As you approach year’s end, check if you’re on track to reach the financial goals you set for yourself back in January. If not, there may still be time to fulfill those financial resolutions…
If one of your New Year’s resolutions was to lose 20 pounds, you’ve likely stepped on to the scale periodically to gauge your progress. If you set specific financial goals for this year, it’s just as important that you keep tabs on your progress, using either a financial advisor or (at least) an online tool to run a projection for you. TIAA’s Retirement Advisor, for example, can help calculate if you’re on track to reach your retirement goals. <https://publictools.tiaa-cref.org/public/publictools/advice/getStarted>
The last few months of the year are perhaps the most important, allowing you to make a last-ditch effort to max out on your retirement account contributions. Don’t forget, the annual limit for participants below aged 50 in 2016 is $18,000 for a 403(b) or 401(k) and $5,500 for an IRA. How close are you to contributing the maximum? If you’re checking in three-quarters of the way through the year, you should ideally have put $13,500 into your workplace plan already. And by continuing to contribute at the same rate, you’ll be taking full advantage of the pretax saving benefits of a 403(b) or 401(k), as well as getting the full employer match, if available.
Find you’re falling short? There are ways to catch up…
For instance: Consider increasing your contribution rate for the last few months of the year. A surprising number of retirement plan participants don’t realize they can increase or decrease their contribution rate at any point during the year, and mistakenly believe that changes can only be made during the open enrollment period (often the case for healthcare elections and other employer benefits).
Make the most of pay raises and bonuses.
In either case, the extra money could make it easier to defer a little more of your salary towards your retirement plan and/or IRA. If you are aged 50 or over, you have an even greater opportunity to catch up with your overall savings, since you can contribute a further $6,000 to your 403(b) or 401(k), or an extra $1,000 to your IRA in 2016.
Your weight-loss resolution may have fallen irretrievably by the wayside, but if a $24,000 investment goal was one of your January targets, you may be able to achieve it by increasing your salary deferral rate for the last three months of the year. Remember: You can always change it back again in January or February; but if you did get a pay raise recently, why not keep the higher contribution rate?
Making room in your budget
The holiday season can burn a bigger hole in your budget than the preceding financial quarters combined, especially if you’re a generous gift-giver (or simply have a huge family). Start gift shopping as early as possible to find the best deals. Waiting until 5 p.m. on Christmas Eve to hit the department store is not only stressful, many of the best bargains have already been snagged. Some of my better-organized friends start shopping for holiday gifts all year long, taking advantage of Cyber Monday after Thanksgiving, and other 24-hour sales.
How’s that emergency fund coming along?
If one of your goals was to build up a rainy-day fund, how is that going? Compare your current balance to what it was in January. Assuming that no unexpected expenses hit this year, are you any closer to your emergency fund end goal? That is, an amount that would provide a true safety net; for many people, that’s enough to cover around six months of living expenses. Find room in your budget, if you need to; it may be time to downgrade your cable subscription or put that gym membership on hold.
Beyond the turtleneck sweater: Smarter ways to give gifts to younger relatives
Instead of a gift that may not outlast the season, why not gift your younger loved ones something longer lasting, such as some future financial security? One way to help achieve that is by setting up a UTMA or UGMA custodial account and to invite relatives (desperate for gift ideas) to put money into the account on a child’s behalf. Custodial accounts were designed to pass on assets to a minor, who may gain complete control of the account once he or she reaches adulthood. Such gifts will qualify for gift tax exclusion and allow children to have investments without the need for an attorney or trustee.
Or, do something really crazy and get the family on board with a “no presents this holiday season.” Give each other the gift of a homemade card, and time volunteering at a local charity—money saving and giving back to your community, all at once!
As the year winds to a close, consider making good use of the time you have left in 2016 by making every effort to max your tax-advantaged accounts out. Even if you broke all your other resolutions, you may still have time to fulfill this one.