Being Smart with Your Money

SavingNow is a great time to make some key financial moves that can help you throughout the year and make it easier to reach your goals.

Here are some steps to save money, take advantage of new financial strategies and protect your identity and your accounts:

Review your insurance premiums. Reconsider all your insurance coverage, particularly auto. This can be an easy way to free up extra cash. Ask your current insurer for all available discounts and get quotes from other insurers for the same amount of coverage.

Increase your retirement-savings contributions. If you've been maxing out your 401(k) or are turning 50 this year, up your automatic contributions to take advantage of higher limits and catch-up opportunities.  You should also set up automatic monthly contributions from your bank account or paycheck into an IRA. This will allow you to save before you have an opportunity to spend it.

Make a charitable-giving plan. When you earmark funds for charity, think of the ways you can contribute—by writing a check, giving appreciated securities, giving to a donor-advised fund, or making a tax-free transfer from your IRA (if you're older than 70½). Ask your estate planning attorney how the new tax law may impact your charitable-giving strategies.

Make the most of the new tax law. Speaking of the new tax law changes, look at how it may affect your IRA conversions, home-equity loans, medical-expense deductions and 529 college-savings accounts.

Plan for your RMDs. If you're already older than 70½, or if you're reaching that milestone in 2018, start planning for your required minimum distributions (RMDs). Determine from which IRAs, 401(k)s, or other accounts you'll need to withdraw money and consider which investments from which you'd like to draw. You may also want to investigate making a tax-free transfer of your RMD to charity, which will become more common now that fewer people will be itemizing under the new tax law.

Make some Medicare decisions. If you're going to be 65 this year, start thinking about Medicare. If you don't have health insurance through a current employer (or a spouse's current employer), then you’ll need to enroll within the three months before the month you turn 65 and the three months after that. If you're still working and have health insurance through your employer (or if you're covered by your spouse's employer), you may not need to sign up just yet.  However, be very careful to avoid paying a late-enrollment penalty or missing out on important coverage.  You should also plan out how you're going to fill in the gaps in Medicare—like with a Medicare supplement policy and Part D prescription-drug coverage, or by having medical and drug coverage through a Medicare Advantage plan.

Select your military pension. If you're in the military and joined between the years 2006 and 2017, you'll have a big decision to make on your retirement benefits this year. You can stay with the current retirement system, which gives you a nice pension—but only if you stay for 20 years or more. You could also opt for the new system, which reduces the pension but also provides matching contributions for the Thrift Savings Plan that current service members can keep immediately.

Reference: Kiplinger (January 5, 2018) “12 Smart Financial Moves for the New Year”


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