When you think about retirement, it’s easy to picture possibilities like traveling, free time, maybe even picking up that hobby you’ve always wanted to try. Those dreams don’t just fund themselves, which is why 401(k)s and IRAs are such an important part of the picture. These accounts are designed to help you save and invest for the long term, but even with the best intentions, it’s surprisingly easy to get thrown off track, especially as the year winds down.
What’s helpful to know is that many common “derailers” happen right around year-end, when life gets busy, finances are reviewed, or you’re tempted to put off action until next year. Here’s what to watch for and how to keep your retirement savings on track.
1. Forgetting About Old 401(k) Accounts
Changing jobs is almost a given these days, and each time you do, there’s a good chance you leave a 401(k) behind. Maybe you tell yourself you’ll “deal with it next year,” but those old accounts can add up and become easy to lose track of.
Not only does this make it harder to see the full picture of your retirement savings, but you might also miss out on better investment options or lower fees elsewhere.
How to stay on track: Before the year ends, track down all your retirement accounts, from past 401(k)s to any IRAs you’ve opened over the years. Rolling old 401(k)s into one IRA can help simplify your finances, letting you start the new year with a clear view of your savings.
2. Pausing Contributions for “Just a While”
The end of the year can be full of unexpected expenses, such as holiday bills, travel, or other last-minute costs. It can be tempting to pause contributions and tell yourself you’ll make up for it next year. But when it comes to retirement accounts, time is one of your best allies.
Even small contributions benefit from compound interest. Missing the last months of the year can reduce your overall growth more than you might expect.
How to stay on track: If money gets tight, consider contributing a smaller amount instead of stopping completely. Even a temporary reduction keeps your retirement savings moving forward while giving you some breathing room.
3. Cashing Out When You Leave a Job
If you’ve changed jobs recently, the end of the year is a common time to review your finances. It can be tempting to cash out your 401(k), especially if the balance isn’t huge. Withdrawing early comes with penalties and taxes, and could potentially rob your future self of years of potential growth.
How to stay on track: Consider keeping your 401(k) invested by rolling it over into your new employer’s plan or into an IRA before the year ends. That way, your money stays invested and continues working for you into the new year.
