5 money moves to make before 2016
With 2015 winding down, there's no better time to take a look at your finances and review your goals for the year. Even though the new year is just a couple of months away, you've still got a chance to make a positive impact on your bottom line. Not sure where to start? Read on and find out what you'll need to add to your financial to-do list before 2016 rolls around.
Find out now: How much do I need to save for retirement?
1. Check Your Retirement Contributions
If you've been saving steadily in a 401(k) or IRA this year, it's a good idea to take a moment to see how much cash you've piled up. If you've got some wiggle room before you hit the annual contribution limit, now's the time to try and max those accounts out. For 2015, you can save $18,000 in your 401(k), plus an extra $6,000 if you're 50 or older. The annual limit for Roth and traditional IRAs is set at $5,500 or $6,500 for the 50-and-up crowd.
2. Rebalance Your Portfolio
While you're taking a look at your retirement contributions, you might find that you need to rebalance some of your investments. Rebalancing involves making sure you've got the right mix of investments so you're not carrying more risk than you're comfortable with. If you don't know how to rebalance your portfolio, you can always use our asset allocation calculator. Here's a basic rule to help you get started: Younger investors can invest in riskier bets like stocks. As you get older, it's safer to shift some of your asset toward more dependable vehicles like bonds.
Check out our asset allocation calculator.
3. Add up Your Deductions
Tax time isn't here yet, but you'll have to act fast if you want to cash in on any additional deductions for the year. Some of the things you might be able to get a last-minute deduction for include traditional IRA contributions, charitable donations and certain medical expenses. Deductions reduce your taxable income so the more you can claim, the better chance you have of lowering your tax bill.
4. Harvest Your Investment Losses
If some of your investments didn't do so well this year but others took off, you have a chance to minimize your tax burden through tax-loss harvesting. If you're not familiar with the concept, here's a quick breakdown. When you sell an investment for a profit, you pay capital gains tax on the earnings. If you swap out an investment that's lost value for one that's similar, you can offset the gain with the loss and cut your tax bill in the process.
The IRS has strict rules about this strategy and the number-one thing to remember is that the new investment can't be identical to the old one. Investing in exchange-traded funds is a good idea if you're worried about overlapping investments. For example, if you sell a tech stock for a loss, you could invest in a tech ETF instead.
Try out our investment calculator.
5. Review Your Goals and Set New Ones
If you started off the year with big money goals in mind, it's important to take a look at how much progress you've made toward reaching them. This can help you determine what you need to work on come January.
For example, if you planned to pay off all of your credit card debt by the end of the year but you know you're going to fall short, that might need to be your number-one priority in the new year. If you didn't save as much as you'd planned, review your budget to see where you can free up some extra dollars.
If you didn't have any goals for the year, you might want to spend some time thinking about what you want to achieve in 2016. Having a clear game plan for whatever it is you want to do – whether it's paying down debt or investing in your future – can help you start the new year off on the right foot financially.
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