Your End of The Year Financial Check List

Roth Conversion –
The income limitations on converting a traditional IRA to a Roth IRA have been eliminated and taxes due on a Roth conversion, processed in 2010, can be paid in 2011 and 2012.

Required Minimum Distribution –
A required minimum distribution on your IRA and 401k/403b is required every year once you attain 70 ½.

Maximize your retirement contributions –
Be sure to maximize your retirement plan contributions for 2010. Below are the maximum contributions for your 401k and IRA contributions for 2010. You have until April 15th to contribute to your IRA.

401k – $16,500 plus a $5,500 catch-up provision if you are over 50
IRA – $5,000 plus a $1,000 catch-up provision if you are over 50 (income limits apply)
Simple – $11,500 plus a $2,500 catch-up provision if you are over 50

Adjust retirement contributions for 2011 –
There is no change to 401k and IRA contribution limits between 2010 and 2011. However, if you have turned 50 you can make a catch-up contribution. A change in your income may also impact your ability to contribute to an IRA.

Harvest Tax Losses –
If you have been thinking about selling some poor performing stocks or mutual funds, do so before the end of the year to take advantage of tax losses in 2010. However, if capital gains rates increase in 2011 it may be more advantageous to offset gains in 2011.

Charity Contributions –
Go through your closets and garage before the end of the year and donate any unwanted items to get a nice deduction on your tax return. When you drop off your items be sure to get a receipt. When making a charitable contribution, consider donating appreciated stock rather than cash.

Take advantage of the annual gift allowance –
In 2010 you can gift up to $13,000 per person without paying gift tax or impacting your estate tax exemption.

Make 529 Contributions –
Contributions made to the Colorado 529 plan are deductible on your state tax return. Money can be contributed into the Colorado 529 plan for tuition that is payable in 2011.

Review your expenses and draft a new budget –
Everyone should review their expenses and revise their budget at least once a year. December is a good time of year to review historical spending habits and make adjustments to your budget for the coming year. It is difficult to establish saving goals without a good understanding of what is available after your non-discretionary expenses.

Set financial goals for 2011 –
I recommend setting new personal and financial goals at the beginning of every year. Think of it as personal strategic planning. Set some long term goals for 3-5 years then identify some action plans for the next twelve months.

Adjust tax withholdings for 2011 –
Adjust your tax withholdings or estimated taxes for anticipated changes in income and deductions in 2011.

Organize 2010 tax documents –
Year end is a good time to create a folder for all of the 2010 tax documents you will be receiving and to start organizing your expenses and receipts. You will have everything thing in one place when it comes time to complete your tax return.

Make adjustments for changes in family circumstances – birth, death, marriage, dependents, and retirement –
Major changes in your life circumstances may result in numerous changes in your financial situation. For example a birth, marriage, or death will probably necessitate a change in your will and beneficiary designations. It also may impact your income tax withholdings. The birth of a child may result in significant tax benefits. With the birth of a child you also may want to consider starting a college fund and a change in life or disability insurance.

Spend FSA accounts –
With many companies, flexible savings accounts cannot be carried over into the next year so be sure to spend the money in your FSA account this year, before you lose it.

Consider the impact of possible changes in the tax law –
If the Bush tax cuts are not extended, there is a possibility that the capital gains rate will increase from 15% to 20%, that tax rates will increase, and that some tax deductions will disappear. These possibilities need to be considered in making your year end financial decisions.

About the author

Jane M. Young, CFP®, EA, MBA, CDFA

Jane M. Young is a Certified Financial Planner and co-owner of Pinnacle Financial Concepts, Inc. and Divorce Solutions, Inc. She has been a financial planner since 1996. She is also enrolled to practice before the Internal Revenue Service. Prior to becoming a financial planner Jane held several management positions at Digital Equipment Corporation and Quantum Corporation, where she worked for 14 years. Jane holds a Bachelor of Science degree in Business Administration from the University of Colorado and an MBA from the University of Colorado. She has also completed the two year Certified Financial Planner Professional Education Program with the College for Financial Planning.

Jane is very active in the community. She is the immediate past president of the Rotary Club of Colorado Springs and a past president of Leadership Pikes Peak. She is a graduate of the Leadership Pikes Peak class of 2004. She is a past president of the Financial Planning Association of Southern Colorado and a past president of the Pikes Peak Chapter of the National Association of Women Business Owners. Jane is also a member of the University of Colorado at Colorado Springs, College of Business, Alumni Leadership Team. Jane is a graduate of the Leadership Program of the Rockies class of 2009 and a graduate the Colorado Springs Leadership Institute class of 2011. She is also a member of the Estate Planning Council and Artemis. Jane was selected as a 2010 Woman of Influence by the Colorado Spring Business Journal.

As a fee-only financial planner Jane is a member of the National Association of Personal Financial Advisors, the Financial Planning Association, the National Association of Tax Professionals and the Alliance of Cambridge Advisors. She has been quoted in several local and national publications including The Wall Street Journal, US News and World Report, Consumer Reports, Investment News, MSN Money, Kiplinger Magazine, Financial Advisor Magazine, Bankrate.com and the Colorado Springs Business Journal. She also works as a volunteer instructor to new advisors with the Alliance of Cambridge Advisors and has worked as an adjunct instructor at the University of Colorado at Colorado Springs.

Jane is from St. Louis, but grew up in Colorado Springs. She enjoys skiing, golfing, traveling, hiking, painting and learning to speak French.

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