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Kiplinger’s Personal Finance: Smart moves to boost retirement savings now

You still have time before the end of the year to make some money-smart moves that will improve your retirement nest egg. Here’s how:

Max out your retirement plan:

You may be able to squeeze a little more money from each paycheck for your retirement savings. You can contribute up to $18,500 to a 401(k), 403(b) or federal Thrift Savings Plan in 2018, plus $6,000 in catch-up contributions if you’re 50 or older.

Contact your 401(k) administrator or your employer’s human resources department ASAP to find out how much you’re on track to contribute to your 401(k) by the end of the year and to ask about the steps you need to take to boost your contributions.

The earlier you make the change, the better because 401(k) contributions are made through payroll deduction. If you’re contributing to a traditional or Roth IRA for 2018, you have until April 15, 2019.

Add a bonus to your plan:

If you aren’t on track to max out your retirement account for the year, adding money from a year-end bonus can be a great way to boost your contributions without affecting your regular take-home pay.

Rules vary, and some plans don’t allow participants to contribute their bonus, says Mariana Edwards, with benefits consultant Willis Towers Watson.

Make sure that you don’t cross the annual contribution limit. You have until the tax-filing deadline to withdraw any extra contribution and the earnings on it, which will both be taxable.

Use your side hustle to boost retirement savings:

you have self-employment or freelance income, open a solo 401(k). You must open it by Dec. 31, although you have until April 15, to contribute and take a tax deduction for 2018.

You can contribute up to $18,500 ($24,500 if you’re 50 or older) to a solo 401(k), minus any contributions you’ve made to an employer’s 401(k) for the year.

You also can contribute up to 20 percent of your net self-employment income to the plan. Contributions to the solo 401(k) can total $55,000 in 2018 (or $61,000 if 50 or older) but can’t exceed your self-employment income for the year.

Another option is to open a SEP account, but if you have just a little freelance income, you can contribute more money to a solo 401(k). SEP contributions are limited to 20 percent of net self-employment income, up to $55,000.

Convert to a Roth:

Consider converting some money from a traditional IRA to a Roth IRA this year, up to the top end of your income tax bracket.

You’ll pay taxes on the conversion (minus any portion that represents nondeductible IRA contributions), but the money will grow tax-free in the Roth after that.

Be careful about making a large conversion if you’re within two years of signing up for Medicare. Otherwise you could have to pay extra for Medicare Part B if your adjusted gross income (plus tax-exempt interest income) is more than $85,000 if you’re single or $170,000 if you’re married filing jointly.

Your last tax return on file determines your Medicare premiums, so a 2018 conversion could affect 2020 premiums.

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