Retirement Planning Advice and Financial Related Education by Barry Unterbrink, Chartered Retirement Planning Counselor

Wednesday, November 28, 2012

Year-end Planning for Investors

Year end Planning for Investors
2013 is rapidly approaching, and this gives investors just a few weeks to get their "ducks in a row" in two important areas; recordkeeping and tax planning.

My biggest bugaboo is that investors must face these year-end challenges just as the holiday season hits. Let's face it - the time between Thanksgiving and New Year's can be hectic and stressful. Travelling, visitors arriving, shopping - I can't think of a busier (must get'r done) time of the year. If you are a big corporation, you can pick your fiscal year - most retailers end their year January 31st. Where can I sign up for that?

So perhaps with a bit of fog on our mirrors, and a natural inclination to avoid money topics this time of year, we should at a minimum have a "to-do" list written up as an actionable plan.
So here's my short list, and I've checked it twice1:

* Review your bank and brokerage / investments. Do you have gains and losses taken this year? IRA's and 401-k's don't count as they are not taxed this way. Can you utlilize some more gains or losses to improve your taxable income and pay less tax? If your advisor or C.P.A. isn't planning a meeting to discuss tax issues before year-end, call him/her and have this discussion.

* Mutual Funds - it's been a rather good year for stocks and bonds, so many mutual funds could distribute capital gains to you by year-end. Before buying any mutual fund before year-end, check to see when and how much they plan to distribute in capital gains and income. You may end up paying tax on newly purchased mutual funds even if you don't have any profit on the shares - not a nice outcome.

* Recordkeeping - help your tax preparer and yourself by having your bank and investment records in good order. This means getting the data from your paper statements, or on-line from their web site. Be careful of the deadlines and scope of their datafeeds. Some keep just 6 months of data - a hassle if you don't remember to pull it in the summer. Most carry one year, so get to it early January. If you use tax software, it's pretty slick to download your tax form data: interest, dividends and other transactions right into their program. Check to see if your financial institution supports the tax software you use (Turbo Tax,  H&R Block at Home, etc). Check also when the final data will be released by your financial entities; they often issue "corrected" forms after you get the first copy which is normally early February. Most data can also be downloaded in a spreadsheet format (called a csv file), making it easy to print and then checking off those expenses that are tax-relevant.

* Tax payments / filing - remember to pay your estimated tax payment due January 15th for your 2012 tax return. Also, if you don't owe Federal income tax, you can file your tax return late; there is no penalty for filing late. But please file so the IRS knows this. They may send you a letter to remind you.

* Retirement accounts - You have until your tax filing deadline, normally April 15th, to fund your IRA and take the deduction for 2012.

If your taxes seem to get more complicated each year, you are not alone. There are numerous changes to know and then use. I suggest to use a tax professional. With just one good idea/strategy, they could save you money in tax. By waiting until after December 31st, your planning becomes very limited indeed.

I believe that the fiscal cliff will be avoided or at least mitigated in it's effects on our economy and your taxes. Whether the decisions work well longer term is anyone's guess. If you have a financial topic that you want discussed, just leave a comment or suggestion by clicking below, and I will try to discuss it in my next posting. 

Happy Holidays!
~Barry Unterbrink, CRPC

1 For more complete information and advisement on your taxes, please see your C.P.A. or tax professional.

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