We all know there is quite a bit of financial planning we should do at the end of the year before we miss the boat on 2016 opportunities. A recent article from Forbes.com takes a look at 10 opportunities you shouldn’t miss. For this post, we’ll take a look at five of the year-end retirement planning tips you should be thinking about. Then, we’ll conclude with our next post on five more money matters to think about before that New Year’s party.
1. 401(k)s or 403(b)s. Any contributions to these retirement accounts must be made by December 31st. Check now to see if you’re on track to hit your retirement savings goals for the year. You still have a little while to hit your goal or max out your contributions for this year. And if you missed the boat for 2016, start thinking about adjusting for 2017. Think through your savings goals and adjust your regular contributions accordingly.
2. IRAs. Per IRS rules, you have until April 17, 2017 to make all your 2016 IRA contributions. You could make a lump sum contribution with that bonus check—and that’s not a bad idea—but start thinking now about how you’ll hit your goal or maximum contribution by tax day. As with your employer-sponsored plan, you should double-check to see what your maximum contribution is. If you won’t be able to hit that number, no problem! Set a realistic goal for yourself and budget to hit it by April 17th. Also, for any qualified retirement plans, you should check to make sure you take out your required minimum distributions. For first timers (those turning 70 ½ in by December 31st of this year), you have until April 1st to take out your first distribution. For anyone else, your cutoff is December 31st.
3. Roth Conversions. You need to be careful with this one, but converting a traditional IRA to a Roth IRA could be a good option, especially if your income this year is lower or if you think you’ll be in a higher tax bracket next year. You should consult with a financial professional before making this move, however, since it could increase your tax burden. However, those who have retired early and are looking to access their retirement savings now should think about this option. Just make sure you beware the 5-year-rule and consult with a professional.
4. Withholdings. You can still make changes to your withholdings for 2016 and it might be a good idea if you think you’re on track to pay too much or too little. The IRS has a withholding calculator you can use to determine where you should be and whether you might need to adjust. And of course, you can start thinking now about withholdings from your 2017 paychecks, too.
5.Investment Planning. Over the year, your investment portfolio may have shifted and your careful asset allocation could be off. Now might be a good time to review and rebalance your portfolio to adjust for any outperforming or underperforming allocations. Talk with your financial advisor about 2017, too. Your plan for next year might need to be slightly different than your plan for 2016, so it’s always good to take the opportunity to speak with your financial professional to find out.
These are just a few of the financial opportunities the year’s end brings us. Take a look at the opportunities that apply to you, maximize 2016 and look ahead to 2017 to do a little planning. If you start planning and budgeting now, you are far more likely to make the best financial moves for yourself and your family in 2017.
Reference: Forbes.com (November 22, 2016) “10 Money Moves to Make Before Year End”