Don't Miss Your 2012 Money Deadlines

Make sure your financial year's end runs smoothly

Scott Holsopple

It’s only August, but the rest of 2012 will fly by. Before you know it, we’ll be talking about budgeting for 2013, New Year’s resolutions and snow-day retirement planning.

Don’t let 2012 pass you by without noting some important deadlines.

Establish 2012 SIMPLE IRA or Safe Harbor 401(k): Employers can establish a SIMPLE IRA or Safe Harbor 401(k) for 2012 between January 1, 2012, and October 1, 2012. Plans established after that time will be ready for 2013 contributions. SIMPLE IRA plans are most common among small businesses, including those employing only one or two people. If you’re a freelance consultant or otherwise independently employed, this could be a good way for you to save for retirement. Note that there are special procedures for companies established after the October 1 deadline.

Crossroad between two years

Recharacterize a Roth: Individuals who converted a traditional IRA or 401(k) account—or a portion of one—to Roth may actually want to switch back. If you converted your traditional dollars to Roth and then lost a lot of account value, you’re paying taxes on money you no longer have. To recharacterize your account means you switch it back to a traditional, tax-deferred account. You must do that by October 15, 2012. Before doing this, consult a tax professional to make sure it’s in your best interest.

eFile a 2011 Income Tax Return: Tax-payers who filed tax extensions, or those who are just filing late, must eFile 2011 federal income taxes by October 15, 2012. This isn’t directly related to retirement planning, but good budgeters who want to maximize retirement savings won’t risk penalties by missing this tax deadline.

Employee Benefits Enrollment: Lots of employers have open enrollment during November. If you’re enrolling for your 2013 benefits this fall, be sure to:

  • Calculate which health insurance plan will be best for you using a best-guess estimate of your 2013 medical expenses;
  • Enroll in your employer’s retirement plan if you haven’t already, and note the employer match level if applicable;
  • Examine your benefits paperwork to see whether you have access to 401(k) advice;
  • Take advantage of any flexible spending account options your employer offers—for dependent care and/or medical expenses; and
  • Look for other perks your employer may have added this year.
  • Contribute to 401(k): Any contribution to your 401(k), 403(b) or similar employer-sponsored plan must be made during the current year. So your deadline is your last pay period of the year. Take the time to make sure you’re contributing enough to reach the maximum match offered by your company and, if possible, the maximum total contribution. The maximum 401(k) contribution allowed for 2012 is $17,000, plus an additional $5,500 if you’re over 50 years of age. Note that employer-sponsored plan deadlines don’t coincide with IRA deadlines. The IRA deadline for 2012 contributions is April 15, 2013.

    Required Minimum Distributions: Anyone over age 70½ must take an RMD from their IRA(s) and/or employer-sponsored retirement plan(s). The first RMD must be taken by April 1 of the calendar year following the calendar year you turn 70½. But every distribution after that must be taken by December 31 to avoid penalties. If you turned 70½ in 2011 or prior, be sure you take your RMD by December 31, 2012.

    There are other deadlines around the corner that are less cut-and-dry. The holidays will be here soon enough, and now is a good time to start saving in order to avoid poor spending and borrowing choices in November and December.

    Late summer is also the time to start thinking about whether you’ll want to make some larger 401(k) contributions prior to the December 31 deadline—particularly if you’re eligible for catch-up contributions and you’re nearing retirement.

    Enjoy the end of summer and the beginning of deadline season.

    Scott Holsopple is the president and CEO of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal.

    Smart401k is not an accounting firm and does not provide tax advice. Nothing in this article should be construed as tax advice and Smart401k does not warranty or guarantee, in any way, the accuracy of any tax-related information contained in this article. Please contact your tax professional to discuss (1) the timing of your tax filings; (2) the tax year deadlines associated with investments in your particular retirement plan; (3) the benefits and constraints associated with your retirement plan alternatives; (4) the timing of required withdrawals from your retirement plan; and/or (5) any other tax matters.

    Additionally, please contact your retirement plan administrator to discuss administrative matters relating to your employer-sponsored plan, including, but not limited to, open enrollment periods, requirements to alter your plan contribution amounts or timing, and any other administrative matters.