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Fiscal Cliff Financial Planning Part 2

Before the year ends, you can prepare with fiscal cliff financial planning. In Part 2 of our series what to do before the end of the year, I’ll address your IRA, specifically if you have a Roth IRA.

Before the year ends, you can prepare with fiscal cliff financial planning.

In Part 1, I talked about tax planning for the fiscal cliff. This year is different than past years because tax experts are predicting capital gain taxes will go up and therefore, it might be best for you to take your gain this year and postpone your loss until next year.

In Part 2 of our series what to do before the end of the year, I’ll address your IRA, specifically if you have a Roth IRA.

The Fiscal Cliff and Your IRA

The consideration for those of you with a Roth IRA is that if you want to make a contribution for this year, you have until April 15 next year to do it instead of the December 31 deadline for a traditional IRA account.

But on January 1, you can begin contributing to your Roth IRA for 2013. What this means is between January 1 through April 15, you can contribute to your Roth IRA twice, once for this year and once for next year.

The easiest thing to remember about contributing to your Roth IRA is that for a taxable year, you can contribute from January 1 of that year through April 15 the following year.

What doesn’t change – for those of you under 50 years old – is the maximum amount you can contribute every year is $5,000.

If you’re 50 and older, your annual maximum is $6,000. And even better, you can catch up previous years when you were 50 and older to get to the maximum.

An example is if you’re 52 years old and you only contributed $4,500 when you were 51, you can contribute an additional $1,500 to that year’s filing.

But just as with any year, any contribution to your Roth IRA means you’ll be paying income tax for the year you contributed. The benefit is that you won’t be paying income taxes when you withdraw that money.

Aside from the Roth IRA contribution, those of you with a traditional IRA should consider converting to a Roth IRA if it benefits you.

Long-Term Planning Prepares You for the Fiscal Cliff

Most people see this as a binary event but it’s much more than that. It’s a long-planning calculation to decide how to maximize a conversion. And with the upcoming fiscal cliff, it's more urgent to plan now.

Should you do it all at once? Should you do a certain amount this year? Take your time to decide what’s best for you. Don’t assume it’s all or nothing.

I hope you’ve enjoyed this article on fiscal cliff financial planning and also what we presented to you in Part 1.

If you have any questions, give us a call. That first call to us is free.

The views expressed are by Sheldon Harber and should not be considered legal or tax advice. Please see a qualified attorney or accountant for answers to specific questions.

Investors should carefully consider the investment objectives, risks, fees and expenses before investing. For this and other important information please obtain the investment company fund prospectus and disclosure documents from your Rep/Advisor. Read this information carefully before investing. Diversification and asset allocation strategies do not assure profit or protect against loss.

You’re best served by an experienced financial and tax professional. Asset Strategies, Inc. has been serving clients for over 60 years. Visit us at our website, www.assetstrategiesinc.com, call us at 314-432-0288 or email me at Sheldon@assetstrategiesinc.com. We also provide services in Chicago. Call Paul Wedeen at 630-556-4672 or email him at Paul@assetstrategiesinc.com.

Securities offered through a non-affiliated company, Cambridge Investment Research, Inc., a registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Cambridge Investment Research Advisors, Inc. a registered Investment Advisor

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