Retirement: 3 Common Mistakes to Avoid in December

These are common mistakes you should avoid when it comes to your retirement plan in December:

  • The year’s final month might be crucial to your efforts to save money.
  • Ensure that your IRA or 401(k) is correctly managed over the year’s last month.

You should consider the following three things to ensure you are not mismanaging your retirement account in the final month of the year and maximizing your savings.

If your objective is to have a comfortable retirement, you must have a personal savings account. Social Security may provide you with a significant payment, but it won’t cover all your living expenses.

Instead, you should anticipate needing income outside of Social Security once your job concludes, which is where your IRA or 401(k) comes into play. Meanwhile, we’re nearing the end of 2024, so now is the time to maximize your retirement funds. This includes avoiding these costly errors in December.

Stopping or pausing your contributions

In the case of front-loading your IRA or 401(k) contributions and reaching the annual contribution limit, you can cease financing your account in December if you have already contributed the maximum amount for the year. If not, you should not suspend your contributions to free up funds for the holidays.

December may be a costly month, and there’s little doubt about it. It is also your last chance to increase your long-term savings in 2024.

In addition, every dollar you contribute to a standard IRA or 401(k) plan this year is a dollar of gains that the IRS cannot tax. Keep contributing to your IRA or 401(k) in December, even if you’re satisfied with the amount of money you’ve saved for retirement this year.

Not checking the performance of your assets.

It is unnecessary to check your IRA or 401(k) balance every day or week. Examining your plan balance too frequently might cause you to make impulsive actions, such as selling down investments and locking in losses.

Monitoring the performance of your retirement plan is also important, ideally every quarter. If you still need to review your IRA or 401(k), schedule a review for December.

It may be time to sell specific assets underperforming outside the stock market fall this year. Or, you may decide that it is prudent to reorganize your assets based on your age.

Not abandoning expensive investments.

Investors with funds in a 401(k) account might easily fall into the trap of paying excessive investing fees. 401(k)s often prohibit the purchase of individual stocks. Instead, they restrict you to small funds, some of which may have expensive fees (known as expense ratios).

If you’re paying a lot in investing fees, it may be time to replace some of the most expensive mutual funds in your 401(k) with index funds, which may charge a fraction of what actively managed funds do. In addition, index funds often produce comparable returns, so there is little use in paying more significant fees if they do not provide further financial benefits.

An excellent time to prioritize retirement savings is at the end of the year. Avoid making these errors in December so that you can end the year on a more pleasant note.