7 money moves you can actually make before the end of the year
WASHINGTON >> The typical list of financial moves to make before year-end can be helpful. It can also be frustrating. You’re told to rush to put more money into your 401(k) or similar retirement workplace account. Some experts advise that you “max out” before Dec. 31.
The maximum amount you can contribute this year is $19,000. If you’re 50 or older, there’s a catch-up provision that allows you to sock away an additional $6,000 for a total of $25,000. In 2020, the annual max increases to $19,500 and the catch-up to $6,500.
Or, you might be encouraged to make end-of-year charitable contributions.
Got kids? Well, why don’t you give that 529-college savings plan a cash boost before you ring in the new year? If your state offers a tax deduction for contributions to a 529 plan, even
All cars come with a rearview mirror, which increases a driver’s awareness. It also helps you safely change lanes. When it comes to your money, looking back can help you make changes going forward. Review how things went for the year. If you don’t like what you see, decide how to change course.
better.
If you have stocks that have declined, it might be smart to sell and use the losses to offset other capital gains, experts recommend.
Here’s the thing.
All of these suggestions make sense but, for many people, they are simply unrealistic or irrelevant.
How likely is it that you can tell your employer, “Hey, just roll my last few paychecks into my 401(k) so I can get as close as I can to the $19,000 cap?”
In my experience, people who can max out their workplace retirement account set this in motion long before the end of the year. You can’t take aftertax savings to fund this account, so you would need to have the money taken out of your paycheck before taxes. Unless someone is getting a huge year-end bonus, it’s not likely he or she can make a lump-sum 401(k) contribution in the last few months or weeks of the year.
I get a chuckle about the charitable giving recommendation, as if there are a lot of people saying to themselves, “Shoot, thanks for the reminder about this great tax deduction. I’ve been meaning to send off a $3,000 check to my favorite charity.”
The average workingclass family is living paycheck to paycheck. They’re struggling to make ends meet, so there isn’t any extra cash to make year-end money moves.
So, what can they do before
Dec. 31? Here are some moves that are both practical and doable.
• Pull your monthly bank statements for the last year. I recognize you probably would rather get a root canal than follow through on this advice. But there’s a purpose to what might be a painful process. You need to own your financial truth. And you can’t do that if you don’t have truthful information. People will tell me, “I don’t eat out much.” But their bank or credit card statements tell a different story. Before you make any financial resolutions for the new year, take a real assessment of your 2019 expenditures.
• Total all your debts. Knowing how deep in debt you are can be a powerful motivator to aggressively pay it down.
• Total your savings. Yes,
this figure may be nonexistent or pitiful, but you’ve got to face what it is. Aim to improve it for 2020.
• Review your retirement account. Experts advise not to babysit your 401(k) money by looking at it constantly during the year. Doing so might lead to you make rash moves that cost you money. But year-end is a good time to dive in and check if you’re saving enough. Maybe in 2020 you can increase the percentage of your pay that you’re investing for retirement.
• Review your Social Security statement. This statement provides important information about your earnings records, estimated benefits and how much you or your family would receive in disability, survivor or retirement benefits. Sign up for an online
account at www.ssa.gov/ myaccount.
• Do a net worth statement. Once you’ve pulled your bank statements and tally your debts and savings, put it all together — assets minus liabilities — and determine your net worth. For help, use the calculator at www.investopedia.com/net-worth/demo.
• List your financial highs and lows for 2019. All cars come with a rearview mirror, which increases a driver’s awareness. It also helps you safely change lanes. When it comes to your money, looking back can help you make changes going forward. Review how things went for the year. If you don’t like what you see, decide how to change course.
You may scoff at this list of year-end action items as too much work. Or, you won’t do the tasks because you fear what you’ll find.
But I have one question for you as 2019 comes to an end: How’s not knowing working for you?
Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle. singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/ Michelle Singletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.