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Personal Finance

Money Management

Best Money Moves for December 2021

Lixia Guo / Money; Getty Images

The holidays have already begun, and the end of 2021 is fast approaching. But you probably don’t need Money to tell you that. What you might need, however, are some reminders of key end-of-the-year dates and important strategies to keep your finances in order this month. And we have plenty of those.

It’s easy to get wrapped up in all the gift giving and festivities this time of year and leave your money matters on the back burner. But we all know that’s how financial fires start. Below, we dive into tips to manage holiday-shopping drama and a few deadlines you’re not going to want to miss this month, as well as some other smart money moves you can make now to set yourself up for success in 2022 and beyond.

Here’s what’s on the December docket.

1. Brace yourself for slim retail pickings and delivery delays

Let’s get the bah-humbugging out of the way first: Holiday shopping this year is a complete mess.

If you haven’t been keeping up with all the supply-chain snafus in the news as of late, you should know that things aren’t going so well for shoppers and retailers. You may have gotten that sense from the empty shelves if you were recently shopping in store or from the barrage of alerts about supply issues and delivery delays on retailer websites if you were shopping online.

Simply put, a lot of products are being affected due to two kinds of shortages: a lack of materials to make the products and a lack of labor to move them. Combined, these shortages are contributing to sky-high prices while also making certain items much harder to come by. And if you do happen to snag an in-demand item online, that’s no guarantee you’ll get it in time.

There's not a whole lot you can do to combat these issues, unfortunately. Still, we recommend trying to shop in-person and locally — that way you won't be at the whims of online-order delays from major e-commerce retailers. The browser extension Sook may be helpful in locating items on your gift list that are available at nearby businesses. Also consider the four-gift rule, popular among minimalists: one gift they want, one gift they need, one gift they wear and one gift they read.

There is a silver lining in all this. All the delays could lead to major discounts right after the holidays as retailers scramble to sell off their glut of off-season merchandise. So if you're willing to wait, you could score some major deals.

2. Adjust your budget because child tax credit payments are ending

According to the IRS, direct child tax credit payments have been going to more than 30 million families each month since July. Eligible parents have been receiving up to $300 per month, per child younger than 6 and up to $250 per child 6 years or older.

The program was created back in March as part of the third stimulus package, the American Rescue Plan. However, the direct-payment portion of the program is expiring this month: Dec. 15 marks the final scheduled payment unless the program is expanded through additional legislation.

The U.S. House of Representatives did recently pass a version of the Build Back Better Act — aka President Biden’s social spending agenda — that extends these child tax credit payments, but the Senate has yet to approve it, leaving 2022 payments up in the air.

To be safe, parents should prepare their budgets under the assumption that direct child tax credit payments won’t continue into the new year.

What is certain, however, is that eligible parents will be able to claim the remaining portion of the tax credit, which could total $1,800 per child depending on their age, when they file their taxes next year. And parents who opted out of monthly payments will be able to claim the entire tax credit, as much as $3,600 per child, when they file.

3. Enroll in Medicare or swap plans by Dec. 7

In case you missed (or ignored) all of the TV commercials and PSAs: the last day to enroll in Medicare or change your plan is Dec. 7. This deadline is for coverage starting Jan. 1, 2022.

The three core plan options are:

Original Medicare
Medicare Advantage (managed by private insurers that may add vision and dental perks)
Medicare Part D (a drug prescription add-on plan)

If you’re one of the 63 million Medicare beneficiaries, don’t just carry over your current benefits. Experts recommend you take a moment to review your medications and recent diagnoses to decide whether your current benefits meet your needs.

If you need unbiased help making sense of your options, turn to one of these government sources:

Medicare’s Plan Finder tool
Phone assistance at 1-800-Medicare
Your local State Health Insurance Assistance Program (SHIP)

Try to avoid calling the private companies on those smarmy enrollment commercials, as their main goal is to profit — not help you make the best decision to fit your unique needs.

4. Max out your 401(k) account (or get as close as possible)

This time of year, it’s hard to think beyond next week — let alone to when you’re going to retire. But you should be aware of an important upcoming retirement deadline this month.

The final day to make 401(k) and 403(b) retirement contributions is Dec. 31. For 2021, the maximum contribution limits set by the IRS are $19,500. If you’re 50 or older, you can make what are called “catch-up contributions” of up to $6,500 — for a grand total of $26,000.

(You may have heard that the IRS recently increased retirement contributions, but those new limits are for 2022.)

Maxing out your retirement contributions is one of the smartest retirement moves to make. Your future self will thank you. To do so, you should contact your employer to double check how much you have already contributed this year, subtract that amount from $19,500 (or $26,000 if you’re 50 or older) and then contribute as much as you can toward that difference.

This may sound like a ton of money to stash away — and it is, no doubt — but the funds you put into a traditional 401(k) plan can also help you right now. Your contributions can lower your taxable income, thus lowering your tax bill.

Pro tip: While you’re at it, you can also set up deferrals from your paycheck to automatically max out your 401(k) contributions for 2022. The new contribution limit for next year is $20,500. The catch-up contribution limit stayed the same. Divide your contribution limit by the number of pay periods in 2022, so that you can set it and forget it.

5. Make your final 529 contributions for the year

Americans hold nearly 15 million 529 college savings plans. That doesn’t mean everyone with one of these tax-advantaged investment accounts fully utilizes its benefits, however.

In addition to the 529 plan’s federal tax benefits, a majority of states also offer their own tax benefits. A cherry on top, if you will. Folks in 29 states and Washington, D.C. who contribute to 529 plans are eligible for state income-tax deductions or credits so long as they contribute by their state’s deadline.

A report from Saving for College shows that all states except the following six have a Dec. 31, 2021, contribution deadline:

Georgia (April 15, 2022)
Iowa (April 30, 2022)
Mississippi (April 15, 2022)
Oklahoma (April 15, 2022)
South Carolina (April 15, 2022)
Wisconsin (April 15, 2022)

6. Use up your FSA money (or say bye bye)

A Flexible Savings Account (FSA) is a health-care savings account offered by some employers. It allows account holders to tuck away up to $2,750 per year, tax-free. The catch is that FSAs have a “use-it-or-lose-it” stipulation. That means that if you don’t use up your money by the deadline, which in most cases is Dec. 31, you can kiss that money goodbye.

Each year, Americans lose out on approximately $400 million by not spending all their FSA money, FSA Store President Rida Wong, previously told Money. And this year, you may be surprised to find your FSA balance is higher than normal. That could be due to an FSA rule change via the second stimulus package. The legislation allowed employers to extend their FSA spending deadlines by 12 months. In other words, if your employer opted in to this extension, you may still have access to some 2020 FSA funds — but those too will expire this month.

Some solace: FSA funds can go toward much more than doctor’s visits and prescriptions. For example, FSA Store is an e-commerce site that stocks exclusively FSA-eligible products, and it currently lists a wide array of items, including lots of over-the-counter drugs, self-care items and more — basically everything you’d find near the pharmacy section of a Walgreens or CVS.

According to the website, FSA funds can even apply to an acupuncture foot massager. (See the IRS’s list of permissible FSA uses for more details.)

It’s either that, or your unused money goes off into the ether, likely never to be seen again. By you, that is. Your employer is probably pocketing it.

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