Summer Solstice Financial Checkup
We're closing in on the longest day of the year. To celebrate the annual halfway mark, some people wear flowers in their hair and dance in the shadow of Stonehenge. Others run solstice marathons by the light of the midnight sun.
You have until April 15, 2019 to
fund an IRA—but the sooner you
start putting money into your IRA,
the more time your money has
to work for you.
Before the dancing and running and other celebrations end, here's something all of us can put on our summer solstice checklist: check in on the progress of your 2018 financial goals. After all, the summer solstice is known as a time of renewal and great potential. Don't neglect the great potential of sound financial planning and decisive action.
A good place to start is with your retirement accounts. Are you on track to save to the max this year? If you are falling behind, you still have time to catch up. As a refresher, here are the important annual IRS contribution limits to keep in mind:
- Employer-sponsored plans: You can put up to $18,500 into a traditional or Roth 401(k), 403(b), 457 or Thrift Savings Plan account—and $24,500 if you are 50 or older. Use FINRA's calculator to see if you're on track to Save The Max. Check your last pay stub to see how you're doing through the first half of 2018. Log in to your 401(k) account or contact your human resources department to increase your savings if you find out you are a bit behind.
- IRAs: You can put $5,500 in a traditional or Roth IRA every year. There are income limits associated with Roth contributions but not contributions to a traditional IRA. If you have a retirement plan at work you lose the ability to get a tax deduction for your contributions if you make over $73,000 (single) or $121,000 (married). Even if you exceed income limits to get a tax deduction, your earnings grow tax free and are only taxed once you withdraw. You have until April 15, 2019 to fund an IRA—but the sooner you start putting money into your IRA, the more time your money has to work for you.
In addition to shoring up retirement savings, use the longest day of the year to accomplish these three financial tasks:
- Check your progress toward adequately funding an emergency fund. A good target to shoot for is $2,000, or just over $160 per month. Everyone should have an emergency fund. To start one, set up a separate savings account at your bank, and direct at least $100 per month to it as an automatic deposit.
- Get your free credit report. Check out AnnualCreditReport.com, the only resource authorized by federal law to provide free credit reports from each of the three major credit bureaus—Equifax, TransUnion and Experian. You can request a report from each of the credit bureaus—for free—once every 12 months. If you already received your report—and reviewed it—take a few minutes to reacquaint yourself with how much each credit card you have is charging you in interest, and the balances you are carrying on each card. Consider paying down, or paying off, the cards with the highest interest rates first.
- Start planning for the holidays now. There are a number of added expenses that tend to accompany holidays around the winter solstice, from gifts to the cost of entertaining. Start developing a savings strategy now during this long summer's solstice—because you might not find the time to do so on the shortest day of the year.
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