3 Small Steps to Maximize Your Investing Goals this Year


It happens all the time. We begin the New Year with ambitious resolutions: I’m going to lose weight and start exercising, volunteer my time, save more. Yet so often we get overwhelmed and sputter out.

My advice for tackling these great goals — especially the savings one: Take smaller, manageable steps that can in fact quickly have a real impact.

One important step you can take toward your savings and investing goals is to rely more on tools already available to you at your workplace and take them to the max.

One of the most efficient resources you can tap are your tax-advantaged accounts. Many of them let you invest with pre-tax dollars, and your money can grow tax-free. Depending on your tax bracket, that can result in savings of 30 percent or more. Think of it as paying for your future at a discount, with little extra effort on your part.

Here are the three big ones:


In addition to the health insurance you may be getting at your job, your employer may offer access to tax-advantaged health care savings accounts that lets you use pre-tax dollars to pay for expenses your insurance doesn’t cover — co-pays, prescriptions or even that pair of retro eyeglasses you’ve been thinking about. I already regret missing our open enrollment period as both my daughters head into two years of expensive braces. So make a note of your company’s open enrollment so you can take advantage of these opportunities when they’re offered.

There are two types of accounts commonly offered — health savings accounts (HSAs) and flexible spending accounts (FSAs). And while the rules and contribution limits around them differ, both are smart options to help you save money on taking care of yourself and your family. If your employer doesn’t offer either of these, you can start saving for your health on your own by finding a qualified HSA trustee.


 You may already be contributing to your company’s 401(k), but if you’re only investing enough to be eligible for your employer’s match instead of the maximum that your company will match or more, you’ll be giving up a trifecta advantage: more pre-tax savings; free money from your employer; and a larger pool of dollars to compound over time. And here’s the bonus: The personal contribution limit for 2016 is $18,000 (and an additional $6,000 for catch-up contributions for those 50 years and older).

You should also consider opening or adding to a traditional Individual Retirement Account. The investments are tax-deferred, and contributions may be tax-deductible, up to allowable limits. Another option is a Roth IRA. Contributions to a Roth IRA are not tax deductible. But you can make tax-free withdrawals for qualified distributions. Additionally, for either type of IRA, you can avoid early withdrawal penalties on distributions if they’re used for higher education or first home purchase.


The average four-year cost of sending a child to a private college in 2014-2015 is approximately $170,000. That cost is likely to more than double for a baby born today. A 529 college savings plan can help you catch up by letting your money grow tax-deferred — so over time, more of your contributions go to your child’s education. Other potential benefits include higher contribution limits (depending on the state), no age limit to use the funds and a better chance to qualify for financial aid (as compared to some other college savings plans). No wonder 529 plans are growing in popularity as a college savings tool.

These are just a few easy ways to help take the first steps to success this New Year. What resolutions for your financial future do you plan to take to the max?

Heather Pelant is Personal Investor Strategist for BlackRock. She is a regular contributor to The Blog.


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