Do recent tax changes affect you? Are you over exposed in bonds and fear interest rate risk exposure? Do you need to assess your tax situation? Is it time to re-evaluate your insurance needs? You may not need to address all of these issues but chances are you do need to look at some yearend planning. Some of the topics I will discuss you can address yourself other you may want to seek the advice of financial planners or accountants.
With recent tax changes it is never too early to start planning for your 2014 taxes. Some examples of tax planning now would be if you turned 70 ½ this year and need to make your minimum withdrawal or face stiff penalties in your traditional IRA’s and 401(k)’s. Also if you have sold any equities and have large capital gains now might be the time to sell some of your losing ones to offset the capital gains. You are allowed up to $3,000 in losses to offset your capital gains and if you had more than that in losses you can carry the losses forward into future tax years to offset any future gains. Also if you plan on giving any to charity and are able to take it off on your taxes now is the time to decide a few things in that regard as well. What charity do you want to give to? Do you want to give cash or an equity that has appreciated in value? These are just a few of the tax consequences you need to consider now and should not wait until after the start of the new calendar year to think about.
Now as I looked at in a prior blog rebalancing is not necessarily a good thing depending on fees and amounts involved. But if you are like most your equities are far outpacing your fixed income investments. And with interest rates to really have nowhere to go but up it may not be the best idea to get into long term bonds at this time. Instead look at bonds that have three to five year maturities to limit rate sensitivity to a degree. As I said in the previous blog try adding to the medium term bonds instead of doing a true rebalance of buying and selling of assets. Rebalance by adding to an asset class and not all of your asset classes.
Also this time of the year most companies have open season on insurance plans. If you need to make changes to any of your companies plans like health, dental, vision or life start thinking about what changes you do need to make now and not when open season is actually at your company. If you had a life event during the year you most likely were able to make changes at that time but this is an opportunity to change insurance companies in general or adjust your policies without the need of a life event. Also you need to be aware of where you stand if you have any tax advantageous plans such as a Flexible Spending Plan. Although most plans will allow you until March 15th to spend the funds it is best to plan ahead and spend them prior to the end of the year. Also now is the time most companies ask for next year’s elections so be planning on what you will want to contribute to the plan next year.
As you can see it may not be the best idea to wait until the start of the year for some financial planning activities. Start now and stay on top of things and any transitions will be smother than you think. Monitoring your financial situation is something that needs to be done on a constant basis and really should not be a once a year event. Year-end does not need to be hectic for you or your financial advisor/planner if you are prepared.
