Give the Gift of Planning For Your Future

December 30, 2010

For some of us, planning for the care as we age is a legitimate contingency in our financial plans. Most children have at least a vague idea of whether their parents will require financial assistance or guidance as they age. But there is one way to know for sure: Ask. Talk about finances with your children early enough to provide them with a clear picture of how your needs may affect their finances and planning.

For those of you who have adult children, I would recommend that you initiate the discussion. Let your kids know if you have worried about your finances or if you have sufficient assets to cover your needs. Tell them whether you have a financial plan. If you find it difficult to discuss your specific finances with your children, at least give them some insight into your situation. Just remember how infuriating it was when they were teenagers and they never seemed to communicate with you – even on matters that you thought were important. Talk to them. They probably want to know but may not know how to ask, just like you years ago.


Top Ten Year End Tax Ideas – Part Two

December 28, 2010

1. Take some losses. Even though the stock market is up this year, you still might find that some of your portfolio holdings are at a loss. You can sell those assets and deduct up to $3,000 per year against ordinary income. The remainder carries forward for future use indefinitely. The assets must be held in a non-qualified or “taxable” account, as opposed to IRAs or other tax deferred or tax advantaged plans to deduct these losses.

2. Fund an IRA or Roth IRA (depending on which best fits your situation). Don’t wait, start the tax savings now. If you have funds in a savings account, more than likely you are earning a pitiful interest rate that is also taxable. You can put up to $5,000 ($6,000 if age 50 or older) into a Traditional or Roth IRA, which each have their own separate tax advantages until April 15. Certain income limits do apply.

3. Take a distribution from your retirement plan or convert your retirement plan to a Roth IRA. If your income is lower in 2010 than it will be in 2011, you could take a withdrawal and pay tax at a lower rate this year. You could also convert all or a part of a Traditional IRA or other qualified retirement plan to a Roth IRA now and never have to pay tax on those funds again! Restrictions, penalties and taxes may apply. Unless certain criteria is met, Roth IRA owners must be 59 ½ or older and have held the IRA for 5 years before tax-free withdrawals are permitted. Remember that for the funds you convert to a Roth IRA in 2010, you have the option of electing to spread the taxable income into 2011 and 2012.

4. Get educated! No matter what your age is, now is a good time to look at continuing your education. The American Opportunity Credit provides a tax credit as much $2,500 on the first $4,000 of qualifying tuition and other education expenses. Pay your spring semester tuition or purchase your books before December 31 and you could receive the benefit of extra tax credits (not a deduction!) for this year. This credit is scheduled to change to be less favorable in 2011, so try and maximize the benefits under this year’s rules if possible.

5. Fix-up your house. Making energy efficient improvements (windows, doors, furnaces and much more) and receive a 30 percent tax credit on the first $5,000 of qualifying property purchases (a $1,500 credit). These improvements must be installed by December 31 in order to count for the credit in 2010. Remember that if you already used up all of your credit in 2009, you are ineligible for tax benefits in 2010. If you only used part of the credit, you can still make improvements and take advantage of the unused portion yet this year.

These are simply brief overviews of some of the tax items that you should not only be thinking about, but also trying to take advantage of. There are many favorable tax provisions that will only be in place for a short while. Make sure to call your financial advisor.

Top Ten Year End Tax Ideas – Part One

December 23, 2010

1. Meet with your financial advisor or tax professional. They have a much better feel for your personal situation and can provide strategies for your circumstances. The following ideas, while they can provide significant tax benefits, may or may not make sense in your personal situation. There are so many variables to address that not all of the details can be covered in this article so remember to please consult a professional to maximize these ideas.

2. Be charitable. Make a donation to your favorite charity by December 31. If your charity accepts credit cards, you could charge your donation before year-end to have it count for this year’s tax return.

3. Bunch your itemized deductions. If you are close to being able to “itemize deductions,” but not quite yet over the standard deduction, you might want to make extra charitable deductions, pay state or property taxes, pay January’s mortgage payment or medical expenses in December 2010 to take advantage of tax benefits without doing a whole lot of things differently, just timing your deductions to maximize your tax benefits.

4. Buy something. If you were planning on it anyway, make your purchase in December 2010 instead of January 2011. If you own a business, you should think about purchasing equipment or taking an extra trip to the office supply store to get more deductions this year.

5. Take some gains. Currently, long-term capital gains rates are at historically low rates of zero to 15 percent. It is likely these rates will go up in the future, so it might be beneficial to take advantage of what is currently available.

These are simply brief overviews of some of the tax items that you should not only be thinking about, but also trying to take advantage of. There are many favorable tax provisions that will only be in place for a short while. Make sure to call your financial advisor.

Your Year End Financial Checkup – Part Two

December 21, 2010

Review your overall investment allocation and consider rebalancing as necessary. In conjunction with rebalancing, take some time to re-evaluate the amount of volatility or risk that is acceptable to your situation. Some considerations when evaluating your level of risk tolerance are your age, time horizon & proximity to retirement, cash flow needs, net worth, and investment objective. And, if you haven’t already, structure investments appropriately into short-term, mid-term and long term buckets; making sure you have a smart place from which to draw money should you need it.

Review account beneficiary forms to confirm that you have a named primary and contingent beneficiary that reflects your wishes. Discuss and review your estate planning documents, such as your Wills, Trusts, Health Care Directives, and Durable Powers of Attorney with your Attorney to confirm that the documents you currently have in place take full advantage of the current estate tax laws and that they accurately reflect your wishes. If you have not yet established these documents, consider meeting with an Attorney to discuss whether they are appropriate for your situation. Be sure to advise your heirs and executor where your estate planning and account documentation can be found in case of death or incapacitation.

Review your current property/casualty, life, disability and long term care insurance coverage with your Financial Advisor and other insurance advisor(s) to determine if you are properly insured.

Organize year-end financial statements and 2010 tax documents as you receive them. Also, be sure to destroy old documentation that is no longer needed in a safe manner.

Review your credit report annually. The law requires the major national consumer reporting bureaus to provide you with a free credit report each year upon request.

Your Year End Financial Checkup – Part One

December 16, 2010

As 2010 comes to an end and 2011 gets underway, it’s a great time for a financial check-up and review of your financial situation. Following are some items to consider:

Take a look at your current budget and savings plan and make adjustments as necessary.

Review current IRS Guidelines, such as contributions to your employer retirement plans and other retirement accounts. The maximum contribution to a 401(k), 403(b) or 457 Plan in 2010 and 2011 is $16,500 and taxpayers age 50 and older may make “catch-up” contributions of an additional $5,500. The maximum contribution to a SIMPLE IRA Plan in 2010 2011 is $11,500 with a “catch-up” contribution of $2,500 for taxpayers age 50 and older. The maximum contribution to Traditional and Roth IRAs is $5,000 in 2010 and 2011, contributions are subject to eligibility requirement based on Adjusted Gross Income. Taxpayers age 50 and older may make “catch-up” contributions to Traditional and Roth IRAs of $1,000. Please note: You have until April 15th, 2011 to make a year 2010 contribution to your IRA or Roth IRA if you qualify.

A Different Gift This Holiday Season

December 14, 2010

The year is rapidly coming to a close and many individuals and companies are looking for that perfect organization to contribute to this holiday season. Charitable giving is a fulfilling and meaningful experience, and even though individual donations are down 13.7 percent nationally this year (Source: Businessweek), many are continuing to make a conscious effort to give back and better their community or cause they support.

With any year-end giving, there are many things to take into consideration.

For individuals, charitable giving can be a daunting task if you are unaware how to file the information on your federal tax return and may end up losing you money come tax time. The following is a list of basic charitable giving tips to ensure your contributions pay off on your tax return:

a. Donate cash or property – Contributions are not deductible until an actual payment is made.
b. Contribute to a qualified tax-exempt organization – Individuals must contribute to a charity with 501(c) (3) tax-exempt status to receive tax benefits, unless it is an organization that is not required to by the IRS, such as churches and religious organizations.
c. Itemize deductions – Filing your tax deductions only works for people who are eligible to itemize their deductions.
d. Keep records – Be sure to follow the IRS’s requirements when filing for taxes, including saving canceled checks, acknowledgment letters from the charity, and appraisals for donated property.

Regardless of your how much you give or what charity you choose to support, it is important to talk to your financial or tax advisor – before you donate – about the best approach to maximize your tax savings.