The money moves you make before the end of the year can have a significant impact on your financial future. Before the ball drops at midnight and the new year arrives, resolve to make these eight money moves.
1. Ramp up retirement savings.
If you haven’t maxed out your 401(k) or IRA, now is the time to make additional deposits. 401(k) contributions are capped at $18,000 — or $24,000 if you are over 50, thanks to “catch-up” contribution limits; IRA maximums are $5,500 with an additional $1,000 if you’re over 50. Making end-of-year deposits will help lower your tax liabilities and, of course, boost your income in retirement.
2. Invest in your health.
You’re eligible for a health savings account if you have a high-deductible health insurance plan. Contributions are made with pretax dollars and can be withdrawn tax-free for qualified medical expenses. Individuals can deposit up to $3,400 and families can deposit $6,750 (plus an additional $1,000 if you’re over 55). If you haven’t opened an HSA or contributed the maximum, doing it before year’s end will offset your tax liability in the new year.
3. Use Flexible Spending Account benefits.
If you have a FSA through your employer, all of the funds need to be used by year’s end. The funds can be used for health expenses ranging from copays and medication to new glasses or contacts. Be sure to check your plan for a list of eligible expenses.
4. Make 529 contributions.
Investing in a college savings plan will help your children (or grandchildren) cover the cost of college. While there are no federal tax write-offs for 529 contributions, some states do offer tax benefits. Contribution limits are generally limited to $14,000 per student per year ($28,000 for married couples).
5. Donate to charity.
Now is the time to write a check or donate goods to your favorite charities. If you itemize deductions, you can claim donations to registered nonprofit organizations on your taxes — just remember to get a receipt or save a copy of your canceled check or online donation for all contributions.
6. Check your tax withholding.
You might be taking home a smaller paycheck than you should. Review your tax withholding and compare it to your annual tax liability to determine whether too much is being sent to Uncle Sam. You can adjust your withholding by filling out a new W-4 form and submitting it to your employer.
7. Offset capital gains.
Review your investment portfolio and consider selling losing investments to help offset any capital gains from investments. Reducing your tax liability is not the only reason to sell investments but it can help ease the sting of capital gains taxes.
8. Review your finances.
The end of the year is a great time to take stock of your financial situation and use the information to create a budget and set financial goals for the upcoming year. A little time spent planning can make a big difference in your financial outlook for the new year.
Consider these eight tips to make your money go farther, so you can reach your goals and save for the retirement of your dreams. Your Farm Bureau agent can help you discuss your retirement goals and ways to achieve the retirement you want.