Summer is almost over, school is starting and 2013 will be over before you know it. If you put off retirement saving until later in the year, now is the time to get on the ball. Sure, you can contribute to an IRA up until April 15, but it's better to just get it done this year. It's easier to keep track of and you can start off with a clean slate in 2014. Here are five things you should do before the holidays roll around:
- Contribute to your 401(k) plan. For 2013, you can contribute up to $17,500 to a 401(k) or equivalent plan. If you are 50 or older, you can contribute an extra $5,500. Check your 401(k) statement and see if you're on track to max out your contributions for 2013. You can also increase your contributions a bit if you're behind. I know this is a lot of money, but saving now will help ease your retirement immensely. Even if you can't contribute the maximum, at least be sure to get all or most of the company match.
- Open a Roth IRA. The maximum contribution for a Roth IRA is $5,500 in 2013. People age 50 or older can contribute another $1,000. When you contribute to a Roth IRA you won't have to pay tax on the gain. It will also give you more tax planning options in retirement.
- Invest in other taxable accounts. While tax-advantaged retirement accounts provide valuable tax savings, we should invest even more if at all possible. Many early retirees invest in rental properties and dividend stocks to build up passive income. Early retirement is much more difficult if you depend solely on tax-advantaged accounts.
- Rebalance. Stocks and bonds have been quite volatile in 2013. If you haven't checked your asset allocation lately, then it's time for a review. Your portfolio probably will need some rebalancing after all the ups and downs. Rebalancing once a year is essential to keep your asset allocation on track.
- Take some capital losses. Selling stocks off at a loss can actually save you some tax dollars. You can use the loss to offset stock sale gains and other income. You could wait until December to do this, but many people will be doing the same thing near the end of the year. It's better to plan a bit and sell off those stocks over the next few months at your convenience.
Joe Udo blogs at Retire By 40 where he writes about passive income, frugal living, retirement investing and the challenges of early retirement. He recently left his corporate job to be a stay at home dad and blogger and is having the time of his life.