As the new year approaches, it is a great time to start making financial resolutions. Here are three ideas to help improve your finances.
- Increase Retirement Savings. In 2021, the limits remain the same as 2020. You can contribute up to $19,500 to your 401(k) plan, or $26,000 if you’re 50 years of age or over. This does not include an employer match, if one is available to you. IRA contribution limits have also remained unchanged at $6,000 per year with those age 50 and older eligible to make an extra $1,000 contribution. If you cannot contribute the maximum, strive to contribute enough to maximize employer matches inside your retirement plan. Many plans now offer you the ability to enroll in automatic contribution increases each year. By slowly increasing 1% or more each year, you will hit the maximum contribution before you know it.
- Set Financial Goals. “People don’t plan to fail; they fail to plan,” the old saying goes. Set aside time to sit down and think about some realistic goals that you can actually achieve. Prioritize the ones that are most important and then write them down. The more specific the goal the higher likelihood of achieving a desired result. Broad goals like, “I want to pay off debt” aren’t as effective as saying, “I want “x” credit card paid down to $0 and $5,000 in an emergency fund.” Once your goals are in place, identify a due date and actionable steps to help you execute. For example, “Ask HR to automatically transfer “x” dollars to “x-savings account” per pay.”
- Take Advantage of Health Savings Accounts. Does your employer offer access to a Health Savings Account? HSA’s are triple tax-free. This can be a powerful retirement planning tool! Of course, they can be used to pay for qualified healthcare expenses, tax free. But what many people don’t know is that at age 65, HSA’s can also function similar to that of a traditional IRA and be used to pay for non-healthcare related expenses. If your employer offers a HSA, consider increasing or maximizing your contributions.
If you need assistance outlining a plan to help achieve your financial resolutions for 2021, give us a call. We’re always more than happy to help map a course for you.
Happiest of holidays to you and yours!
