The holiday season is a time for celebration. It’s when most people enjoy the company of their loved ones and spend time having fun. And this is as it should be. After all, we work hard all year and life is the most fulfilling when we find the right work-life balance. But the end of the year isn’t just a time to relax. Take a tiny bit of time out of your day to complete these five year-end tasks for aspiring retirees.
Plan how much you will contribute to your retirement accounts. The best time to elect the percentage of your paycheck to direct deposit into a retirement account is now, before the new year starts. Try to boost the amount you will save next year if you can. You can contribute up to $17,000 to your 401(k) in 2012, $500 more than in 2011, and another $5,500 if you are age 50 or older. Next year, take advantage of being able to defer taxes on more of your retirement savings.
Develop a plan to reduce your 2012 taxes. There is still time to reduce your 2011 tax burden. But significantly reducing your tax bill requires a conscious effort year round. Efficient tax planners are already looking for ways to reduce their 2012 tax bill. Planning early will also help shield you from making sudden decisions that are often costly.
Funnel extra cash into your retirement and savings accounts. One way to increase your savings is to funnel loose change into your savings accounts. Bills that you forgot in your drawers, extra cash you find in your wallet, and monetary gifts you might receive from others during the holidays should be stashed in your savings vault. If you haven’t maxed out your retirement accounts, deposit windfalls of cash into those accounts first. The contribution limits reset each year, so you are missing out on the tax savings if you don't take advantage of it now.
Figure out how to make your gifts meaningful. Gift exchanges are a chore for many families. Many people end up spending money excessively around the holidays on people they seldom see the rest of the year. This huge money drain benefits no one. Talk to your social circles and decide how you can make your gifts meaningful for everyone. Otherwise, skip the tradition and pocket your savings for your future self.
Be thankful for a good year. No matter how you feel your year has gone, there are lots of things to be thankful for. Your health, your family, and your standard of living in a developed nation are just some of the privileges that we often take for granted. There is always room for improvement, but be thankful and enjoy the holidays. Reducing stress has the added benefit of possibly reducing your medical bills in the future.
David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.