Take time to review financial plans
November 25, 2013
As the holiday season approaches, many of us are planning for all the events that the season brings. This is always a very busy and often stressful time for all of us. However, it is still important to take the time and review some important aspects of our financial plans.
First of all, we should make sure we are on target regarding funding our retirement plans. If we are deferring through a company plan, we need to check and see that we are deferring all we can afford. The same goes for those of us that have individual IRAs or SEP IRAs. Years ago I had a client — we will call him George — who ran a small business and used a SEP IRA to fund his retirement. When he first became a client, he let me know that one of his big frustrations was that, when it was time to fully fund his SEP, which he would not know until March or April, he rarely had enough money to fund and pay the taxes due. I asked him what his full contribution had been averaging over the three or four years, and he stated around $15,000. I then suggested that he fund a portion of it, say, $10,000 on a monthly basis, so at the end of the year he would only need to come up with $5,000 instead of the full $15,000.
This simple change in funding not only allowed him to effectively save more, it prevented frustration and he took advantage of dollar cost averaging.
In addition to funding your retirement, this is a good time to make sure you are on track with your charitable contributions. If you want to save on taxes and put your money to better use than giving it to Uncle Sam, having a charitable donations strategy is a great way to do it.
If you are like most people, you give money here and there to various organizations you believe in. However, if you are like me, you are not quite sure how much you have given year-to-date. Now is the time to review all you have given and calculate what percentage of your income you have donated.
A way to make this easier is to set a dollar goal and then fund your favorite charities on a monthly basis through automatic debit.
Lastly, now is a good time to review any capital gains or losses that you want to take advantage of. With the market at all-time highs, it may be time to harvest some gains and rebalance your portfolios. Remember, the capital gains tax can be the cheapest tax you pay, 0-20 percent depending on your income and deductions.
In addition, you can also offset any gains with losses to reduce your exposure even further. Finally, if you have more losses than gains, you can deduct up to $3,000 annually, carry any remaining losses till next year and offset them with next year’s gains.
Although the end of the year is a busy time, we all should remember to take advantage of year-end tax and planning.
Dollar-cost averaging does not assure a profit or protect against loss in declining markets. Such a plan involves continuous investments in securities, regardless of fluctuating price levels of such securities, and investors should consider their financial ability to continue purchases through periods of low levels.
The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial professional.
Please remember that investment decisions should be based on an individual’s goals, time horizon and tolerance for risk.
Frederick Fisher is a CFP®, and insurance agent. Securities and advisory services offered through National Planning Corporation, Member FINRA/SIPC, a Registered Investment Adviser. Ostrofe Financial and NPC are separate and unrelated companies. For questions or suggestions, contact Rick Fisher at 530-273-4425 or firstname.lastname@example.org. Branch address: 565 Brunswick Road, Ste. 15, Grass Valley, CA 95945.