Consider taking capital gains
For taxpayers in the 10% and 15% brackets, the capital gains rate is currently 0%. This is scheduled to last through the 2012 tax year. Maxing out your pre-tax retirement contributions or a period of unemployment may allow even individuals with typically high incomes to take advantage of this provision. If you have significant unrealized capital gains and low income this year, this strategy might be right for you.
Plan contribution rates for 2012
The New Year is a great time to increase your retirement plan contributions. In 2012 the limit for 401k contributions will rise to $17,000. If you are 50 or older you will be able to contribute an additional $5500 as a catch-up. The limit for Roth and Traditional IRAs will stay the same at $5k/year with an additional $1k catch-up. You also have until April 15th, 2012 to make your IRA contribution for the 2011 tax year.
Make Catch –up contributions to your retirement accounts
If you are 50 or older you can contribute an additional $5500/year to your 401k as a catch-up. If you are over 50 and have already hit the $16,500 limit for 2011, you may still be able to contribute more from your last paycheck of the year. Contact your HR department to set this up.
Take your RMD
Once you turn age 70.5 the IRS requires that you begin withdrawing money from your retirement accounts. The penalty of not taking your mandatory required distribution from your IRA, is one of the highest the IRS imposes. Failing to take your Required Minimum Distribution before the end of the year will result in a 50% penalty of the amount that was not withdrawn in addition to the tax due. To make your RMD before year end, contact your plan provider.
Compare actual spending to your budget
Most of us have a tendency to go on a spending binge this time of year. The price competition between retailers and constant sales are a shopper’s dream. Now is a great time to revisit those saving and expense targets set earlier in the year and compare your progress. For help setting targets and monitoring your progress please contact us to develop a financial plan.
