This is the time of year where everything gets a little bit crazier and we all get a bit stressed out. The holiday’s can creep up on us, just like the end of the year, and when that happens we have a hard time deciding which way to turn. On top of the holiday madness, there is something even more important to think about. Our retirement accounts.

Why Retirement accounts

Now, as somebody who didn’t contribute anything to any retirement accounts for years because I couldn’t afford it, along with a lot of the American population, this isn’t something that crept into my brain regularly. That is until I started ponying up the dough to fund my retirement. Because, let’s face it, none of us want to work forever!

But when you are living paycheck to paycheck, just the thought of saving anything for retirement seems completely out of reach. Once you realize that even saving something as small as $10 or $20 a week, with the magic of compounding, can help you tremendously in retirement.

No matter whether you have been contributing to a retirement account since your first “adult” job, started a SEP IRA or 401k through your small business or opened up your own IRA or 401k through something like Betterment, now is the time to revisit it. In all of the craziness that surrounds the end of the year why would you even consider adding one more thing to your plate? Well, it is pretty simple really.

Retirement Account Clean Up

If you have automatic contributions set throughout the year that is a great way to set it and forget it. But at the end of the year, we should all sit down and take a good hard look at our retirement accounts, no matter where they are at, to see if we can do something different to help us even more.

The end of the year is the best time to see how much you have contributed throughout the year and how much more you can legally contribute to max out the accounts. Not only that, but if you have a Traditional IRA or a Traditional 401k, then everything you contribute is PRE-TAX. This means that you get a bigger tax break come tax time next year the more you contribute to these types of accounts.

We don’t really have the amount of disposable income we would like to have, but having 5 kids contributes to that a lot! So while we aren’t able to throw as much as we would like into our retirement accounts, we do still have them and revisit them at the end of every year.

With this in mind, another trick that we use to help our future selves out as much as possible is to give ourselves a holiday gift. Instead of purchasing a lot of stuff that we really don’t need, or may not really ever get used to its fullest potential, we make the smarter choice. We invest those funds in our future and give ourselves a holiday gift into our retirement accounts instead.

Retirement account holiday example

If you still want to celebrate the holidays by gift giving, then how about dividing up the amount that you normally allot for gifts. Here is a good example:

• Let’s say that you normally spend $1000 on holiday gift giving.
• Cut that in HALF.
• Figure out how to cut your gift giving by either the amount of people you give to or by how much you allot to each person on your list.
• Take the other half, the $500, and put it into your retirement account(s).

If you have a Traditional retirement account, and you need more tax write offs for the year, then the best place to put it would be in one of those accounts. But if you usually take a standard deduction and aren’t worried about the tax write off, then I would suggest putting it into a Roth account since those are POST-TAX accounts. This means that you won’t have to worry about paying taxes on the money when you withdraw it in retirement.

• When you put this extra money into your retirement account, make it a separate deposit with a “Happy Holidays to Future Me” note. This way you will still feel like you got something for the holiday season, which is more fulfilling.

Your family and friends will still get the holiday cheer (and some gifts) from you, but you will get something even greater. This is the gift of a larger retirement account, possibly lower taxes and one of many tips for setting aside money for retirement. I call this a win-win!