Year-end Financial Planning Tips

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Even though the end of the year is rapidly approaching, there is still time for you to take advantage of these year-end financial planning tips:

  • Use up any balances in your Medical Flexible Spending Account. Remember that you will lose any balances that you do not use. Check with your plan provider for eligible expenses and for any grace period into the new year.
  • Schedule medical appointments and procedures before year-end if you have already met your health care plan’s out-of-pocket deductible.
  • Offset capital gains and losses in your taxable investment accounts.
  • Avoid buying any mutual funds that are planning a year-end capital gains distribution. Most mutual fund families will publish a list of estimated year-end distributions like this one from American Funds.
  • If you are over age 70½ and have an IRA or other pre-tax account, be sure to take your required minimum distribution for 2009 or opt out this year. You also have until the end of the year to make a tax-free charitable rollover to a qualified non-profit organization.
  • Maximize your annual gift tax exclusion. If you’re fortunate enough to be able to gift money to your loved ones, you can give each individual up to $13,000 this year with no gift tax ramifications. If you’re married, you and your spouse can each give $13,000 to anyone you want. But you need to do so by year-end.
  • Fund your 529 plan to maximize your state’s tax deduction. For example, a married couple who are Michigan residents can deduct up to $10,000 of contributions to the State’s MESP 529 Plan made during 2009 from their 2009 Michigan income tax return.
  • Create a 2009 tax file if you haven’t already so you have a one place for all of your tax documents to land when they start arriving in the mail.

If you have other year-end tips you would like to share, feel free to e-mail

me at [email protected].

Please keep in mind that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

In Case You Missed It – CFA Magazine

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I was quoted in the July-August 2008 edition of the CFA Magazine in an article (PDF) about reconciling different points of view between clients and advisers. I discuss educating a client about the expense and diversification ramifications of choosing value-based investments.

Low-Cost Credit Monitoring

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I’ve had a number of clients ask about identity theft and credit monitoring. I think it’s a good idea to keep tabs on your credit reports and score, but I don’t think that most of us have to pay for an expensive monitoring service.

Unless you have a specific reason to believe that you are at more risk than the average person, I think that quarterly monitoring of your credit reports is sufficient. It’s also a good idea to check your FICO credit score once a year. Here’s how you can accomplish all of this for $16 per year by putting quarterly reminders on your calendar.

This process will allow you to check your FICO credit score once per year and to monitor your credit reports from the three major credit reporting agencies: Equifax, TransUnion, and Experian. Each agency can receive and record different information about you, so it’s a good idea to review each report for anything fishy.

If this sounds too labor intensive for you, you can automate the process by anteing up $50 per year for myfico.com’s .

You want to make sure that you are checking your FICO credit score from the Fair Isaac Corporation. You can find many other credit score rating products and get many of them for free. However, the vast majority of lenders review your FICO score when they consider lending you money, so it’s the one you’ll want to know.

If you’d like to learn more about how credit ratings work and how to maintain a good score, I recommend that you read You’re Nothing But a Number by John R. Ulzheimer.

Please keep in mind that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.