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6 Ways to Save More for Retirement (and Not Spend) This Holiday Season

From decorations to gifts, the list of holiday expenses often seems to grow longer each year. Putting too much money toward the season can make it tough to find spare dollars to set aside. “The holiday season is a time when it is easy to make emotional purchase decisions to the detriment of our longer-term financial goals,” says Peter Basciano, associate professor of finance at the James M. Hull College of Business at Augusta University.

[See: 10 Classic (and Unique) Retirement Gift Ideas.]

Yet amid the bustle, the final months of the year bring an opportunity to set retirement savings priorities. You’ll have your last chance to contribute to a 401(k) for the year. You can also think about goals for the future. Here are guidelines to help you cut back on holiday spending and bank more dollars for retirement.

Save your year-end perks. If you receive a bonus, consider putting the extra cash toward retirement. The contribution limit for a 401(k) is $18,500 for individuals under age 50 in 2018. Employees who are 50 or older can contribute up to $24,500. “This will help fast-track your future savings goals and help lower your taxable income,” says Andrea Woroch, a consumer finance and money saving expert in Bakersfield, California. Contributions made to a 401(k) plan are deducted from the income you will be taxed on. If you’ve already maxed out your 401(k), you can put the money into another long-term savings vehicle, such as a Roth IRA.

If your company offers you a raise at the end of the year, try setting aside a certain percentage of the increase. For example, say you receive a raise of $6,000 for next year, which comes to $500 a month. You might decide to put 10 percent of the raise, or just under $50 a month, toward retirement. “Since you aren’t using the extra income now, you won’t even notice that it’s gone,” says Woroch, who is a U.S. News contributor.

[Read: 7 Budget-Friendly Ways Retirees Can Create Memorable Holidays.]

Pick up some extra dollars. To bring in more cash, look into jobs at retailers or restaurants, which typically need more help during the holiday rush. If you want to stay home on nights and weekends, check out online gigs or sign up to be a pet sitter. “More pet parents are looking for reliable care while they travel over the holidays, and this offers an easy way to bring in extra cash,” Woroch says. Rather than spending the money you bring in, put it in a long-term savings account.

Make a list. Before shopping, write down the decorations you want to purchase, as well as the gifts you plan to buy. If you’re hosting any dinners or parties, draw up a grocery list too. Then look at your plans and estimate an amount to spend. “If you have a budget set for holiday shopping, you can prioritize and think through how you will get things done in that confine,” says Chantel Bonneau, a wealth management advisor at Northwestern Mutual in San Diego.

Setting a budget might help you look for deals to stretch your dollars. It can also help you avoid spending more than you have. If shopping sprees lead to high credit card balances, you may need to dedicate funds during the coming year to get rid of debt, making it difficult to save for retirement. “It is important not to get carried away in the season,” Bonneau says. “You do not want to pay for overspending long into the new year.”

Make gifts practical. If you know of expenses you’ll face in the next 12 months, now might be a time to cover those costs. Give your family an annual subscription for satellite radio, cable or a game system. The same strategy might work for a computer or tablet your child will need in the coming school year. Winter and spring attire can be given as well. “In addition to fun gifts, we also make the majority of these necessary clothing purchases during the holiday season at sale prices, and then use them as gifts,” Basciano says. “This results in lower overall household expenses and provides an additional source of funds for retirement.”

[Read: 12 Money-Smart Gifts to Give During Retirement.]

Reflect on the past. As the year draws to a close, you’ll be able to look back and see where your earnings went during the previous months. “The holiday season is the perfect time to review your financial plan,” says Brian Walsh, manager of financial planning at SoFi, a personal finance company, who lives in the Philadelphia area. Sit down with an advisor to go over your progress, look at your accounts and identify areas where changes could be made. You might find you saved more — or less — for retirement than you planned.

Understanding your financial situation will help you set goals for the holiday season and the coming year. You might decide to save an additional amount each month toward retirement, or to shift some funds into a retirement account now.

Reduce trip-related costs. Airfare can be more expensive during holiday dates than other times, especially as the end of the year draws closer. “Be strategic with holiday travel,” Walsh says. If you live far from family, you might invite relatives to visit you this year. And if you decide to travel, watch for deals before making any purchases. Set a limit for what you’ll spend on travel. If you stay under the amount, move the extra funds to your savings account.

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6 Ways to Save More for Retirement (and Not Spend) This Holiday Season originally appeared on usnews.com



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