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10 Money Moves To Make Before Year End

As we near the end of the year, now is the time to assess what financial moves you should make before year end. There are a number of tax related decisions that could significantly reduce your tax liability for the current year. Beyond taxes, there are also some year end moves that can help you stay on track with your budget, credit, and investing.

Here are 10 money moves to consider making before December 31st:

  1. 401k: Conbtributions to a 401k or 403b must be made before December 31 for the current calendar year. As a result, now is the time to evaluate whether you are on pace to max out your contributions or at least hit your goal. Keep in mind that it can take at least one pay period for changes in contribution amounts to take effect. As a result, you'll want to adjust your contribution amounts now if you are looking to save more this year for retirement.
  2. IRA: Unlike a 401k, those who invest in a IRA have a little more time to max out contributions. According to the IRS, you can make 2016 IRA contributions until April 17, 2017. Yet you don't want to wait until the last minute if you may not have the cash to fund your IRA. Instead, you can begin making smaller contributions now with the goal of maxing out your IRA by the deadline. As you plan your contributions, keep in mind the IRA contribution limits for 2016.
  3. Roth Conversions: Converting a traditional IRA to a Roth IRA can be a good strategy, particularly if your other taxable income this year is lower than normal. Keep in mind that Roth conversions may add to your tax liability, and if so, at your marginal rate. A conversion, however, can be a good strategy for early retirees looking to get access to retirement funds (so long as you are mindful of the 5-year rule).
  4. Withholdings: It's not too late to make adjustments to your paycheck withholdings. If you think you are on track to withhold too much or too little, you can make adjustments now to get back on track. This handy IRS withholindg calculator can help you make the calculations.
  5. Charitable Contributions: For those that itemize deductions, it's common to wait until the end of the year to make charitable deductions. We contribute appreciated stock and mutual fund shares to a donor advised fund with Vanguard each year. While this process is relatively easy, it can take some time. Contributing stock, for example, can require what's called a medallion signature guarantee(think notary on steroids), which can take some time. The point is start moving forward now on the charitable contributions, rather than waiting to the last minute.
  6. Credit Card Strategy: As we enter the holiday season, it's worth taking a few minutes to evaluate the credit cards you use. Here there are two things to consider. First, are you making the most of the money you are spending with the right rewards credit card? Consumer Reports identified the best cash back cards, which you can see here. My personal favorite is the Citi Double Cash card, although Discover it and the Blue Cash Preferred Card from American Expressare two solid options. Second, consider a 0% balance tranfser card to handle any high interest credit card debt you are trying to pay off. Balance transfer cards are often in demand following the holiday season.
  7. Budgeting: Speaking of credit cards, now is the time to set a budget for holiday spending. As noted above, January is the biggest month for balance transfer credit cards. The reason is that consumers are looking to lower the interest rate on all of the debt they acquired during the holidays. Better than a balance transfer card is avoiding the debt in the first place. There are several free apps that can help you stay within your budget.
  8. Investment Plan: Year end is a good time to revisit your asset allocation, particularly as you work to max out retirement account contributions. If it's been awhile since you last rebalanced your investments, year end is the perfect time to get it done. I've found this spreadsheet to be incredibly useful in tracking and rebalancing investments. If you prefer an online, automated solution, there are several free investment tracking options.
  9. Goals Assessment: A lot is written about setting goals in January. Equally important is reviewing your goals and accomplishments near the end of the year. If you set financial goals last January, now is the time to evaluate your performance against those goals. This assessment not only gives you insight into how well you executed on your goals, but it can also give you ideas for next year's goals.
  10. Planning: And that brings us to the last money move to make before year end--start setting next year's goals. Take the time to set meaningful financial goals based on an assessment of your current situation and last year's goals. Here it's helpful to set SMART goals, that is, goals that are Specific, Measurable, Achievable, Relevant and Time bound.

(read more http://www.forbes.com/sites/robertberger/)

Posted 12:45 PM  View Comments

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