The Clock is Ticking…Things to Consider for Year End

????????????????????Perhaps your November 1st started something like this.  You poured a cup of coffee, turned on your computer and started to check email. Then you looked down at the desk calendar, and to your surprise another month had passed you by. October’s rapid passing means that many of us have been keeping busy.  However for some, it means that 2013 might be slipping away a bit quicker than they anticipated. With that in mind, we thought we might spend a bit of time discussing some things to consider as you are making your year-end investment plans.

A new tax landscape
At the start of 2013 a 39.6% new federal income tax rate took effect. If your taxable income exceeds $400,000 ($450,000 if you are married and filing jointly and $225,000 if you are married and filing separate) you will be subject to a 20% maximum tax rate on long-term capital gains and qualifying dividends. This compares to only 15% last year. Additionally, if your adjusted gross income level is more than $250,000 ($200,000 if you are married and filing jointly and $150,000 if you are married and filing separately), you may be assessed a 3.8% surtax on your investments. Also, your itemized deductions could be limited and your personal and dependence exemptions could be phased out this year.
So what does this mean? In the simplest of terms, if you are not careful, you might find yourself in a higher tax bracket this year with some costly tax implications. Now is the time to check with your financial advisor to determine the impact your investments will have on your 2013 taxable income.

Don’t forget retirement plan contributions
Research your current retirement plans and find out if you are benefiting from tax-advantaged retirement savings vehicles. In many cases, traditional IRAs and employer-sponsored retirement plans such as a 401(k) permit you to contribute funds with pretax dollars.  This allows you to reduce your 2013 taxable income. The window to make 2013 contributions to an employer’s plan typically closes at the end of the year, while you generally have until the due date of your federal income tax return to make 2013 IRA contributions.

Consider harvesting your losses
One way to offset capital gains is to sell off some of your losing investments to generate capital losses. This process, known as harvesting tax losses, might be something to consider depending upon the performance of your portfolio. For instance, strong gains in the first half of the year coupled with an even so-so second half could have the potential to create a higher tax bill than anticipated. One recommendation to offset gains is to sell off shares that have lost the most. A word of caution if you are considering selling off your losses – be sure to thoroughly examine all your options with your financial advisors to ensure that the correct investments are chosen for harvesting.

With all of that said, it is important to note that there are a lot of things to consider for each investment story. Are you considering retiring in 2014? Do you have a wedding planned? Or, perhaps you were recently divorced – All of these things make your situation unique. This is why it is important to talk to a financial advisor who has your best interests in mind. An advisor who gives you the whole picture and helps you determine the best scenario for your specific situation.  There are many things that play into the year-end tax picture for 2013 – it’s not too late to make sure that you are fully prepared to face 2014!

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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