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Year End Planning: Five Things to Be Thinking About

The early fall is an opportune time to address your financial planning needs. The cooler weather and shorter days force us inside. The hustle and bustle of the holiday season is still a couple months away. And from a seasonal perspective, there are decisions that can or need to be made now that will affect your circumstances for next year. Here are some things to be thinking about as the year draws to a close:

Budgeting: This is a great time to refresh or establish a budget. For many, this is a lull period as summer vacation spending is behind you while holiday shopping is ahead of us. So it makes for a good time to get a grasp of your discretionary and non-discretionary spending and setting limits. It could help prevent you from going overboard in the upcoming months.

Income Taxes: There are many things that can be done prior to year end to maximize tax efficiency, options diminish greatly afterwards. I recommend spending some time prior to year end determining your income tax projections. Doing this can reveal if you are subject to any potentially adverse tax circumstances (such as the AMT) or have any opportunities that you may want to act upon. It helps avoid any nasty tax surprises when you least expect it. It certainly makes sense for those with material change in their income circumstances during the year, but even those with little financial change can still find value is doing this.

Employee Benefits: It’s that time of the year when employers begin the annual enrollment period for their benefit plans. Some employers have limited options while others have multiple options. Regardless, start thinking about your benefit needs now rather than minutes before the deadline to file the paperwork. What are your insurance needs? Are there any options available that are worth considering? What are your retirement funding needs and do you need to make adjustments in your deferrals or go with the Roth option (if available)? Does it make sense to fund a health or dependant care reimbursement account or even a health savings account? These are all critically important to your financial well being. Take the time to think these things through and make wise elections.

Near Term College Planning: This can be a crucial time for financial aid eligibility. Some colleges require a Profile form and the deadline for this is on December 10th of the student’s senior year for the following school year. FASFA applications can not be submitted before January 1st, but filing early and accurately is critical. If you have a child that is a year away from their base year for determining financial aid (January of their junior year to December of their senior year), you may want to consider making any financial moves now that would adversely impact your aid eligibility if left until next year.

Retirement Planning: If eligible for a tax-advantaged retirement account, plan to fund it and haven’t funded it yet, time is running out. Depending on the type of plan, you have until the end of the year or the tax filing deadline to implement. Also this is a good time of the year to consider a Roth conversion. If eligible, this may be a great opportunity for someone under the right circumstances.

The time to be thinking about these things is now, not during the holiday season or once January comes. By taking the time to make sure your financial house is in order, you will be ahead of the game in 2007.

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