As we head into the end of the year, there are two important deadlines when it comes to retirement savings. December 31st of the current year and April 15th of the year following.
Let’s start with the December 31st deadline. Generally, this is when 401(k) contributions through payroll must have been made.
I note this as an important date because 401(k) plans can generally only be funded through payroll deferrals. Missing this window may leave unused contribution room. For those looking to save more or sitting on excess cash, increasing deferrals may be a great avenue to furthering retirement savings going into the end of the year.
In fact, I’ve written about this accelerated savings method before! Shoutout to the incoming class of first year Big Law associates!! Check that post out here for more.
It might not be a bad time to review total earnings as well! Pushing into that 32% bracket may make the case to switch from Roth deferrals to pre-tax deferrals. Consider any potential bonus compensation as well.
One more item, we’re approaching the tax-loss harvesting season. These too must be realized in the calendar year. It might be worth taking a peek at that brokerage account. Realizing losses may assist in deferring taxes on any realized gains throughout the year.
If you want more tax-loss harvesting content, look no further. Here is a great piece that I wrote last year around this time.
These small moves can make a significant difference for young professionals over the course of their careers.
Then we have the April 15th deadline. This is where IRA, Roth IRA, and HSA contributions come into play. Generally, contributions to these accounts can be made for the prior year until April 15th of the following year!
This gives us some additional time to ensure where we want to direct our funds. It can be particularly helpful for those that receive a more sizable bonus towards the end of the year and may be looking to stash some of that away.
As the year formally closes out, people will have a very good idea of where income lands for 2026. Keep in mind the income limitations for outright Roth IRA contributions. If you crushed it in 2026, the backdoor Roth may be the avenue to funding a Roth IRA! PS: Pay attention to any pre-tax balances in an IRA to avoid the pro-rata rule.
I always find that these deadlines are a great time to revisit the year’s financial progress. Take a look at what was saved to retirement plans such as the 401(k) or Roth IRA. Is there room to contribute a little more? Small amounts in these advantageous accounts can go a long way over someone’s lifetime. Heading into 2027 is a great time to map out new financial goals, especially if we have new insights to any raises or changes in compensation structures.
And if you’re looking to get your finances in order heading into 2027 with the help of a professional, you know who to reach out to.
This is for informational purposes only and is not intended as legal, tax, or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of publication and are subject to change without notice. Past performance is not indicative of future results.