You Only Have 3 Months Left to Make These 3 Retirement Moves

(Kailey Hagen)

I know I’m not the only one wondering how 2022 went by so quickly. It feels like just last month I celebrated the New Year and now we are already approaching another Christmas season. As a financial writer, I’m not just thinking about holiday meals and gifts, but also the rapidly approaching deadlines for some important retirement moves.

If any of the following three items were on your 2022 financial bucket list, now is the time to make them a top priority. You must complete them by December 31st if you want them to be valid for this year.

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1. Claiming Your 401(k) Match

You earn your 401(k) match, assuming your company offers one, by putting money into your 401(k) each year. But you are only allowed to do this by withholding money from your paychecks. You cannot make lump sum contributions like you can with an IRA. So if you’re hoping to claim your 401(k) match for 2022, you only have a few weeks left.

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Talk to your company’s human resources department if you’re unsure how much more you need to contribute to your 401(k) to claim your full compliance. Then divide that amount by the number of pay periods remaining to see how much you should withhold from each paycheck. For example, if you need to save $1,000 over six pay periods, that’s about $167 per paycheck by the end of the year.

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If this is not feasible, see if you can change your budget, e.g. Or if you have extra savings laying around, you can use them to cover your day-to-day expenses to balance your smaller paychecks.

2. Maximize your 401(k)

Since you will no longer be able to make 401(k) contributions for 2022 after December 31, you only have three months to maximize your 401(k) contributions. This year, that means setting aside $20,500 if you’re under 50, or $27,000 if you’re 50 or older. That’s a lofty goal, but if you can achieve it, it will go a long way in increasing your retirement readiness.

3. Performing Roth IRA conversions

Roth IRA conversions are a way to turn tax-deferred funds held in a traditional IRA or 401(k) into Roth savings. People do this because they want tax-free Roth savings when they retire. Tax-privileged savings do not offer this advantage. Instead, you receive a tax credit in the year you make your contribution.

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To convert tax-deferred to Roth savings, you must tax the amount you convert that year. If you’re only converting a small sum, it might not matter when you do it. However, many people choose to wait until the end of the year to do so, especially if they plan to exchange large sums over time.

By the end of the year, you probably have a good idea of ​​which tax bracket you will fall into. So you can convert just enough to get to the top without jumping to the next tier, which would force you to pay taxes on a larger percentage of your income. Then the next year you can do the same and so on until you’ve converted everything you want to convert.

If you are interested in a 2022 Roth IRA conversion, you must first open a Roth IRA if you do not already have one. Then contact the administrator of that account and the account you want to transfer the money from to find out what paperwork you need to fill out. Remember, you’ll need to add the converted monies to your tax bill for the year, so make sure you have the cash you need to cover those extra expenses if needed.

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You don’t have to take the above actions if you don’t want to, but they’re worth considering if you’re trying to improve your retirement preparedness. Don’t panic if you don’t have as much retirement savings as you’d like by the end of the year. You can always invest additional retirement savings for 2022 in an IRA by making a contribution from the previous year before the April tax deadline. Weigh all your options and decide which one is right for you.

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