Important Year End Financial Considerations

2013 is rapidly coming to a close. With all the holiday festivities coming up, it is also important to designate some dedicated time and thought to one’s finances and tax planning for 2013-2014. It could be time very well spent. And even be money well spent in advancing retirement savings and both long term and short term planning.

Here are five things to do right now:

1. First and foremost meet with your financial advisor and accountant. Do it face-to-face or by phone… but do it. Get yourself, and them, in the habit of having this annual meeting. The topics to cover should include the following:

2. Year-end tax strategies for capital gains:

What are the positions that you should divest of before year end? Should you take the gain or the loss this year? Do you need to take a gain or loss this year? And there is a subtle difference between the “should” and “do.”

Should you take the gain or loss pertains to the performance of the investment. If it is underperforming with no foreseeable recovery, you should consider taking the loss for this year’s taxes. If the investment has achieved its objective and has peaked as far as you and your advisor can surmise, what are the tax implications, if any, of taking the gain now?

Do you need to take a gain or loss has to do with solely with your tax planning. This is why it is critical to have this meeting with both your financial advisor and your accountant.

– Consider Doubling down. In general, doubling down is purchasing more of a stock that you already hold and that has dropped in value. In some cases, it is throwing good money after bad. We are not talking about the general case but, rather, a very specific case with a unique opportunity that only comes at year end. Let us say that you bought 500 shares of XYZ for $200 a share earlier in the year. The stock has fallen to $150. You would like to take the loss but love the stock. You believe that it will recover and maybe even improve past the $200 price you originally bought it at. You can take the loss and hold a position in the stock per the wash-sale rule. This “take the loss but love the stock” strategy constitutes you buying more shares before Nov 30 and selling the original shares by December 30. You must buy an equal number which in the case of our example is 500.

3. Be wary of buying mutual funds before the ex-dividend date. Mutual funds, as per the Investment Company Act of 1940, must distribute up to 90% of income to fund holders in the form of a dividend. This regulation helps funds cut their expenses by shifting the tax burden to their investors. This makes the funds rate higher as they do not account for the full tax costs. This distribution is a taxable event to the fund shareholders. If you consider buying a new fund or increasing your position in a fund you already have, discuss this with your financial advisor and be aware of the ex-dividend date. The accepted rule is to make the purchase after the ex-dividend date, as there is no advantage in buying before the ex-dividend date as the price of the shares goes down by the exact amount of the dividend.

4. Do you have any significant life/financial events? Let your financial advisor know of any significant changes you have or expect to have in terms of income or outlays. The business and financial events include raise, bonuses, 401K distributions, sale/purchase of a home, sales/purchase of a business, business gains or losses, to name a few.

There are also lifestyle changes to consider. Did you get married? Divorced? Widowed? Do you have a child about to attend college or get married? Did you have any deaths in your family? Were there expenses? Inheritances? Depending on the kinds of life changes, you may need an estate planning attorney to be involved in this review as well.

It is a good time to make any changes yet this year that could minimize your tax burden for 2013 and perhaps even 2014.

5. Retirement Planning: If you have just started a business, ask your advisor if you establish one of the following retirement plans: simple IRAs, SEP plan, or a single person 401k. Talk to your advisor about an IRA contribution to be made before April 15, 2014 for 2013 tax purposes.
Most people that would benefit from this kind of review do not usually have these personal Financial discussions or pow-wows. Even if some meet with their financial advisor as suggested, they do not include their accountant or estate planning attorney. And they do not always paint an accurate picture of all the personal matters that can affect their Financial Plan to their advisors. Do not be too shy to call for such a meeting.If you can afford to have advisors and accountants, put them to work for you. And be accurate and honest. These advisors all are there to help you and will appreciate your proactive interest that will allow them to excel at what they do. This kind of review has been very beneficial for the clients of CGO Wealth Management and helps the experts planning your Business Success, Investment Success and long-term Financial Holdings. And one expert can complement another and ensure that the expert professional advice you are paying for is coming from more than one source.

Make sure your year-end preparation and outlook is beneficial to you and is tailor designed for your financial growth.

It will make it a better year.

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