The pressures of the holidays are building. Don’t let this infiltrate your investments by making moves you may regret. Don’t buy mutual funds right before a distribution you may owe taxes on next year.
But do consider making moves where you might benefit from spreading tax obligations over several years.
It’s also a good time to consider topping up contributions to tax-deferred accounts. Morningstar’s Julie Virta reminds readers:
For many workers, access to a 401(k) or similar account is one of the easiest ways to save for the future, while also getting a break on current- or future-year taxes. Most plans allow for tax-deferred contributions, while some also allow for after-tax contributions through a Roth account. The earnings on the former accrue on a tax-deferred basis, while the latter compounds tax-free.
Of note, withdrawals from a Roth account are tax-free only if you’re over age 59½ and have held the account for at least five years. You’ll owe taxes on withdrawals from a tax-deferred account and a potential penalty if you are under age 59½.
Contribute at least enough to capture an employer’s match if one is offered. You don’t want to leave any free money on the table. Additionally, you can continue to contribute up to $22,500 for 2023, or up to $30,000 for those age 50 or older. Workers who haven’t hit that max limit — and who want to — may be able to boost contribution amounts in the last few weeks of the calendar year.
Action Line: If you need help reviewing where you stand, I’m here. Finish the year strong by subscribing to my free monthly Survive & Thrive letter by clicking here.
E.J. Smith - Your Survival Guy
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