This Week in Your Wallet: 401(k) Questions to Consider before 2014
As we head down the home stretch of 2013, it’s my bet you’ll be thinking a little more than usual about your money. Did you spend all the money you stuffed into your flexible spending account? (You may have a few more months depending on where you work, but check with your benefits manager.) Did you make all of your charitable contributions? And did you do right by your 401(k)?
This week on my blog, I tackle a question from a reader (thanks for writing, Bill) who asked about the philosophy behind contributing to an unmatched 401(k). If you’re one of the many people working for a company that doesn’t match, I lay out your options in detail, so take a look here.
If you’re already contributing, there are other things to keep in mind — like maximizing the amount you’re kicking in. As DailyFinance reports, not all tax breaks are available come filing time; there are some you have to consider before December 31st.
For 2013, contributions tap out at $17,500 – $23,000, if you’re 50 or over. If that’s not in the cards this year, it always pays to at least try to grab the match. December 31st is usually the cutoff date for both tax-deductible 401(k) contributions and employer matching, so if you have any catch up you’d like to play, call your plan provider or benefits manager pronto and ask for specific instructions for how to do this (it may require going beyond the typical paycheck deduction).
Along those same lines, investors over 70½ years of age have until the 31st to take their required minimum distributions (with the exception of the first distribution), but before you cash out, triple-check your math to make sure your withdrawal amount is correct. Otherwise you’ll be hit with a 50 percent tax penalty on the amount that should have been withdrawn in the first place. For a little guidance, Bankrate offers a calculator for determining your required minimum distribution.
‘Tis the season for giving back
From tax talk to charity talk, we can’t help but acknowledge the obvious: charity donations can reduce your taxable income and lower your tax bill. That’s all well and good, but you’ll also want to make sure you’re giving effectively and efficiently.
Roughly 25% of household charitable donations occur between Thanksgiving and New Year’s Day, according to a study from the Indiana University’s Center on Philanthropy. Before you take out your checkbook this year to write the same amount to the same charity, become a more mindful donor by reevaluating if the organization is really worth your dime. According to the folks at MarketWatch, the process mirrors choosing a stock. Both are investments you hope to profit from — though in the case of charitable gifts, your profit comes in the form of changes you’d like to see happen, in fighting disease, in ridding the world of childhood hunger, in improving the environment, or whatever. By that logic, the best way to pick a charity is to focus on outcomes.
First ask yourself a few values-based questions, like what angers you the most, or what inspires you the most. After the self-assessment, survey the charities that share your passions and see which ones will give the biggest “change per buck.” The article asks: What’s the greater ROI, a $10,000 gift that goes to buying children books? Or a $10,000 gift that sponsors a class that teaches children how to read? I’m more inclined to take out my checkbook for the latter.
Shopping in peace
For those of you looking to knock out your holiday shopping lists with a little more legroom in the coming weeks, Kiplinger has got you covered with the best, crowd-free shopping days. You’ll be good to go this week through December 13 as well as on Monday, December 16. You’ll likely receive better customer service on those days as well, because store clerks will have more time and energy to attend to you. If you’re looking for breathing room, however, give yourself a break December 21. Much like Black Friday, retailers pull out all of the stops with steep discounts and special offers to get consumers back in the stores before St. Nick’s big day. If you’re still in the market for deals, however…be my guest.
A little holiday rivalry
I’m excited to have been nominated by the kind folks at GoBankingRates.com as one of the most popular personal finance experts of 2013. I’m up against some tough contenders, but a little friendly competition never hurt anyone. So please help me win the #1 title this year and vote for me in their third annual 12 Days of Finance poll. You can cast as many votes as you’d like between December 1-31 on GoBankingRates.com. Thanks!
Have a great week,
Jean
As we head down the home stretch of 2013, it’s my bet you’ll be thinking a little more than usual about your money. Did you spend all the money you stuffed into your flexible spending account? (You may have a few more months depending on where you work, but check with your benefits manager.) Did you make all of your charitable contributions? And did you do right by your 401(k)?
This week on my blog, I tackle a question from a reader (thanks for writing, Bill) who asked about the philosophy behind contributing to an unmatched 401(k). If you’re one of the many people working for a company that doesn’t match, I lay out your options in detail, so take a look here.
If you’re already contributing, there are other things to keep in mind — like maximizing the amount you’re kicking in. As DailyFinance reports, not all tax breaks are available come filing time; there are some you have to consider before December 31st.
For 2013, contributions tap out at $17,500 – $23,000, if you’re 50 or over. If that’s not in the cards this year, it always pays to at least try to grab the match. December 31st is usually the cutoff date for both tax-deductible 401(k) contributions and employer matching, so if you have any catch up you’d like to play, call your plan provider or benefits manager pronto and ask for specific instructions for how to do this (it may require going beyond the typical paycheck deduction).
Along those same lines, investors over 70½ years of age have until the 31st to take their required minimum distributions (with the exception of the first distribution), but before you cash out, triple-check your math to make sure your withdrawal amount is correct. Otherwise you’ll be hit with a 50 percent tax penalty on the amount that should have been withdrawn in the first place. For a little guidance, Bankrate offers a calculator for determining your required minimum distribution.
‘Tis the season for giving back
From tax talk to charity talk, we can’t help but acknowledge the obvious: charity donations can reduce your taxable income and lower your tax bill. That’s all well and good, but you’ll also want to make sure you’re giving effectively and efficiently.
Roughly 25% of household charitable donations occur between Thanksgiving and New Year’s Day, according to a study from the Indiana University’s Center on Philanthropy. Before you take out your checkbook this year to write the same amount to the same charity, become a more mindful donor by reevaluating if the organization is really worth your dime. According to the folks at MarketWatch, the process mirrors choosing a stock. Both are investments you hope to profit from — though in the case of charitable gifts, your profit comes in the form of changes you’d like to see happen, in fighting disease, in ridding the world of childhood hunger, in improving the environment, or whatever. By that logic, the best way to pick a charity is to focus on outcomes.
First ask yourself a few values-based questions, like what angers you the most, or what inspires you the most. After the self-assessment, survey the charities that share your passions and see which ones will give the biggest “change per buck.” The article asks: What’s the greater ROI, a $10,000 gift that goes to buying children books? Or a $10,000 gift that sponsors a class that teaches children how to read? I’m more inclined to take out my checkbook for the latter.
Shopping in peace
For those of you looking to knock out your holiday shopping lists with a little more legroom in the coming weeks, Kiplinger has got you covered with the best, crowd-free shopping days. You’ll be good to go this week through December 13 as well as on Monday, December 16. You’ll likely receive better customer service on those days as well, because store clerks will have more time and energy to attend to you. If you’re looking for breathing room, however, give yourself a break December 21. Much like Black Friday, retailers pull out all of the stops with steep discounts and special offers to get consumers back in the stores before St. Nick’s big day. If you’re still in the market for deals, however…be my guest.
A little holiday rivalry
I’m excited to have been nominated by the kind folks at GoBankingRates.com as one of the most popular personal finance experts of 2013. I’m up against some tough contenders, but a little friendly competition never hurt anyone. So please help me win the #1 title this year and vote for me in their third annual 12 Days of Finance poll. You can cast as many votes as you’d like between December 1-31 on GoBankingRates.com. Thanks!
Have a great week,
Jean
