Last Minute Financial Planning for 2013

Christmas is just around the corner, and the end of the year is not far behind.  It seems like time is at a premium this time of the year with last minute shopping and preparations for holiday celebrations. But spending a few minutes making sure your financial affairs are in order before the end of the year may save you thousands of dollars in 2014 and beyond. Let’s look at a five steps to take before the new year to ensure your financial plans don’t get derailed.

Step 1 - Take Your Required Minimum Distributions (RMDs)

You are required to begin taking required minimum distributions by April 1st of the year after you turn 70 ½ years old, and annually by December 31st every year after from all traditional IRA and/or retirement accounts. (Roth IRAs have no required minimum distribution amounts). The IRS website ( contains the tables necessary to calculate your RMD.

Failure to correctly take your required minimum distribution in a timely fashion can lead to a tax penalty of 50% of the required minimum distribution amount. If you have any questions about whether you need to take a required minimum distribution or calculating the amount, give our office a call.

Step 2 - Review Your Beneficiary Information

A lot can change in a year’s time, so it is important to make sure that your plans to pass assets to others are accurate and up to date. Having your beneficiaries improperly designated can inadvertently leave loved ones out of your estate plans.

Take a few minutes to review all of your life insurance policies. Are the beneficiaries correct? As long as you are the owner of the policy, you can change beneficiaries to remove an ex-spouse, or perhaps add a child who has reached adulthood. Do you own any annuities? If so, ensure that these assets will be properly passed along to the intended beneficiaries. Finally, check the beneficiary information on all of your IRAs, including Roths, retirement plans, pensions, etc. 

Step 3 - Minimize Your Income Tax Burden

Although not everyone has the ability to control when they realize income, if you do have some flexibility you can save yourself some income tax. Expecting a bonus? If you expect to be in a high tax bracket this year, then perhaps you can defer your bonus until 2014. Do you expect to be in a higher tax bracket this year? Then it may make sense to accelerate income, such as bonuses, into the 2013 tax year and save yourself from the higher tax bracket in the future.

Planning on making charitable deductions? Make sure you make them by December 31st to qualify for your 2013 tax return. If you are anticipating any long or short term capital gains this year, you still have time to offset them with trades this year, perhaps coinciding with rebalancing your portfolio. Make sure to consult with your tax advisor before making any of these moves.

Step 4 - Enroll in Your 401(k) Plan. Rebalance Your 401(k) Account.

Not enrolled in your company’s 401(k) plan? You may be passing up free money. Although many companies temporarily suspended their matching contributions during the last downturn, many of these matches have been restored. By not participating in your company’s 401(k) plan you are not only jeopardizing your retirement prospects, you are also passing up free money. Also, since many employers are not making matching contributions until the end of the year, it is important to be enrolled on December 31st in order to qualify for your match. This may mean that you will want to delay your next career move until after January 1st, as well.

If you are already enrolled in your 401(k) plan, the end of the year is a great time to rebalance your 401(k) allocation. If your plan will allow it, make sure you rebalance the entire allocation. If matching contributions are made in company stock, you may want to consider selling out of concentrated positions to more risk-diversified funds. Rebalancing your portfolio is a disciplined strategy to ensure you more frequently “buy low and sell high.”

Step 5 - Fund Your Retirement Plan

Unlike traditional and Roth IRA accounts, you do not have until April 15th of the following year to make your contributions to your 401(k), 403(b) or other retirement plans. December 31st is the hard deadline. If you anticipate a potentially onerous tax bill next April you may want to consider stashing more away in your 401(k), 403(b), TSP, SEP IRA or Simple IRA. 

And don’t forget about catch-up allowances if you are over age 50. Catch-up provisions are a great way for pre-retirees to reduce their income tax burden as well as ensure they will live a comfortable retirement.