October, Better for your 401K than Christmas
In recent days I’ve been seeing Christmas items appear in stores. I think it is too early to do my Christmas shopping, but not to reduce my biggest annual expense, taxes.
Since taxes are probably your biggest expense too I’d suggest making sure you are maxing out your 401k or other retirement plan before the end of the year. Your retirement contributions generally give you an instant 15-35% boost because of their pre-tax status.
If you haven’t been contributing you may not be able to reach the IRS annual maximums by the end of the year. Ask your plan administrator if you can over contribute to the plan for the last few months to make up the difference. Not every plan allows this but I had one lucky year were I was cash strapped for the first half of the year but was doing well in the second half. I talked to the hr department and they let me contribute double their monthly maximum so I could hit the yearly IRS maximum.
Go ahead, maximize your retirement investment and give yourself a great Christmas present in October.
I did that in May when I realized that I would be relocating for a promotion for my fiancee. I didn't know if my new job would have a 401k plan or if I would be allowed to invest in it right away. Turns out they don't have a 401k plan, but at least I got two full months of putting in 75% of my salary. It's amazing how quickly that can add up. It's just a huge drain on your savings.
Lazy Man and Money | October 12, 2006 03:24 PM