While many of us are concentrating on holiday shopping, football and getting ready to celebrate, this is also the time of year to get your financial life in order and be financially ready for 2014. To that end we put together a blog with 6 year-end financial considerations that you should be making in order to get prepared. Enjoy.
1) It’s time to Rebalance your Portfolio. 2013 has seen the stock market heated up practically the entire year which means that you probably have a portfolio filled with equities that haven’t been allocated or rebalanced in quite some time. Letting these things run might seem a bit tempting but actually could leave you with a portfolio that has more risk than you care to have.
2) When making charitable donations it’s best to use Appreciated Investments. When making your year and donations you should definitely consider using appreciated stocks, mutual funds and so forth. Doing this means that you’ll receive credit for whatever the market value is on these donated securities and you also avoid paying capital gains taxes on any appreciation you might have made. If you have an unrealized loss on any of your investments it’s best to actually sell the investment instead, take the loss and then simply donate cash.
3) If you have a 401(k), maximize your contributions. Unless you have already done so, you definitely should make sure that you maximize your 401(k) contributions for 2013 and change any deferral from your salary to do so (if you haven’t already). The limit is $17,500 and if you are over 50 years old, $23,000 this year. The year’s almost over so this is something you need to do fast. Once 2014 hits make sure to change the amount back in time to get your first paycheck.
4) Review all of your options for your 401(k). The end of the year is when many companies update the investment menus of their 401(k) and add new investment options, replace funds and add new choices. Many times this coincides with the process for open enrollment on employee benefits so take the opportunity to review those changes and, if you’re keen on doing it, update your investment choices.
5) If you’re self-employed, create your own solo 401(k). A solo 401(k), if you’re self-employed, is one of the best retirement planning vehicles available. In order to be able to take advantage of it and make contributions this year you need to open it by December 31. Once you do you’ll have until the time you file your 2013 tax return (including any extensions you make) to not only make contributions but also take advantage of any tax options that are available.
6) If you are 70 ½ or older, take your required minimum distributions. It’s extremely important to take these distributions by the end of the year because if you don’t you’ll face a penalty of 50% on the amount you didn’t take as well as your normal income taxes.
Along with all of the 6 items mentioned above it’s a great idea to sit down and talk with either a financial advisor or other qualified tax professional to make sure that you not only take full advantage of any deductions possible but also don’t mistakenly break any of the new rules put forth this year.
The end of any year is about family, friends, great food and always a good bit of football. It’s also the best time to make sure that your finances are in order so that you pay as little as possible and get back as much as possible in the new year, as well as saving yourself from hefty penalties and losses.