Financial Moves Before the Year’s End

Ray Levitre is a Certified Financial Planner and the author of 20 Retirement Decisions You Need to Make Right Now and he shares three financial planning strategies to take right now.

Avoid Capital Gains Taxes

#1: You need to take a look at the investments in your non-retirement accounts to see if you have any capital gains that will add to your 2010 tax-burden. For example, let’s assume you bought $10,000 of Apple Computer in 2008 and sold it in 2010 for $20,000 for a gain of $10,000. You would have to pay a capital gains tax of $1,500 on your $10,000 profit. However, you can avoid the tax by finding another stock in your portfolio trading at a $10,000 loss. By selling the stock and incurring the loss it will cancel out the gain for tax purposes. In this example the strategy will save you $1,500 in taxes. If you like the stock you sold you can buy it back in 31 days later.

Convert to a Roth IRA

#2: 2010 is a great year to convert some money from your traditional IRA to a Roth IRA. First of all, in 2010 regardless of your income level you can convert to a Roth. Secondly, if you convert in 2010 you can spread the tax over the next two years. There is a pro and con of this move to be aware of. The pro is that once the money is in a Roth the money will grow tax free and can be withdrawn tax free during retirement. The con however, is that you will have to pay income taxes on the money you convert. For those in a lower income tax bracket this year the conversion is a no brainer. Pay the taxes now in a lower tax bracket and not have to pay them later if you are in a higher tax bracket.

Avoid a 50% Penalty

#3: If you are over 70 ½ you are required to withdraw some money from your IRA. If you don’t take the distribution you’ll have to pay a 50% penalty. The penalty is 50% of the amount you were supposed to withdraw. For example, if you were required to withdraw $20,000 and didn’t you would have to pay a $10,000 penalty. If you are over 70 ½ make sure you take your distribution.

These are easy tips, but can be easily misunderstood. It’s important to have a financial advisor who can make sure that you are making the best moves with your money. Have a discussion with your advisor about these three items and any other items you might wonder about.

Those people who have a plan end up having more money in their portfolios than those people with no plan at all.

If you would like a free copy of Ray’s book, simply go to, click on “Contact Us” and send a message requesting a free book. Ray will give away 50 free books.

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