It should come as no surprise that saving for retirement is a financial priority that takes discipline, diligence and oversight. One important year-end financial move to help keep your retirement savings in check is to review your contributions to 401k plans and IRA’s for the year.
If you received a year-end bonus, you may want to go ahead put some of it into your retirement to max out your contributions for the year (see our post on year-end planning for your bonus). Likewise, if you’ve received a raise, can you increase your regular contributions?
Year-End Tips for 401k Participants:
✔ Max out 401k contributions if cash flow permits. For 2012 the limit is $17,000 and if you are over age 50 you can contribute an extra $5500 per year. To calculate your maximum percentage divide $17,000 by your annual salary.
✔ Review your employer match policy to make sure you are not leaving money on the table.
✔ Plan for 2013. The maximum contribution amount for 2013 is $17,500; an increase of $500 from 2012.
✔ If you have left an employer and have an old 401k sitting around, you may want to consider rolling over to an IRA.
Year-End Tips for IRA Owners:
✔ The 2012 maximum contribution amount for IRA’s is $5000.
✔ Don’t forget about the “Catch-up” contribution if you are 50 or older. That’s an extra $1000 you can contribute for a total of $6000. (Note: Total combined contributions to Roth and/or traditional IRA’s cannot exceed these amounts)
✔ Do you have multiple IRA accounts? Consider combining them to simplify record keeping and management.
✔ SEP-IRA: Maximum contribution limits for self-employed and small business owners is 25% of salary or $50,000; whichever is smaller.
✔ Plan for 2013. The IRA contribution limit is $5500 and the SEP-IRA limit is 25% or $55,000; whichever is smaller
So, before you bid farewell to 2012, spend some time with these checklists. Your future is worth the time it takes to properly plan today. If you need help, we’re always ready with answers.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.