Preparing for retirement is something you should be working on throughout your life. That's because spreading the work out over years will make it more manageable, but also because there are tasks you need to do each year to set you on the path to financial security in your later years.
With 2021 coming to a close, it's time to make sure you've checked these three tasks off your to-do list so you can get on the right track (or stay on the right track) toward a secure retirement.
1. Check your Social Security earnings record
Social Security will be an important income source when you retire, so you want to get the full benefits you deserve. You can do that only if your earnings record is correct. That's because your benefits are based on average wages over the 35 years your income was highest (when adjusted for inflation).
You should check your earnings record every year to make sure you're getting full credit for the money you paid Social Security taxes on. If an error exists on your report, you'll want to correct the record as soon as possible while you still have documentation to prove how much you made so you don't end up with a smaller benefit than you deserve.
So if you haven't checked your earnings record already this year, it's time to sign into your mySocialSecurity.gov account and do so. If you find errors, take action now to get them fixed and give your benefits a boost.
2. Contribute enough to your 401(k) plan to max out the employer match
Social Security won't be enough to support you on its own, so you'll need investment income. For many people, the best way to ensure a nest egg large enough to supplement Social Security is to invest in a workplace 401(k) plan (or a 403(b) plan if that's the plan your employer offers).
Putting money into a 401(k) allows you to earn an employer match with most companies. This free money can make a big difference in the ultimate size of your retirement nest egg. In fact, for the average American, the employer match alone could be worth around $333,000 over the course of a career. Earning the full amount of matching funds goes a long way toward building retirement security.
Your employer typically matches only a certain percentage of contributions each year, and, unfortunately, if you forgo that matching money in any year, you lose that opportunity forever. So if you haven't yet earned your full employer match in 2021, contribute as much as you can to your 401(k) over the next month to try to do so. Make sure you understand your employer's rules for how much it will match each pay period, though, because it may be impossible to get the full match at this point in the year.
Even if you can't earn every dollar of matching funds now, try to get the most you can by the end of 2021 -- and start planning right now to max out this match in 2022 so you can avoid passing up free retirement money.
3. Come as close as you can to maxing out your tax-advantaged retirement plans
You can also get help with retirement savings from Uncle Sam if you contribute to tax-advantaged retirement accounts. These can include not just a 401(k) but also a Roth or traditional IRA as well.
While 401(k) contributions must be made by the end of the calendar year, you have until tax day to contribute to an IRA for the 2021 tax year. That could be in April or in October if you file for an extension. Still, it pays to try to get as close as possible now to maxing out these accounts if you're eligible for them. Getting all your contributions in this year allows you to start working on earning 2022's full tax breaks as soon as the New Year rolls around.
By claiming all the tax savings you can and earning as much of your employer match as you can, you'll be able to bulk up your investment account. And by checking your Social Security record, you can ensure your retirement checks from this source are as large as possible. Since Social Security and savings will probably be your two main retirement income sources, doing all you can this year to bolster both is well worth it.