There's little more than a month left to this year, and that means we're running out of time to make key retirement moves for 2023. With the holiday shopping season now in high gear, you might prefer to put off further retirement savings decisions until 2024. But that might not be a good idea.
If you make any of the following three retirement mistakes, you could wind up paying dearly in the future. It's best to act quickly if you don't want to cost yourself.
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1. Skipping your 401(k) match
The deadline for claiming your 2023 401(k) match is December 31st. Those who aren't able to do this could miss out on hundreds or thousands of dollars, which could be worth significantly more after being invested for decades.
Check with your plan administrator if you're unsure how much you've contributed to your 401(k) this year or whether you have claimed your full match. If not, see if you can increase your contribution rate over your last few paychecks of 2023 to get as much of this extra cash for retirement as possible.
If claiming your 2023 401(k) match isn't in the cards for you financially, that's OK. Begin planning for 2024 instead. Try to defer some of each paycheck beginning in January to give yourself a better shot at claiming the full match by the end of the year.
2. Overcontributing to retirement accounts
Overcontributing to your retirement accounts will cause a lot of trouble for you at tax time. The federal government limits how much you can contribute to tax-advantaged retirement accounts, like 401(k)s and IRAs. It imposes stiff penalties to those who set aside more than the annual limits.
Those who make excess deferrals to 401(k)s pay taxes twice on the excess -- once in the year they make the overcontribution, and again in the year of the correction. Those who put too much into an IRA will face a 6% penalty on the excess every year until the extra money is withdrawn.
Check these annual limits now to ensure you haven't exceeded them. If you have, notify your plan administrator at once so they can assist you in correcting the error before the tax deadline. If you act promptly, you won't face the penalties outlined above.
3. Not reviewing your investment strategy
Reviewing your investments periodically is crucial for protecting your wealth and maximizing your profits. Your risk tolerance changes over time, and your retirement timeline may change as well. These things necessitate adjustments to your retirement portfolio to ensure you're not exposing yourself to too much risk or investing too conservatively.
It's also a good idea to think about whether you still have confidence in your investments' ability to earn you a profit over the long term. If you feel you're paying too much in fees or you've invested in stocks that have consistently lost money for years, you may want to consider moving your savings elsewhere to maximize your investment growth in 2024.
Technically, this isn't something that has to be done by the end of the year. But now is a great time to do it anyway. It'll enable you to enter the new year confident that you're doing all you can to build your nest egg.
If you have any other retirement to-dos still lingering on your 2023 checklist, consider setting aside an afternoon to take care of them. Or if that feels too overwhelming, focus on one task at a time. Once you've completed any applicable items listed above, you can shift your attention to your financial plan for 2024.
