Money IQ: Thinking Ahead for 2013

Money IQ
By Eric Loucks

Thinking Ahead for 2013

Hard to believe, but 2012 is almost behind us and 2013 is just around the corner.

The time between Thanksgiving Day and New Year’s Day presents a wonderful opportunity to assess the financial positives and negatives of the past year and to plan for improvements in the New Year.

Before we head into 2013, there’s still time to make last minute adjustments for 2012. With taxes potentially rising for the next year, it is a good time to consider a few tax saving ideas:

  • Capital Gains rates are scheduled to rise. If you are considering selling a security you have owned for over one year, it might pay to sell it in 2012 vs. 2013.
  • A 2012 Roth IRA conversion (from a traditional IRA to a Roth IRA) will make sense if income tax rates rise in 2013. Plan wisely so that you do not push your total income into the next effective tax bracket!
  • Medically related purchases or procedures are moving up from 7 percent of income to 10 percent of income in order to be tax deductible. Consider making these purchases or procedures this year if you’ll meet the 7% minimum for 2012.
  • Add more to your employers 401k, 403b or 457b retirement plans. There is still time left to boost up your retirement plan and get a tax deduction for 2012. This is especially helpful for high earners who would otherwise not qualify for a traditional IRA. Remember, contributions to company plans can only be made through payroll, so act fast for 2012!

Note: These tax ideas are broad-based and differ by individual. Check with a tax advisor for your specific situation.

Onto 2013 … what changes have occurred over the last 12 months that require action? Did you get married, divorced, have a child or a death in the family? If you said “yes” to any of these questions it’s important to update your beneficiary information on the following investment vehicles:

  • IRA’s (Roth & Traditional)
  • Annuities
  • 401k’s, 403b’s 457’s
  • Life Insurance Policies
  • Transfer on Death Accounts (TOD)
  • Paid on Death Accounts (POD)

The failure to update beneficiaries often has difficult consequences. Keep in mind that generally a Will does not supersede beneficiary designations and whoever is named as beneficiary receives the funds regardless of what is written in a Will.

Note: Again, this is for general informational purposes only. Please contact your attorney for specifics to match your situation.

Getting a raise or cost of living increase this year? Why not increase the allocation to your retirement plan by half of the increase? More goes into your pocket and more goes to fund your retirement. Does your company match part or all of your contribution? Even more reason to increase it.

Finally, end of the year is a great time to review your spending to find ways to save. Does your cell phone plan still meet your objectives or are you overpaying? How about that cable bill? Still using all those channels? It’s open season for reviewing and updating medical, dental, FSA’s, etc. Are you using your employer’s benefits to maximize savings while protecting your family?

This column does not exhaust all of the planning ideas possible, but employs a few thoughts to move toward a prosperous 2013. Happy Planning!

Editor’s note: Eric Loucks has more than 30 years of experience in the financial services industry, and has been an Investment Officer with the LANB Investment Group for the past six years. Loucks grew up in Los Alamos, spent the majority of his career with Charles Schwab in San Francisco and Phoenix and returned to New Mexico six years ago.

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