During this season, I like to take a few minutes to reflect on the accomplishments, failures, and things I still have left to do this year. (My wife is really good at helping me remember things in two of these categories. I’ll let you guess which two.) While the amount of items in each category varies from year to year, I always seem to have a few recurring financial tasks in the last “there’s still time to get this done” column. With that thought bouncing around the inside of my head like a kid who ate all of Santa’s cookies on Christmas Eve, I decided that I’d make a short checklist of financial stuff for you, too.
Things to Still be Done in 2018
- 529 College Savings Account Contributions – You have until December 31st to fund any 529s that you’d like to make contributions to. These contributions can be very important not only for your long-term financial health but also your short-term, as they have potential tax benefits that you may enjoy as early as next tax season. If you don’t have a 529 account set up, don’t fret. Simply Google (or Bing, maybe?) your State and 529 Plan to get more information on opening an account, funding the account, and any current state tax benefits. Once you have the information required to open an account (which is minimal), you could both open and fund the account in under 30 minutes.
- Charitable Donations – Due to the changes in tax laws this year (ie, a greatly increased standard deduction), I’m not sure how applicable this will be for many of us. Previously, it wasn’t hard to reach the point where itemizing your deductions on your tax return made sense for you. Now, with the increased standard deduction, that point may be more difficult to reach. However, if you think you may still be able to itemize your expenses this spring, make sure you have any charitable contributions completed by December 31st.
Things That Could be Done in 2018, But Can Wait a Couple of Months (if Needed)
- IRA/Roth and Health Savings Account Contributions – Technically, you have until April 17, 2019 to file your 2018 taxes. This means that you have until the same day to make your IRA/Roth and HSA contributions for 2018. Why would you want to wait that long? Maybe that’s just the way you’ve always done it? Maybe that’s when you’ll have the money available to make the contributions? Maybe you just can’t be bothered with things like this right now? That’s all well and good, but I would encourage you to start to move your contribution timing closer to the end of the calendar year, if possible. Why? First, it’s just cleaner when it’s done that way. There’s no question if the contributions you made were for the previous year or the current year. The paper trail of the transaction will clearly show when the contribution was made and, therefore, what year it was made for. And second, the earlier the contributions are done, the less likely you are to have other wants/needs compete for those same dollars. Let’s face facts, it’s really easy to be tempted to indulge in spending money on something that will benefit you now versus saving money for the future. The longer it takes for you to save the money, the more opportunities you’ll be faced with to spend the money instead. Therefore, the earlier you can contribute the money, the better.
Something That Makes Sense to do Now*
- Increase Your Retirement Contribution at Work – I should address the * first. It’s not uncommon to receive raises during this time of year. If you’re one of those people, congratulations(!) and this advice is for you. If you aren’t one of those people, but, you anticipate a bump in pay in the future, tuck this advice away for that time. One of the biggest reasons we are reluctant to bump our retirement contributions up from year to year is because we don’t want to see our paychecks decrease in size from one week to the next, even though we know we’re just putting that money somewhere else. The easiest way to sidestep that very natural aversion is to time the increase in your retirement contributions to coincide with your first raise paycheck. With this method, your take-home pay increases and you contribute more to your retirement account, with none of the sting.
- The contribution limits for employer-sponsored retirement plans (401(k), 403(b), 457, most government thrift plans) increase in 2019, by the way. The new contribution limit increases $500 in 2019 to $19,000 while the catch-up provision for anyone 50 and older remains the same at $6,000.
- The contribution limit for IRA/Roth contributions also increases in 2019 for the first time since 2013. You’ll now be able to save $6,000 into an IRA/Roth while the 50 and older catch-up provision remains the same at $1,000 (income permitting).
- Increase Your Retirement Contribution at Work 2 – You know how I just said that if you didn’t get a raise yet to tuck that last suggestion away for when you do? Yeah. On second thought, do that and raise your retirement contributions now. Even if it’s only a tiny bit, it has the potential to make a significant difference for you in the long run. Do it now and later.
- Start Preparing for Tax Season – I know, I know. Why do I have to mention something so evil during this time of year? Listen, I’m not asking you to spend hours on this. Not at all. Focus on getting organized. You’re going to start getting tax forms really soon, and chances are you’ve already got some receipts or statements lying around that you need to make sure you keep. Start a tax folder where you can stash documents and receipts as you get them over the next 6 weeks or so. Then, when you sit down to do your taxes on the night of April 16th, you’ll have most, if not all, of your information already waiting for you, reducing the amount of time spent hunting for that elusive W-2.
While you may be able to add a thing or two to make this list a bit more complete, you’ll be sitting pretty going into 2019 if you’re able to address each of these items. The one thing I don’t want you to do is refuse to do anything because the list seems impossible to complete. Instead, pick one or two things to accomplish between now and the end of the year. If that’s all you manage to do, then you’re still in better shape than you were before you started. If those one or two things lead you to another one or two things, even better. And then, if you do those things, too, then maybe we’ll discuss getting serious about a budget in 2019!!
It’s the season of miracles, after all…
Happy Holidays, everyone. See you next year.
Damian is the lead Financial Concierge on Your Money Line, the financial help line serving all Pete the Planner® Financial Wellness clients. Damian is a CERTIFIED FINANCIAL PLANNER™ professional and loves answering your money questions. Despite sharing a last name and sense of humor, Damian and Pete are not related.