On!
Take unused clothes to a homeless shelter and donate books to a local library or a non-profit clinic. Just make sure you have a receipt for donations of $250 or more. There are other tax forms if you give bigger amounts — all the more reason to talk to an investment pro this time of year.
4. Make Your Required Withdrawal
Six months after you turn 70, you must begin taking out money from your retirement accounts, like an IRA or a workplace 401(k). The IRS dictates a minimum you must withdraw (called a required minimum distribution or RMD), and if you don’t, you’ll be penalized — 50 percent of the money you didn’t take out. You don’t have to spend it, so if you don’t need it, just park it in savings.
5. It’s Safer to File Early
Doing your taxes ranks right up there with a root canal. I get it. But filing your return early lessens the probability of being a victim of identity theft. If you’ve already filed, nobody else can file a fraudulent claim using your information. If you mail in your tax return, don’t put it in your mailbox. Take it directly to the post office. This is an easy way to protect your money — and your identity.
Before the ball drops on December 31, set up an appointment with your financial advisor to review your investments and finances. You can also talk about any changes to your retirement goals. If you don’t know who to talk to, we can recommend a professional in your area. Taking action now can put you closer to your retirement dream in the future!
About Chris Hogan
Chris Hogan is the #1 national best-selling author of Retire Inspired: It’s Not an Age. It’s a Financial Number and host of the Retire Inspired Podcast. A popular and dynamic speaker on the topics of personal finance, retirement and leadership, Hogan helps people across the country develop successful strategies to manage their money in both their personal lives and businesses. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at chrishogan360.com or facebook.com/chrishogan360.