It’s hard to believe, but in just a few short weeks 2015 will go into the history books. As the new year begins, it’s worthwhile to take stock of where you are with your retirement plan.
Reviewing financial progress is important, but you can overdo it. Many people confuse constant worry with diligence. Rather, good due diligence lessens the need for worry.
A quarterly checkup is enough, if you set up your retirement accounts right from the start. If so, a year-end review is as much about closing one year as projecting the next.
Here are some year end investing moves that work wonders for your long-term financial picture:
Increase your 401(k)
If you got a raise in 2015, congratulations! Now make sure you don’t just raise your spending to match. Financial planners call that “lifestyle creep” and it can eat your retirement plan alive. If you’re not already hitting the maximum at work, consider bumping up your 401(k) contributions now.
Add to IRAs
If you have a plan at work that’s costly, get whatever you can in terms of the company match and put the difference into an IRA. You still get a tax break, and you can control costs better in a self-managed IRA account. If you have a non-working spouse, consider opening or adding to a spousal IRA.
Put money into health savings
Many people are moving to health savings accounts (HSAs) to pay healthcare costs. Putting money into an HSA will reduce your taxable income in the year you make the contribution. If you make a contribution after Jan. 1 and want to apply the money to the previous year, ask your HSA provider how to designate that choice.
Convert or add to a Roth IRA
You can save a lot of money in taxes in the future by paying the tax bill now. Putting after-tax money into a Roth means it will grow tax-free and withdrawals are tax-free, too. If converting doesn’t make sense (it’s taxable income this year, on top of your regular income), put in a small amount now. Check to see if you qualify first.
Set new savings goals
You know what you earned last year. Did you save 10%? More? Less? Get a solid grip on what actually happened last year and then decide if you can improve your performance next year. If you need to pay off debts or build an emergency fund first, set a schedule and stick to it.
Great retirements don’t happen overnight and they don’t happen by accident. Taking charge of your financial future is the single most important decision you will make this year or any year.
Don’t worry about New Year’s resolutions. Go ahead and make some investing moves now and put a plan into place. You’ll be pleasantly surprised at how stress-free life can be if you have a plan and you know it’s working.