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4 Must-Dos Before 2014

It seems like yesterday we were still enjoying lazy weekends at the pool and sun-filled barbecues. But believe it or not, the end of the year is rapidly approaching. Before you get caught up in the whirlwind of the holiday season, take a little bit of time now to make sure your financial house is in order – and that you end 2013 strong.

These tips could make a big difference when it comes to your retirement plan. What do you have to lose?

Create – and then stick to! – a holiday spending budget. With major retailers starting their “Black Friday” sales on Thanksgiving day, you might be tempted to take advantage of more great deals – and as a result, blow out your budget. Before you tackle the long lines, make a list of friends and family for whom you’re buying and assign each a reasonable dollar amount for gifts. Whatever you do, resist the urge to overspend!

  • Go the extra mile: Consider investing your Black Friday savings. A one-time investment of just $300 – which you could easily save if you’re shopping smart – could turn into more than $3,000 in 30 years. Do this annually for 10 years and that amount increases to more than $21,000[1]. An easy way to add a decent chunk of change to your retirement nest egg!

Maximize your 401(k) contributions. For this year (and next), you can contribute a maximum of $17,500 annually to your 401(k) plan. If you’re not close to hitting that limit, there’s still time. Are you getting a year-end bonus? Consider throwing it into your 401(k) account, if allowed by your employer/plan sponsor, or funneling the extra cash into your individual retirement account (IRA). And, if you receive a raise, add the increase to your annual contribution rate. Also, if you aren’t signed up for automatic contribution increases, be sure to do so before Jan. 1 – even a 1-percent annual increase could mean an extra $500,000 or more at retirement[2].

  • A quick reminder: Eligible savers can direct up to $5,500 to an individual retirement account (IRA) in 2013 – or $6,500 if you’re 50 or older. You have until April 15, 2014, to maximize those contributions for the 2013 tax year.

Gather your financial records and statements in preparation for the tax man. It’s easy to wait until just before the tax-filing deadline of April 15 to get your files in order. Instead, set aside some time this weekend and you could save yourself the headache of a scramble when April does roll around. Use this tax preparation checklist as a starting point for what you might need to prepare and file your taxes. The good news: starting early means plenty of time to track down any paperwork you might be missing!

  • New rules that could affect you: The Medicare surtax will impact upper-income taxpayers (income of more than $200,000 for single filers or $250,000 for married filers) with an additional 3.8 percent tax on investment income. In addition, taxes on capital gains and qualified dividends also increased to a rate of 20.0 percent for those in the top tax bracket (single filers with incomes above $400,000 and married filers with a joint income exceeding $450,000).

Consider meeting with your investment advisor. Schedule time to chat with your investment advisor to see if you’re in good shape to end the year. For example, if you’re affected by the Medicare surtax or new tax rates on capital gains and qualified dividends for upper-income earners, talk to your investment advisor to see how you might minimize those taxes by way of harvesting capital losses. This is also a good time to discuss any upcoming changes to your personal situation that might impact your retirement and investing goals or strategy.

The hustle and bustle of another holiday season is upon us. We know you’re busy and don’t need yet another list of to-dos between now and New Year’s Eve, but these are quick, to-the-point and could be enormously beneficial for your bottom line. After all, who doesn’t want to keep more money in their pocket?

[1] Calculation based on 8 percent annual rate of return and assumes a $300 annual deposit made at the beginning of each year. (The Research Center)



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