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With the end of the year quickly approaching, it is a wonderful time to begin organizing your finances for the New Year. We’ve put together a list of important financial planning topics that warrant consideration.

Presented by Thomas Chester, CFP®

Flexible spending accounts
Thomas Chester, CFP®Money that you’ve put away in your flexible spending accounts (FSAs) must be used by year-end or it will be forfeited. Now’s the time to schedule those doctor’s appointments you’ve been meaning to attend to or to stock up on items that are eligible for flexible spending. Doing this as soon as possible may help relieve some last-minute headaches and ensure that you don’t lose your hard-earned dollars.
Additionally, open enrollment begins around this time of year for certain employee benefit plans. So if you’re not using an FSA, take stock of your average expenses that would qualify. This can help you determine whether setting up an FSA for 2014 makes sense for you. If you already use an FSA, assess how much extra you have left in the account or how much of a deficit you ran and use it to calculate your allotment for the New Year.
Medicare enrollment
Open enrollment for Medicare started in October and ends December 7, 2013. For many, this is the only chance to change health and prescription drug coverage for 2014. If you want to make any changes, act now.
Recharacterization of Roth IRA rollovers or conversions
If you converted a traditional IRA to a Roth IRA during 2013 and paid tax on the conversion, mark your calendar now to allow plenty of time to meet the October 15, 2014, deadline for recharacterizing (i.e., undoing) the conversion.
Reporting losses on stock sales
Be aware of important deadlines regarding trading date closings. A trade to sell a long position must be executed by the close of the last trading date of the current year. Similarly, a trade to sell a short position must be executed so that it settles by the last trading date of the current year.
Retirement planning
Review your retirement plan allocation and contribution elections. If you’re not taking full advantage of any matching features or potential tax benefits for maximizing your contributions, now is the time to evaluate your ability to do that. Also, when it comes to qualified savings, assessing your allocation to ensure that it’s still in balance and pursuing your objectives will help you start the New Year off on the right foot.
Taking stock of savings
Did you set savings goals for the current year? Make a realistic assessment of how well you’ve met those goals and think about your goals for the upcoming year. There’s no reason why you can’t make some financial resolutions along with your other new year’s vows. If you determine that you are off track, let us help you develop and monitor a financial plan.
Taxes, taxes, taxes
RMDs and estimated taxes. If you’re turning 70½, you must devise the best strategy for taking required minimum distributions from your traditional IRA and 401(k) plans.
Be sure to take potentially large bonuses and a prosperous business year into account when considering your taxes for 2013. You may have to file estimated taxes or increase the upcoming January payment.
Managing marginal tax brackets. In 2013, the IRS added a 39.6-percent tax bracket, a 20-percent capital gain tax bracket, and a 3.8-percent Medicare tax on net investment income. Moreover, those in higher marginal tax brackets may be subject to an additional 0.90-percent withholding tax, as well as limits on and phase-outs of itemized deductions and personal exemptions.
If a taxpayer is on the edge of the new tax thresholds, he or she may be able to defer or accelerate income or deductions to help minimize taxes.

  • The 39.6-percent marginal tax bracket affects taxpayers with taxable incomes in excess of $400,000 (filing single), $450,000 (filing married), $425,000 (filing head of household), and $225,000(filing married but separately).
  • The 20-percent capital gain tax rate applies to those in the 39.6-percent marginal tax bracket.
  • Itemized deductions and personal exemption phase-outs affect those with adjusted gross incomes above $250,000 (filing single), $300,000 (filing married), $275,000 (filing head of household), and $150,000 (filing married but separately).
  • The 3.8-percent surtax is applied on the lesser of net investment income or the excess of modified adjusted gross income over $200,000 (individual) and $250,000 (married filing jointly).

Too little or too much withholding. Also of note is that workers with gross earned income of more than $200,000 may have had too little or too much tax withholding in 2013. Employers may have withheld an additional 0.90-percent tax on incomes over $200,000 without regard to the taxpayer’s withholding status, which would put these taxpayers at a higher threshold. Other taxpayers may have had too little withholding because of other income unknown to the employer due to second jobs. Employees should plan to take a credit on their returns or pay additional taxes.
Estate planning
To help ensure that your estate plan stays in tune with your goals and needs, you should be reviewing and updating it on an ongoing basis. If you haven’t done so during 2013, take time before the end of the year to:

  • Check trust funding
  • Account for any life changes
  • Update beneficiary designations
  • Review trustee and agent appointments
  • Review provisions of powers of attorney and health care directives
  • Prepare for the distribution of personal effects
  • Get a firm understanding of all of your documents

Consider seeking professional guidance
The above list of financial planning dates is not exhaustive. We are happy to go over deadlines that are most relevant to your personal situation, so you can better prepare for the coming year.
Whatever your planning may entail, we wish you a happy, healthy, and prosperous 2014!
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.


Thomas Chester is a financial consultant located at (Allen Insurance and Financial, 31 Chestnut St., Camden, Maine, 04843. He offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. He can be reached at 207-236-4311 or at email hidden; JavaScript is required.

© 2013 Commonwealth Financial Network®

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