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A month-by-month guide to a financially healthier you

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With each new year comes a fresh start. While you’re thinking about making resolutions to improve your health, like losing weight or getting more exercise, don’t forget about your financial well-being. Wondering how you might do that? It’s not as hard as you think.



Here’s a month-by-month guide of little things you can do that could pay off in the future:

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January: Check your 401(k) account

Take advantage of pre-tax contribution limits. For 2020, individuals can contribute up to $19,500.1 And if you are age 50 or older (or will reach the age of 50 before year-end), you may be eligible to make an additional $6,500 “catch-up” contribution.2 There are many advantages to taking this step, including potential investment compounding and deferral of income tax—don’t let them pass you by. Investing in the plan involves risk including the possible loss of the principal amount invested.

Five smart ways to “spend” your tax refund:

1) Rebuild your emergency fund

2) Pay down your credit cards

3) Boost your retirement savings

4) Build your college savings

5) Make extra mortgage payments

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February: File early

By February, you should have all the documents you need to complete your 2019 taxes. So why wait until April? Complete your tax return and file now if you’re due to receive a refund. Even if you end up owing taxes, you’ll know where you stand and will be able to face the year on solid financial footing.

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March: Update your beneficiaries

It’s important to decide who will get your 401(k) and other financial accounts in the event of your death. Check with your financial services providers—many now allow you to make your updates easily online. If your accounts require you to submit paperwork with original signatures, make sure you keep copies for your records.

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April: Remember your IRA

Don’t neglect your IRA. You can make a 2019 IRA contribution until the April tax-filing deadline.3 And if you missed our tip for February, now is the time to file your tax return and make any necessary tax payments.

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May: Get your free credit report

Visit annualcreditreport.com, where you can access your reports on file at the three main credit bureaus for free. See any mistakes? Contact both the credit reporting company and the company that provided the information. You should explain what you think is wrong and why, and include copies of documents that support your dispute. For more information, visit the Consumer Finance Protection Bureau website.

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June: Beware gifting season

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It’s a busy month for graduations and weddings. Respect your current financial situation and don’t spend money you don’t have.

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July: Face the inevitable

Confirm that you and other loved ones have the key estate planning documents: a will, a revocable living trust, and power of attorney for both healthcare and financial matters.

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August: Keep back-to-school shopping in check

According to the National Retail Federation, the average family with children in grades K–12 spends more than $697 a year each on back-to-school shopping—including clothes, electronics and supplies.4 And if your kids are into sports or other extracurricular activities, you’re probably spending a lot more! But you don’t have to buy everything at once. Instead, pick up a few items now and hold off on others until fall sales start.

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September: Consider a 529 plan

September is widely recognized as College Savings Month, and with good reason! As kids head back to school, the topic of affording college tuition looms large for many parents. Why are 529 plans worth considering? There may be tax benefits with 529 plans. While you don't get a federal tax deduction for contributions to a 529 plan, many states do offer a state income tax deduction for contributions into your home state plan. Additionally, you don't pay any taxes on investment earnings in the account, and withdrawals, including any earnings, are tax-free when used for qualified higher education expenses.5 The 529 is also a very flexible tool, most with low minimum contributions and high maximum contributions limits. And, a 529 can be transferred to another member of the family if the original beneficiary does not use the money for college. You can also use up to $10,000 per calendar year, per beneficiary, in 529 assets to help pay for tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school.

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October: Check your 401(k)—again!

National Retirement Security Week (typically the third week of the month) and your employer’s annual benefits enrollment period are both great times to revisit your 401(k) account to ensure your contribution amount and investments are in line with your savings goals. At the very least, be sure you’re contributing enough to get your employer’s full matching contribution (if available).

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November: Prepare for the unexpected

It’s always a good idea to check in with your insurance company once a year. Failing to do so could mean you’re overpaying for coverage—or don’t have enough. And don’t limit your conversation to home and auto. For many families, life insurance makes good sense.

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December: Ditch the credit cards

Shopping for the holidays? Try paying cash for everything and avoid the nasty credit card bills in January—a sure way to get the new year off to a wonderful beginning!

Getting your financial house in order is always a good thing, but most of us don’t do it until we’re motivated by a life event like a marriage, birth or divorce. Even if you can’t get to all twelve of the tips we’ve presented here, doing just a few can put you on the path to a more successful and satisfying year.

Learn more and take action

  • If your 401(k) plan is through Merrill, go to Benefits OnLine® today to check your balance, increase your contribution amount, update your beneficiary,6 and monitor your investments.
  • Get more information about 529 College Savings Plans.
 
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Merrill, its affiliates, and financial advisors do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Before you invest in a Section 529 plan, request the plan's official statement and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the plan, which you should carefully consider before investing. You should also consider whether your home state or your designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds and protection against creditors that are available only for investments in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency.

1If your plan offers Roth 401(k) contributions, this limit applies to the combined total of any traditional 401(k) contributions and Roth 401(k) contributions.

2If your plan offers Roth 401(k) contributions, catch-up contribution provisions apply to Roth 401(k) contributions also.

3For 2019 and 2020, the maximum you can contribute to all of your traditional and Roth IRAs is the smaller of: $6,000 ($7,000 if you are age 50 or older by the end of the year), or your taxable compensation for the year.

4Source: National Retail Federation, Annual Back-to-Class Survey, released August 21, 2019.

5To be eligible for favorable tax treatment afforded to any earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for "qualified higher education expenses," as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax as well as state and local income taxes. For distributions after December 31, 2017, qualified higher education expenses include tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school. These distributions are limited to $10,000 per calendar year, across all 529 accounts for the same beneficiary. State tax treatment may vary.

6Online beneficiary updates are not available for all plans.

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