At this point of the year, a lot of people still aren't ready to say goodbye to summer. And so it may seem premature to be thinking about 2021 coming to an end.
But in reality, we're getting down to that final stretch, which means now's a good time to take a close look at your finances and make sure you're on track to end 2021 on a fiscally healthy note. Here are a few key investing moves worth making before the year wraps up.
1. Max out your retirement plan contributions — or get as close as possible
Not everyone can max out an IRA or 401(k) plan. But if you haven't yet come close to hitting this year's contribution limits, then it pays to ramp up in the coming weeks if that's a possibility.
The more money you put into an IRA or 401(k), the more tax savings you'll reap. This year, 401(k)s max out at $19,500 for workers under 50 and $26,000 for those 50 and over. IRAs have much lower contribution limits — $6,000 and $7,000, respectively — so maxing one out may be easier than with a 401(k).
Furthermore, if you have a 401(k) and can't max out, you should at least make sure you're on track to snag your full employer match. If you don't, you'll effectively be giving up free money for retirement.
2. Check up on your investments
You may have investments in a retirement plan, a brokerage account, or both. Now's a good time to see how your investments are performing and make changes as needed. If you have stocks in a brokerage account that only seem to be declining in value, it pays to make plans to unload them before 2021 wraps up. That way, you'll have the option to use that loss strategically.
You're allowed to use capital losses to offset capital gains in your brokerage account. Taking a loss in, say, September or October might put you in a solid position to sell stocks at a profit in November or December without creating a tax headache in the process.
3. Diversify your holdings
We don't know whether 2022 will be a volatile year for stocks or not, so a good bet is to go into it with a nice diverse portfolio. Take a look at how your money is invested and make sure you're not too heavily loaded in one particular segment of the market. If, for example, you realize you have 50% of your money invested in tech stocks, you can make some changes while stock values are still holding strong.
At the same time, it's a good idea to branch outside of stocks. Now may be a good time to look at investing in REITs (real estate investment trusts) or dabbling in cryptocurrency.
At this stage of the year, you may not be ready to say goodbye to 2021. After all, there's still the fall season, Thanksgiving, and the winter holidays to enjoy. At the same time, now's a good time to check these investing moves off your list. Doing so may help you close out the year with a greater sense of financial security.
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