Holiday shopping. Turkey cooking. Family entertaining. November and December are very busy (and stressful) months. But if you’re one of the countless Americans with an IRA or 401(k), there are some critical items that ought to be on your to-do list before you ring in the New Year.

End-of-year retirement planning to-do list

Joshua Kadish, AIF, RFC of RPG Life Transition Specialists, a holistic wealth management firm, says that there are five things every person should do before the end of the year to avoid penalties and protect their retirement interests. “Different retirement accounts have different deadlines, and it’s difficult to keep them all straight,” says Kadish. “But a little planning and diligence can go a long way to maximizing your returns and minimizing tax penalties.”

  1. Maximize 401(k) Contributions: Contributions to your 401(k) are due by December 31st. And if you’ve been lax about contributing during the year, consider making up ground now. You can make an ad hoc payment, or contribute your full year-end bonus to your account. A person who maximizes their 401(k) contributions stands to save thousands on federal income taxes. For 2014, $17,500 is the maximum you can contribute to your 401(k). If you are over age 50, then you can also take advantage of the “catch up” provision and add an additional $5,500 for a maximum of $23,000, which is pre-tax.
  2. Take Minimum Required Distributions (RMDs): If you’re above the age of 70 ½, you are required to take a minimum distribution from your 401(k) or IRA and pay subsequent income tax on that distribution. While you have a slight buffer (distributions must be taken by April 1 the year following your 70 ½ birthday), missing the distribution deadline may result in a tax penalty of 50 percent.
  3. Use Those RMDs to Pay Taxes: Consider having your RMD withheld to cover your estimated tax bill. While those taxes are generally due on a quarterly basis, having them withheld from an end-of-year RMD may help you avoid penalties associated with underpayment of taxes across the entire year.
  4. Assess 2015 Contribution Levels: If you’re in a position to maximize your 401(k) contributions, know that the limit will be slightly higher in 2015. Contact your administrator now to adjust your contribution levels so you don’t miss out on valuable pre-tax contribution opportunities.
  5. Don’t Wait Until the Last Minute: Too many people make the mistake of waiting until mid-December to take their required minimum distributions or make final contributions to their retirement accounts. Requests get misplaced. Financial institutions become overwhelmed with year-end requests. So, if you wait until the very last minute, your run the risk of missing important deadlines. It’s just not worth it.

A little retirement planning can go a long way. The best thing one can do is know the deadlines that apply to them and use that knowledge to avoid unnecessary penalties. After all, you have better things to spend your money on this time of year. 

About RPG-Life Transition Specialists (RPG)

RPG is a financial planning firm that exists to help people connect their wealth to purpose and live a more enriched life as we educate them to make future decisions with confidence. We believe that the financial services model has been broken and have strived to do things differently. We do this by putting education first, spending our time in helping people identify what is truly important in life to them and helping them connect their wealth to their purpose. With a 90% client retention rate over the course of 19 years, the experienced team of financial professionals take time to counsel each prospect and deliver a plan designed to meet each individual’s specific needs.  Partners, Joshua Kadish, AIF, RFC & Nicole Mayer, AIF, CDFA reached #1 on Amazon in the wealth management category for their book, Navigating Life’s Transitions: Connecting Your Means To Your Meaning. They have been featured in esteemed publications like the Wall Street Journal, Money, Consumer Reports, Crain’s Chicago Business and have been recognized by Chicago Magazine as Five Star Wealth Managers in 2012, 2013 & 2014. Kadish is also the former co-host of “America’s Wealth Management Radio Show” with Dean Barber on 890 AM WLS. RPG-Life Transition Specialists is located at 2610 Lake Cook Road, Suite 250, in Riverwoods, Illinois.  They can be reached at (800) 596-0253.  Find them online at www.rpgplan.com.  Securities and advisory services offered through National Planning Corp.  (NPC), Member FINRA/SIPC.  A Registered Investment Adviser.  RPG and NPC are separate and unrelated companies.

End-of-Year Retirement Planning To-dos