Your financial plan matters and you can avoid these mistakes…

Before the books close on 2015, make sure you don’t miss your chances to make some potentially game-changing retirement decisions. 

It’s easy to miss out on opportunities that could be beneficial to your financial future and retirement savings. You still have some few days left before this year ends. Go over our checklist of mistakes savers commonly make before the end of the year.

If you find yourself ill-prepared for 2016, that’s okay! A solid financial planner can help you get back on track.

• Holiday overspending.

  This is easy to do! You may think that because the holidays roll around once-a-year that a little extra spending is  acceptable. The truth is that you need to be mindful of your spending at all points. Especially, during the holidays season. If you have built a solid budget, you should still stay financially disciplined and spend frugally during this time of year.

• Neglecting your financial plan.

  Ah, resolutions. We are notorious for making them and not keeping them. However, there is no better time to set goals than the New Year for your retirement. One of the important aspects of goal-setting is to look back on where you were financially. You can use that as a motivational tool to jump-start your retirement set-up. The best thing about the New Year (for retirement savers) is the fact that you can assess your retirement goals and see where you were lacking and where you should strengthen your savings plan.

• Avoiding conversation about your plan.

  Your retirement plan is not a secret. It should be shared with everyone who is important in your life – particularly your spouse and children, Christmas/the Holidays may seem like a bad time to go over this plan, but if you rarely see one another it might be the best time to do so. Just remember that this doesn’t have to be done with all family members present. In fact, you should try to set aside time to meet with just your close relatives  and those who it will impact before revealing your plan. This is particularly important if you are considering to move closer to your immediate family. You should be certain everyone is one the same page before any large financial decisions are made.

• Being left behind on a 401(k) deduction.

  Unlike IRA contributions, which can be made until April 15th of 2016 and be eligible for a tax deduction, contributions to 401(k)s must be made by December 31st if you want to deduct them from your federal income tax forms for 2015. If you fail to make this contribution you could be missing out on a potentially large return on your money.

• Holding on to losing stocks.  

  To be stock hoarded is a big mistake. If you have money invested in areas other than your 401(k) or IRA accounts, you should evaluate any stock that is down and consider getting rid of it. This way, any stocks you sell for a loss can be used to mitigate any capital gains that are taxed for the following year. The good news is if you like your stock, you don’t have to permanently ditch it, either. You can sell it for a loss and re-purchase it at a lower price after 30 days. Before doing this, you should be sure that you are speaking to a financial adviser so that you follow the IRS’s rules surrounding this process, which is sometimes known as tax loss harvesting.

• Skimping or neglecting your required minimum distribution.

  This is perhaps the most expensive mistake you could make at the end of the year. A required minimum distribution, sometimes known as an RMD, requires that individuals with traditional IRA or 401(k) accounts must withdraw a specified amount each year after the age of 70 ½. Should you fail to do so, it could result in a tax up to 50{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} of the required distribution. The good news is that – for those who have reached 70 ½ during 2015 – the IRS will allow you to push that RMD payment until April 1st, 2016. The downside? This could end up costing you most in 2017, as you might have to take out two RMDs in 2016, pushing you into a higher tax bracket. Don’t forget: even if you have inherited an IRA, you also might need to take out an RMD.  

• Failing to plan future tax reduction.

  This is probably the number one mistake retirees and those planning for retirement make. Any contribution you make to an IRA or 401(k) pension plan are tax-deductible. But once you have withdrawn that money, it becomes taxable. Unless it’s a withdraw from a Roth account, which is tax-free and not subject to an RMD. So: how do you plan on reducing taxes later in life? Consider a Roth conversion at the end of the year. The money you put INTO your Roth account is taxable, but any of your future withdrawals won’t be. If you  convert at the end of the year, you’re more likely to be in a better position to know how much you can convert without impacting your tax bracket.

Take the time now, save yourself money

This time of year is hectic for many individuals, but it is important to set aside time to get your financial affairs in order before the ball drops and 2016 rolls in. By doing so, you will make sure your retirement and your financial future stays strong and lasts you for many New Years to come.

Speak to a trusted financial adviser that can help you solidify your financial plan in case of missing any deadline.