Retirement Account Moves to Make Before December 31
You can make retirement account moves before year-end. Consider topping off your contributions and taking your RMDs.
Now is the perfect time to shore up your retirement accounts and make sure you are as well-positioned for the future as possible. Before year-end, aim to top off retirement savings plans, and if appropriate, take your RMDs.
What retirement account moves should you make before 2024?
You have until December 31 to contribute up to $22,500 to your 401(k) for 2023 if you’re younger than 50. You can put in an extra $7,500 if you’re 50 or older by the end of the year, for a total $30,000. For IRAs, you have until the April 2024 tax-return filing deadline to contribute the $6,500 maximum, or $7,500 if you’re 50 or older.
If you’re self-employed, you may be able to stash even more in a retirement account. As a sole proprietor, if you want to make an employee contribution to your own solo 401(k) account for 2023 (the same employee-contribution limit applies as with a 401(k) from standard employment), you must establish the solo 401(k) and indicate that you plan to make an employee deferral by the end of 2023. But you have until the April 2024 tax-return filing deadline to make your employee contribution.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You can also contribute up to 20% of net self-employment income as an employer, and you have until the April 2024 tax-filing deadline to make that contribution. Total contributions have a limit of $66,000 — or $73,500 if you’re 50 or older.
With a SEP IRA, you can contribute as much as 20% of your net self-employment income, with a $66,000 limit for 2023. You have until the April 2024 tax-filing deadline to establish and fund your SEP IRA for 2023.
When should you take RMDs?
If you turned 73 in 2023, the deadline to take your first required minimum distribution from traditional IRAs and 401(k) plans is December 31, 2023.
The law known as SECURE Act 2.0, enacted in late 2022, lowered the penalty for missed withdrawals from 50% of the amount you should have withdrawn to 25% (10% if you correct the missed withdrawal in a timely manner). Still, that’s a significant chunk of your nest egg, so it’s important to get it right the first time. To calculate your RMD, divide your year-end account balance from the previous year by the IRS life-expectancy factor based on your birthday in the current year. Your plan provider (or providers) should calculate RMDs for you, or you can use the IRS worksheets.
Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
-
With Fixed Indexed Annuities, Zero Is Your Hero
Fixed indexed annuities are retirement tools that can offer potential growth as well as principal protection by limiting market risk. Here's how they work.
By Zachary Steinhandler, Investment Advisor Representative Published
-
Before Buying Your First Home, Get These Three Ducks in a Row
With mortgage rates higher than we're used to, making sure you can comfortably afford to buy your first home is more important than ever.
By David W. Johnston, CFP® Published
-
Is an Annuity Worth It? Tax Pros and Cons
Retirement Knowing how an annuity might impact your tax situation can be confusing. Here are some advantages and downsides to consider.
By Kelley R. Taylor Last updated
-
Why You Should Expect a Lower Social Security COLA for 2025
Avoid the COLA social security dip in 2025 with a Health Savings Account
By Sandra Block Published
-
Prepare to Start Taking Money Out of Your Inherited IRA
A reprieve for adult children and other non-spouse beneficiaries of inherited IRAs will end in 2025.
By Sandra Block Published
-
Six Target-Date Funds to Buy For Your Retirement
These six target-date funds are good set-it-and-forget-it options that are a staple of retirement plans.
By Nellie S. Huang Published
-
Make Longevity Risk Part of Your Retirement Plan
Here some ways to mitigate longevity risk into your existing retirement plans.
By Janet Bodnar Published
-
Want to Quit? Check Your 401(k) Employer Match First
Here are some factors to consider if you want to quick, but don't want to lose gains on retirement funds.
By David Rodeck Published
-
How to Give an Inheritance While You're Alive
If you want to give an inheritance while you're alive, there are many points to think through, including what you can afford and what the rules are around giving.
By Sandra Block Published
-
Five Questions to Ask Before You Buy an Annuity
Annuities come with different provisions and costs. Before you buy one, make sure to ask the right questions, like these five.
By David Rodeck Published