I don't know about you, but to me, it feels like 2023 just started a couple of months ago. Yet somehow we're already halfway through October. The end of the year is coming up fast, and that means you only have a few weeks left to make some key retirement moves. If you hope to do any of the following three things, you'd better start making plans right now.
1. Make 401(k) contributions
401(k)s require you to make all your 2023 contributions by Dec. 31 by withholding money from your paychecks. There is no option to make one-time or prior-year contributions like there is with an IRA. So if you hope to stash more money here, talk to your plan administrator about deferring a portion of your paychecks if you're not already.
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You may set aside up to $22,500 in 2023 if you're under 50, or $30,000 if you'll be 50 or older by the end of the year. Check your online account or ask your plan administrator if you're unsure how much you've already set aside this year. Whatever you do, don't overcontribute, or you could face penalties at tax time.
If you'd like to set aside additional funds for retirement but don't have the cash right now, consider using an IRA. You can make 2023 contributions to these accounts up until the tax deadline -- April 15, 2024. But if you wait until next year to make your contribution, you may need to reach out to your plan administrator to ensure that it applies the funds to the correct year.
2. Do a Roth IRA conversion
Roth IRA conversions can help you save on taxes in retirement. You take tax-deferred traditional IRA savings and change them into Roth savings by paying taxes on the converted sum this year. It raises your taxes now, but it earns you tax-free withdrawals in retirement.
You must do your conversions by the end of the year if you want them to count for 2023, though. The end of the year is a popular time for this, because people are better able to gauge where they'll fall in their tax bracket at this point. Those converting large sums typically do so over several years, converting just enough to take them to the top of their current tax bracket each time.
Those interested in a Roth IRA conversion must first open a Roth IRA if they don't already have one. Then, they need to contact their traditional IRA plan administrator and let them know they'd like to convert their funds. They'll have to fill out some paperwork, and they may need to pay a fee as well.
3. Take your required minimum distributions (RMDs)
Seniors aged 73 and older must deal with annual required minimum distributions (RMDs). These are mandatory withdrawals you must take from most retirement accounts. There are two exceptions: Roth IRAs, and the workplace retirement plan for your current job if you're still employed. In the latter case, you can delay RMDs from this account until the year you retire. In addition, those who just turned 73 get a first-year deadline of April 1 of the following year to take their RMDs.
The amount you must withdraw depends on your account balance and your age. The IRS has worksheets to help you figure out how much you need to take out. Keep in mind that this tells you the minimum you must take out to avoid a tax penalty. But you're free to withdraw more if you want. Check how much you've withdrawn from your retirement accounts this year to see if you've already met your RMD requirement.
If you haven't done one or more of these tasks yet, don't panic. You still have time. But don't put it off much longer. Make a note of it and try to schedule some time in the coming weeks to address the issue.
