January is the perfect time to get your financial act together. It may be a fun New Year’s party game, but you can reap great benefits by adding a financial checkup to your list of to-dos. Following are a few things you can do now to keep your finances on a good financial note this year!
Review your retirement portfolio
If your goals and objectives have changed, it may be time to rebalance your investments to make sure they’re still right for you. If you can spare even a little extra money from your paycheck, increase your contributions to your employer-sponsored retirement plan. One day, you likely won’t be getting a paycheck. So you’ll need to put money away now so you can still have income to live off of later.
Make a contribution
If you haven’t yet contributed to an IRA this year, and you have earned income, contribute now. You can contribute up to $5,500 to your IRA this year; $6,500 if you are 50 or older. If you aren’t eligible to deduct a traditional IRA contribution, make the contribution anyhow! Even if you can’t deduct it on your tax return, the earnings will still grow tax-deferred.
Consider a Roth IRA
Sure, you have to fund it with after-tax dollars, but you’ll also have more flexibility when you want to start making withdrawals. You might consider converting part or all of your traditional IRA to a Roth IRA. If you meet the criteria to do so, you’ll have to pay ordinary income tax today on the portion you convert, but all future earnings will be tax-free.
Put money away for your children’s education
There are lots of options here. Open a 529 savings plan, a Coverdell Education Savings Account, a uniform gift/transfer to minors account, or a mutual fund account earmarked for education. The earlier you start saving, the more you’ll have when you need it.
You can give up to $14,000 each to as many people as you’d like this year without triggering a gift tax. The gift doesn’t have to be cash; it can be the form of stocks, which can grow to even bigger gifts over the years.
Evaluate your financial advisor
Do you hear from him or her regularly to review your situation and/or investments? Or, do you not have a professional who can help you make decisions about all of the aforementioned tactics? If the answer to either of these questions is “no,” or if you need help or more information on any of these strategies, contact him today.
Article provided by Local Government Federal Credit Union.