RMR Wealth Management Blog

Five things investors should do before year end by Brian Mayer

RMR Wealth Management - Monday, December 19, 2011

Tax Planning

Every investor needs to evaluate whether he/she has taxable gains or losses at the end of the year for 2011.  If you have realized losses you can deduct $3,000.00 from your 2011 taxes.  If you have more than $3,000.00 in realized losses, you can carry those losses forward to a future year to offset realized gains.  If you have realized gains, you should look to see if you have any unrealized losses to offset those realized gains.  If you sell a security to book a realized loss you can either wait 30 days to buy back the same security or buy a similar security right away to maintain similar exposure in your portfolio.  Any transactions you choose must be completed by year end.

Retirement Planning

Every investor needs to evaluate the amount being saved in his/her various retirement accounts.  If you invest in a 401(k) plan you can defer up to $16,500.00 from your salary.  If you have not reached that amount yet, you still have time to contribute more with your final paycheck of the year.  If you are over the age of 50, you can utilize a catch up contribution which maximizes your contribution at $22,000.00.  This change can make a huge difference especially if you have an employer who matches your contributions.  If you cannot change this year, use this as an opportunity to adjust your contributions for 2012.  Always remember these contributions are tax deductible and all investments grow tax deferred until you begin withdrawals during retirement.

Roth IRA Conversion

Investors may want to consider converting traditional IRA accounts to Roth IRA accounts.  When you convert you pay the taxes now on the amount you convert, but all investments grow tax free and withdrawals at retirement are also tax free.  This is a strategy that works if you believe your tax bracket will be higher in the future.

Asset Allocation

The end of the year is a good time to take a moment and decide whether your portfolio has an asset allocation that aligns with your goals and objectives.  Many times when markets fluctuate, portfolios tend to become over-weighted in a particular sector or asset class.  Use this time to review your allocation and make sure your portfolio is positioned properly for 2012.


The final item investors can focus on is looking at what the budget appears to be for 2012.  Look for ways to reduce expenses so that this time next year you have more money in your pocket.  Look to see if you can refinance any real estate or other forms of debt.  Have your insurance policies evaluated to make sure you are not overpaying for your coverage.  Finally, look to make charitable contributions with either cash or securities to maximize your deductions as well as helping a cause you wish to support.

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