Year-end planning and a little daydreaming
By Kristi Ellington
LPL Financial
As we were all well entrenched in the holiday season, many of us
found ourselves much busier than normal.
There were cards to mail out and gifts to buy, cookies to bake
and parties to attend.
And here I am trying to put something else on your plate
– next year I’ll try and send out an earlier reminder!
By Kristi Ellington
LPL Financial
As we were all well entrenched in the holiday season, many of us found ourselves much busier than normal.
There were cards to mail out and gifts to buy, cookies to bake and parties to attend.
And here I am trying to put something else on your plate – next year I’ll try and send out an earlier reminder!
That said, the end of the year is an important time to review your personal finances. If you have not yet done so, you may want to give your financial advisors a jingle and see if there are any last-minute moves that could prove beneficial.
Unfortunately, these days it seems the only constant is change, and with many of the changes unknown it makes for difficult planning. This is especially prevalent in terms of taxes and healthcare.
On the healthcare front, we are still deciphering the details of the new Health Care Reform laws and how they will affect us, which makes planning for healthcare costs even more confusing and challenging. As a reminder for those who are currently enrolled in Medicare, open enrollment for Part D ends Dec. 31, and those with higher incomes may be subject to higher premiums; take the time to compare plans to insure you are in the plan that best suits your needs and your pocketbook.
It is also a good time to consider some last-minute year end tax planning.
When I wrote this, Congress was still bickering over whether to extend Bush-era tax cuts, and what to do with the pending expiration of the federal Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 – less than a month away from 2011.
Now with some sense of direction, we know what some of the potential issues are. That said it may be a good time to chat with your tax professional prior to year end and run a few projections – there are a myriad of issues to consider. For example, those who have some control over the timing of income or an itemized deduction or recognizing capital gains may benefit from a review before we move into 2011.
A small sampling of to things to consider would include:
– Contributing as much as possible to your 401(k) or IRA.
– Maxing out your IRA contribution at the start of 2011.
– Consider a Roth IRA conversion before 2010 ends.
– If you are older than 70 1/2, don’t forget the 2010 Required Minimum Distribution (failure to do this can result in some pretty stiff penalties).
– Consider making a charitable gift before New Year’s Day.
– You could make December a “13th month” by accelerating your mortgage payment; paying down a debt is almost like getting a risk-free return.
IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a traditional IRA to a Roth IRA, or a re-characterization of a Roth IRA to a Traditional IRA.
The converted amount is generally subject to income taxation. Please talk to a financial and/or tax advisor regarding your specific situation prior to executing any strategy.
While I can’t stress enough the need for a quick check-in with your financial advisors, especially your tax professional in light of all the moving parts mentioned above, realistically I know that much of your financial planning will fall into the non-urgent category.
Personally and professionally, I find that the more in-depth planning and review tends to happen in the first quarter of the year as folks are gathering all their assorted documents to prepare for annual tax filing.
With this in mind, do what you can to wrap up 2010, and then give into a little daydreaming as you take in the holidays. Have a cup of hot cocoa or a piece of pie with the special people in your life and consider what your financial, business or life priorities might be for 2011.
Look back on the past year and consider what worked, and what didn’t; what you would like to see more of, and what you would like to see less of.
Have some fun with it, get a little crazy, see what comes up, you may be surprised!
The first step to setting goals is to be clear on what you want, then truly effective planning can take place and you can be on your way to making those daydreams come true.
Best wishes to you and yours this holiday season and good luck taking some time for focus on being healthy, wealthy and happy in the New Year.
Kristi Ellington is a local independent financial consultant. Ellington provides access to securities and advisory services through LPL Financial, member FINRA/SIPC. She can be reached in her Gilroy office at (408) 848-0874, her Hollister office at (831) 634-1144 or at [email protected].
