Why February is Key for Retirement Savings Adjustments
The beginning of the year is an ideal time to review your retirement savings to ensure that you are on track for the new year. Are your savings and investing strategies aligned with your retirement planning goals? February is often the first month of the year that this type of review is feasible. This is because February is when you should have all statements from 2024 as well as early 2025 statements, including the ability to look at how your retirement savings are being allocated to your 401(k) or other workplace retirement plan. Catch-Up Contributions for 2025 If you are age 50 or older at any point during 2025, then you are eligible to make catch up contributions to your 401(k) or other workplace retirement plan. For 2025 there will be two levels of catch-up contributions. For those ages 50 to 59 and those age 64 or older, the catch-up contribution level is $7,500. These workers can defer a total of $31,000. This is the $23,500 main contribution limit plus the $7,500 catch-up deferral limit. For those who will be 60 to 63 during 2025 there is a new, expanded catch-up limit. For these folks the catch-up limit for 2025 is $11,250. This brings their total deferral limit for the year up to $34,750. This is the time to ensure that you are taking the full regular catch-up and the expanded catch-up if you are aged 60 to 63. You will want to ensure that you are contributing the full amount to your 401(k) or other type of employer sponsored retirement plan. Review Your Employer Contributions Many employers contribute to their employee’s retirement plan accounts. This might be a matching contribution. A common example is a 50% match on contributions of up to 6% of the employee’s income. This would mean that the employer match is 3% of the employee’s income if they do contribute 6% of their income. Employers may have different matching formulas, but in many cases the match requires the employee to contribute a certain amount to their 401(k). Employer matches or other types of contributions can add a significant amount to your retirement savings. In the case of matching contributions, you want to be sure that you are making a contribution that is at least large enough to receive the full employer match if possible. Adjust to Market Volatility We have seen lingering volatility in the markets in recent months. In this type of environment, it is always important to maintain a level of portfolio diversification that makes sense for you. A key tool is asset allocation. This is the distribution within your portfolio among various asset types such as stocks, bonds and cash. Asset allocation is all about how much you have allocated to each asset class. The purpose is to manage the potential risk of the portfolio along with the potential upside. You will want to set rebalancing parameters. For example, if an asset class is 5% higher or lower as a percentage of the portfolio than its target, it would be time to rebalance this asset class back to its target allocation. If one asset class has varied from its target allocation it is likely that others have as well. Rebalancing often involves buying and selling across several asset classes in the portfolio and transferring funds as needed. This can also be done by directing any new money into your portfolio to asset classes that are under allocated. Tactics such as tax-loss harvesting can also be used where appropriate to help minimize the tax implications of rebalancing. Summary February is a good time to review your retirement plan contributions, including catch-up contributions, employer matching contributions as your portfolio’s volatility compared to both the market and to your comfort level. Be sure to reach out to your Wedbush financial advisor for help with the review. They can help set portfolio parameters and in determining if you are taking full advantage of your catch-up contributions and employer matching. Disclosure Securities and Investment Advisory services are offered through Wedbush Securities, Inc. Member NYSE/ FINRA / SIPC. Wedbush Securities does not provide tax or legal advice. Please consult your tax advisor or legal professional for your specific situation. Rollovers of qualified plan assets is not your only option. Prior to deciding whether to keep an existing plan, or roll assets into an IRA, be sure to consider potential benefits and limitations of all options and discuss rollover options with your tax advisor. Investment products involve investment risks including potential loss and are not insured by any federal agency, are not deposits or obligations of, or guaranteed by any financial institution and may involve loss of value. The information provided is for general informational purposes only and should not be considered an individual recommendation or personalized investment advice. The investments mentioned may not be suitable for everyone. Each investor needs to review their own respective situation(s) before making any investment decisions. All expressions of opinion are subject to change without notice due to shifting market(s), economic or political conditions. Investment involves risks including the risk of principal. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.
Top 5 Money-Saving Tips to Kickstart 2025
As we settle into the new year, February is the perfect time to evaluate and fine-tune your budget for a strong financial start. These actionable tips can help you save more and spend smarter throughout the year. The beginning of the year is a good time to look at your spending, your monthly budget and your savings for retirement and other objectives. Automate Your Savings We all have good intentions about saving every month, but the reality is that if we do not automate this process, these savings are likely not to happen. The act of having to write a check or manually transferring funds can often be a deterrent to savings. It is easy to say,“oh no, I have to pay this or that bill this month. I’ll get back on track next month.” Invariably, most of us never get back on track unless we automate this process. Instead, set up an automatic deposit to your investment or savings account. You will certainly want to establish a payroll deduction contribution to your 401(k) or other workplace retirement as well to ensure that you maintain your desired contribution percentage and receive your desired level of employer match. Audit Subscriptions and Recurring Payments The new year is a good time to review all your subscriptions and any recurring payments. Whether a magazine or other service, do you still use this? Were you aware that you were still paying for this? If there are subscriptions that you use and want, that is fine. For any that you do not want or use, be sure to cancel immediately. It can be easy to forget about these subscriptions and the money saved can be significant. Make a note to yourself to do this at the start of every year to ensure that you are not paying for subscriptions that you do not need or use. It is easy to ignore these no longer used subscriptions and to continue paying for them. Leverage Tax Refunds Wisely If you will be receiving any tax refunds for the 2024 filing season, federal or state, be sure to have a plan for this money. This might include applying the refund against any taxes that you do owe. For example, if you have a refund due from the state but owe on your federal return, you can apply the state refund against what you owe federally. This might be after the fact to a point, but that is okay. Other ways to use a refund can include: Investing for the future. This money can be used to contribute to a taxable brokerage account or in some cases an IRA. Pay off debt such as credit card debt or other types. Start or add to your emergency fund. Plan for Rising Costs Inflation is still an issue whether utility costs, groceries and other costs. This is a good time of year to look at your costs and your ongoing budget to seek ways to save money where possible. Can you make adjustments to your meal prepping? Heating, air conditioning and other related costs should be reviewed as well. The refund can be used to offset costs over the course of the year. The money can be put in a savings or money market account and then a portion can be used monthly or quarterly to offset some of these higher costs. You should also make a concerted effort to lower your costs. This might entail shopping at a grocery store with lower prices. In some cases, it can make sense to buy certain foods and other products in bulk to save money. Maximize Credit Card Rewards Be strategic in your use of credit cards. Avoid running up expenses that you cannot pay off within one month to avoid incurring interest charges. Beyond that, using cards that offer rewards can be advantageous as long as you are careful and strategic about it. This might include travel rewards, or others. Do your best to maximize these rewards. For example, if you plan to travel during the year try to maximize your airline mileage via an airline credit card. Again, make sure that you are careful and strategic. Do not just go wild and start charging with the card. Look at your potential mileage bonuses in light of how much you are spending. It is always important to keep credit card spending in check. Summary As we move into 2025, this is a great time to review some of the basics of your financial life that might be easily overlooked. Whether this is unused subscriptions, credit card rewards, retirement savings and a host of others, review what is happening here and adjust as appropriate. Be sure to reach out to your Wedbush advisor for their help and advice with this. Disclosure Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice. Third-party entities, companies, and organizations that may be referenced on this page are not affiliated with Wedbush Securities or any of its affiliates. Opinions mentioned are that of the third-party and not of Wedbush Securities, the financial adviser and/registered representative, or any of our affiliates. Investment products involve investment risks including potential loss and are not