We're coming up to the end of the calendar year, which is exciting for many reasons. While retirement planning might not make your list of the most exciting year-end events, it does deserve some consideration. Here are a few things you can do to supercharge your retirement accounts before the calendar turns for the final time this year.
1. Review your contributions. Are you trying to max out your 401(k), IRA, or other retirement accounts? Then be sure to review your contributions so far this year and try to make additional contributions when necessary to reach your goals. To avoid penalties, you also want to make sure you don't contribute too much to your retirement plans. Keep in mind that you have until April 15th to contribute to IRAs and some self-employed retirement plans, while 401(k) contributions and some other self-employed retirement plans must be made by the end of the calendar year. You may still have time to direct your final paycheck or a year-end bonus to your 401(k). Contact your human resources department or plan administrator for more information.
2. Convert your traditional IRA to a Roth IRA. It is a great year to do a Roth IRA conversion in 2010 because Congress eliminated the income provision that previously prevented people who earned over $100,000 from being able to convert a traditional IRA to a Roth IRA. The other benefit of converting to a Roth IRA in 2010 is being able to split the taxes over the next two years. Instead of paying to convert when you file your taxes this year, you pay tax on half the income in 2011 and half in 2012.
3. Review your beneficiaries. Review all aspects of your retirement plan administration including your contact information, Social Security number, and your beneficiaries. This is especially important if your family has changed in the past year. You may need to change your plan beneficiaries if you experienced a major life event in the past year, including a marriage, divorce, birth, or death.
4. Review your investment plan. The end of the year is as good a time as any to review your plan contributions and asset allocation. A good place to start is by reviewing your automatic contributions. Do they align with your goals? Can you afford to increase your contributions? Even a 1 percent increase can make a substantial difference in the long run. What about your asset allocation? Are your investments properly allocated based on your investment goals and risk tolerance?
[See 10 Retirement Myths.]
5. Start investing for retirement. It's never too late to start saving and investing for retirement. It's very easy to start a 401(k) with your company or open an IRA through your bank or favorite brokerage firm. Once you open your account, you can start making contributions toward reaching your financial goals.