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Guys, I’m not going to lie. I struggled to write this article. It felt boring. And in a sea of content where everyone is trying to vie for your attention, I almost didn’t write it.
Because seriously, yawn.
But here’s why I decided to sit down and just write it out: last year I missed something huge on this list and it cost me.
If this isn’t the very first article that you’re reading on this site, you probably know that I’m self-employed. Being self-employed means that I get to work while wearing yoga pants and sitting on my couch.
Yes, it’s pretty awesome.
But it also means that I don’t have an employer-sponsored retirement plan. Because I’m my own employer.
I do have access to self-employed retirement plans, like a SEP-IRA. With this plan, I can put aside 25% of my income. Amazing, right?
My income isn’t consistent month-to-month, so it’s hard to get a real feel of what 25% will be. Each quarter last year I would put a little into retirement, but I told myself that at the end of the year, once I knew exactly how much I had made, I’d finish making my retirement contribution.
I mean, you have until April 15th of the following year to actually finish making any retirement plan contributions. The year ends on December 31st, so I planned to do a little bookkeeping and throw more in retirement to make sure I had maxed out that 25%.
I had 3.5 months to get it done.
I’m going to let you guess how this story ends. Me — a CPA and writer/marketer in personal finance — forgets to make that final retirement plan contribution.
I know some of you are probably reading this thinking, “big deal. She forgot to put enough money into her retirement account. There are bigger things to worry about in life.”
And I totally get that perspective. But the problem is that you let it slip one year, then two, then you’re 55 and staring down retirement with nothing set aside. Dramatic, but there’s a reason why only 16% of American’s save the suggested 15% of their income for retirement each year. And 19% save nothing.
A lot of people may be stuck in the paycheck to paycheck cycle and don’t have anything to set aside. But others may miss a deadline to make a retirement account contribution, let it slide, and then continue the downward spiral thinking, “I’ll definitely do that next year.”
Because you’re here reading this, I know it’s not going to be you. (And for the record, it’s not going to be me, either. I’ve just made a near end of year retirement contribution to get me to what I think my max contribution will be this year.)
Here are some of the things you definitely want to put on your to-do in December list. Between holiday parties and shopping, squeeze in a little time to finish these things and start January on the right foot.
1. Contribute to your retirement fund
Whether you’re saving for retirement in a 401(k), IRA (individual retirement account), HSA (health savings account), or a combination, maxing out your contributions before the end of the year is a smart move. Each year you’re able to put away a certain amount into a retirement account and reap the tax benefits. If you don’t do it, you lose out on that advantage.
That would be a bummer.
- Contributions to a 401(k) or 403(b) must be made by December 31st, and contribution limits are $18,500 for 2018.
- If you’re under 50, contributions limits for your Roth or Traditional IRA are $5,500 and must be made by April 15, 2019.
- If you’re saving in an HSA, the contribution limit is $3,450 for an individual and $6,900 for a family. These need to be made by April 15, 2019.
- Any self-employed people can contribute $55,000 per year to their SEP IRA. These can be made up until your tax return due date.
Just a note about these April deadlines: don’t wait until April, do it now! I put it off last year thinking, “oh April is miles away.” As I mentioned, I didn’t get it done and I’ve spent the entire year kicking myself for that.
2. Use any FSA money
If you have a Flexible Spending Arrangement through your employer, you’ve been putting away pre-tax dollars to put toward healthcare. Normally this money is use it or lose it: you need to spend it or it’s no longer yours (yikes).
Under your plan, you may be able to roll over a certain amount or be eligible for a 2.5 month grace period if you don’t get around to spending it by December 31st. But just like the retirement contributions that you can make up until April 15, delaying this spending might mean you drag your feet and forget about it.
3. Make those donations
Have you been meaning to donate, but you just haven’t gotten around to it? Now’s a good time to make that donation. If you itemize deductions, you can take a tax deduction for any charitable donations you make, which will lower your tax bill.
A quick note: the new tax law doubles the standard deduction amount. If you usually itemize deductions on your tax return, you might not be doing that this year. The standard deduction is the amount of money you subtract from your income before paying taxes. In 2017, the standard deduction for a single filer was $6,350. This year it is $12,000.
4. Use your annual checkups
Do you get a set number of dental or vision checks per calendar year? The clock is ticking to use them up. I’m actually headed to the dentist tonight. These are benefits that you are paying for, so schedule those appointments and get the most out of the dental or vision plan that you have.
5. Double check your insurance
This doesn’t actually have a due date, but it’s a good idea to check in on this regularly. Why not do it now while you’re taking care of these other important items?
If you have life insurance, check in a make sure any life changes haven’t left you without enough coverage. Did you have a baby this year? Take on more debt? It might be time to up that coverage.
6. Get organized
My favorite year-end activity is to get organized. Well, truthfully, it’s my favorite all-year activity. I love a good closet purge — it’s addicting.
If you’re a year-end organizer, like me, add ‘organizing your money’ to your to-do list. Jordan and I do have a pretty basic spreadsheet that we use to keep track of our automatic transfers. But we also use the free tool from Personal Capital to keep all of our accounts organized: it links all of our bank accounts, credit cards, mortgage accounts, and investment accounts so we can get a snapshot of our net worth just by logging into one place.
Aside from keeping you organized, it also does some pretty great things to help you analyze your investments. You can see my full Personal Capital tutorial video here.
7. Hi, goals
At the end of each year, Jordan and I sit down to set goals for the next year. We talk about our personal goals, our health goals, and our money goals. In all honesty, we talk about these goals a lot (accountability!), but sitting down to say what we specifically hope to achieve in the year has become one of my favorite annual traditions.
This doesn’t need to be formal. I usually spend a lot of time reflecting during November and December and then Jordan and I will spend some time talking, dreaming, and then create goals we feel really good about.
This year we’re taking a different approach to goal setting and it has completely shifted how I’m thinking about things. We’ve taken more of a life-planning approach and I can’t wait to share more about this soon!
Is there anything else you’ll do at the end of the year to get ready for 2019?
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