TIPS FOR ORGANIZING YOUR FINANCES FOR THE YEAR AHEAD
Jonathan Clements, Director of Financial Education for Citi Personal Wealth Management
Every New Year, Americans resolve to get their finances in shape. As we approach the end of 2012, now is the perfect time to start planning and taking advantage of financial opportunities before the year ends. Here are a few strategies that can help consumers prepare for the coming year and beyond:
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Review your investments. Perhaps this year’s strong stock market has tilted your investment portfolio too much toward stocks. If so, it may be time to diversify.
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Prepare for higher taxes. If federal income-tax rates go up next year, charitable contributions, professional dues, property taxes, and other deductions may be worth more in 2013.
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Look into a Roth IRA conversion. Now could be a great time to convert. You can pay the conversion tax at this year’s potentially lower federal tax rate. Make sure you have money outside your IRA to pay the resulting tax bill.
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Increase retirement contributions. Contributions to Traditional 401(k) plans (not applicable to Roth 401(k) plans) are made with pre-tax income and thus can lower your tax bill. If you’re able, boost your retirement contribution before the end of the year.
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Consider refinancing. With 30-year fixed-rate mortgages still available at 4% or less, homeowners potentially have an historic opportunity to cut their monthly costs by refinancing.
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Review insurance policies. Take a close look at your insurance policies. Consider how much you pay each month and whether you have more coverage than is necessary. Also consider whether your insurance coverage is adequate.
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Use flexible spending accounts. If you have money set aside in a flexible spending account, it is important to check the balance before the end of the year and make sure you don’t end up wasting that money. You have to use that money before the end of the calendar year or you lose it entirely.
As with all strategies, everyone’s financial situation is unique and these strategies may not be appropriate. Please review this with your advisors before embarking on any of these strategies.