Learn and Plan | Year-end retirement planning checklist
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Year-end retirement planning checklist

Nov 29, 2023, 6:19:06 PM | Reading Time: 6 minutes

Before the end of the year arrives, you may want to check in on your finances, including taking steps that can help maximize your retirement savings for down the road. Creating a sound retirement plan can be instrumental in closing potential savings gaps, aligning your income and expenses, and meeting your financial goals for the future. One way to help boost your retirement savings is by maximizing your retirement account contributions. If you reach December and still wish to take advantage of this opportunity, here are some helpful steps and deadlines to keep in mind.

Consider 401(k) contribution limits for your maximum retirement contribution

Many people have a 401(k) through their employer, putting a portion of their pay automatically into the account throughout the year. Employers also have the option to match employee contributions, helping to build those savings for the future. Each contribution you make can help lower your taxable income for the year, and because of this, the Internal Revenue Service (IRS) caps the amount you can contribute annually. Toward the end of each year, the IRS reviews the maximum contribution limits for 401(k) plans and may make adjustments to those amounts for the following year.

How much can I contribute to my retirement account?

Employees can contribute up to $20,500 to their 401(k) plan in 2022. Employees age 50 or over are also eligible for an additional catch-up contribution of $6,500.1 This was put in place to encourage workers approaching retirement to increase their savings for the future. If you have multiple 401(k) plans, your total contributions to all of the accounts cannot exceed $20,500. If your employer makes elective contributions to your account, there are limits set here as well. Total employer and employee contributions for 2022 cannot exceed $61,000 or 100% employee compensation. 1

Meet the 401(k) contribution deadline

If you would like to put more toward retirement and haven’t met the maximum contribution amount for your 401(k) this year, you still have time to do so. Since contributions are made through payroll deductions, you have until December 31 to contribute additional funds. Based on your income and filing status, your contributions to a qualified 401(k) may lower your tax bill, so making those contributions before year-end can be beneficial when tax time arrives.

Can I contribute to my 401(k) after the year's end?

In most cases, contributions to your 401(k) are due before the end of the calendar year, but some employers’ plans have a longer period to make matching contributions for a given year. In this case, you may be able to contribute up to the tax filing deadline for the company. Check with the human resources department to see the specific rules for your organization’s plan.

Check on Required Minimum Distributions

A required minimum distribution (RMD) is the IRS-mandated amount of money that is required to be withdrawn from a traditional IRA or employer-sponsored retirement accounts, like a 401(k) or 403 (b), by December 31 each year. In general, you have to start taking withdrawals when you reach age 72, or 70 ½ if you turned 70 ½ before January 1, 2020.

To calculate your RMD, you divide the prior December 31 balance of your account by a life expectancy factor provided by the IRS. If you own multiple IRAs or 401(k)s, you will need to calculate the RMD for each account. It’s important not to miss the deadline, because you could get hit with a 50% tax penalty on the amount of missed RMD. As an account owner, you can withdraw more than the RMD, just remember that the withdrawal can be taxed as ordinary income. Some providers allow you to set up an automatic withdrawal so you can rest assured that your RMD will be taken on time or schedule monthly distributions if that aligns better with your goals.

There may be changes on the horizon in future years as part of the SECURE Act 2.0, which could further increase the age for taking RMDs.

Your financial professional or tax advisor can work with you to optimize your RMDs and discuss timing and strategies for potentially minimizing taxes. Some of these tactics include taking more than the RMD or turning your RMD into a qualified charitable distribution (QCD) that contributes directly from a traditional IRA to a charity of your choice.

Evaluate how to create a long-term plan for retirement

Depending on where you’re at in your journey and your individual goals and circumstances, you don’t have to wait until year-end deadlines to take important steps to prepare for a more financially secure retirement. It’s never too late to start planning, and the sooner you do, the more opportunity you have to create a comprehensive strategy that can provide the income you need for a potentially lengthy retirement. It can be especially beneficial to put a long-term plan in place while you’re still earning regular income and can build more savings for the future.

What is one thing you should do when planning for retirement?

To determine the best plan of action when creating a retirement strategy, you'll want to first define your goals for the future. Next, choose an estimated retirement age. Lastly, calculate how much income you’ll need to fund your retirement lifestyle. This provides an important foundation on which to build the plan that is needed to help achieve these goals. Predicting how much you’ll need as a retiree can allow you to determine the savings required to live the life you envision, while most importantly, helping identify any income gaps that need to be filled.

How do I create a retirement plan?

Once you’ve set your financial goals, you can then create the roadmap to retirement. Meeting with a financial professional can help you tackle retirement planning more effectively by helping ensure you’ve checked all the boxes and have identified ways to maximize your saving opportunities. Together you can discuss potential retirement risks—including inflation, longevity, rising healthcare costs, and market volatility—and how best to prepare for these factors. You can also discuss Social Security, life insurance needs, estate planning, and other insurance coverage options.

A financial professional can also help answer key questions and make the overall process less complex; helping you to build a personalized financial strategy that can set you on the right track toward achieving your goals in retirement. Meeting with your financial professional yearly, or following any major life events, can help determine if any updates need to be made to your projected income needs, goals, or retirement timeline. Most importantly, having a financial professional in your corner can help you navigate the ins and outs of retirement planning with intention and confidence.

Taking a proactive approach to retirement planning can help provide the greatest outcome, because the sooner you start, the sooner you can begin building that nest egg and laying out the steps needed to achieve your goals. If you’ve already gotten the ball rolling, the end of the year can offer a good opportunity to review your retirement accounts and identify ways to give your savings a boost. Taking time each year to gauge where you are and where you want to be is an important step in making your retirement dreams a reality.

1. Source: IRS.gov, Operating a 401(k) Plan, 2022

Neither Midland National Life Insurance Company, nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.


REV 12/2022