6 End-of-Year Retirement Planning Tips That Will Save You Money

Meeting retirement account deadlines can help you qualify for tax breaks or avoid tax penalties. Some retirement accounts have year-end deadlines for contributions and required distributions, while others give you extra time to make deposits that will count toward tax year 2016. These last-minute moves will qualify you for retirement savings tax perks.

[Read: 5 New 401(k) and IRA Rules for 2017.]

Make 401(k) contributions. 401(k) contributions are typically due by the end of the calendar year. You can claim a tax deduction on up to $18,000 that you save in a 401(k) account in 2016. A worker in the 25 percent tax bracket who fully funds his 401(k) could reduce his 2016 tax bill by $4,500. Income tax won't be due on this money until it is withdrawn from the account. "Make sure you are maximizing the employer contribution to your 401(k)," says Mike Palmer, a certified financial planner and managing principal of Ark Royal Wealth Management in Raleigh, North Carolina. "That means making sure to contribute whatever threshold amount is required to at least get the total employer contribution that's available."

Remember catch-up contributions. People age 50 and older can make 401(k) catch-up contributions worth an additional $6,000, which means older workers can defer paying income tax on up to $24,000 they save for retirement. "Once you are age 50 you can contribute more because there are catch-up contributions," says Sara Stanich, a certified financial planner for The Stanich Group in New York. "See how much you have contributed so far this year, and if you are able to, top it off."

[See: How to Save for Retirement on Less Than $40,000 Per Year.]

Qualify for the saver's credit. If your adjusted gross income is less than $30,750 as an individual or $61,500 as a couple in 2016 and you save in a 401(k) by the end of the calendar year or in an IRA by your tax filing deadline, you might be eligible to claim the saver's credit on your 2016 tax return. The tax credit is worth between 10 and 50 percent of the amount you save in a retirement account up to $2,000 for individuals and $4,000 for couples. "A tax credit is very valuable because it reduces your taxes dollar for dollar," Stanich says. The credit cannot be claimed by those under age 18, full-time students or people claimed as a dependent on someone else's tax return.

Remember required minimum distributions. If you are age 70 1/2 and older, you must take a required minimum distribution from your tradition 401(k)s and traditional IRAs by Dec. 31, 2016, and income tax is due on each withdrawal. The penalty for missing a required minimum distribution is 50 percent of the amount that should have been withdrawn, and that's in addition to the income tax due. "I recommend automating required minimum distributions with your financial institution, so that you don't have to manually request it every year, and they just automatically transfer it to a linked bank account," Stanich says. "You can set it up on a specific date or to go out monthly."

However, if you turned 70 1/2 in 2016, you can delay this first required minimum distribution until April 1, 2017, but all subsequent distributions will be due by the end of the calendar year. Delaying your first distribution until April necessitates taking two required distributions in the same year, which could result in an unusually high tax bill or even push you into a higher tax bracket.

Withdrawals from Roth 401(k)s are also required each year, but you might be able to avoid income tax on the distribution. You are not required to take Roth IRA withdrawals during your lifetime.

Donate your RMD to charity. IRA owners who are age 70 1/2 or older and transfer up to $100,000 per year directly to a qualifying charity can avoid paying income tax on the transaction. This IRA charitable contribution can also be used to satisfy your minimum distribution requirement.

[Read: Tax Breaks for People Over 50.]

Extra time for IRA contributions. While 401(k) contributions typically need to be made by the end of the calendar year, you have until your tax filing deadline in April to make IRA contributions that will qualify you for a tax deduction on your 2016 tax return. "Make sure you max out your 401(k) before the end of the year," says Daniel Wrenne, a certified financial planner for Wrenne Financial Planning in Lexington, Kentucky. "But you have until the tax deadline to contribute to an IRA."

Emily Brandon is the author of "Pensionless: The 10-Step Solution for a Stress-Free Retirement."