Year-End Personal Finance Checklist from Morningstar
Morningstar today has an excellent article that offers tips for year-end personal finance checkup. Following is the summary. To read the full article by Sue Stevens, click here.
1. Supercharge Your Portfolio
- Rebalance: Keep your target asset allocations.
- Net gains and losses: Offset gains by selling losers.
- Check year-dnd fund distributions: Buy a fund after its year-end payout, or sell a fund before its distribution.
2. Shore Up Your Retirement Savings
- Sponsored retirement plan: Max out 2006 contribution limit of $15,000 for your 401(k), 403(b), or 457 plan. If you’re over 50, you can put away $20,000 in 2006.
- IRA: Maximum IRA contribution for 2006 is $4,000 ($5,000 if you’re over age 50).
3. Set a Holiday Budget
- List whom you want to give to and how much you want to spend.
4. Get Estate Documents in Place
- Find the best qualified person to do the job for you.
- Review your estate documents.
5. Earmark Money for the Kids’ Education
- Set aside some money from your next few paychecks or year-end bonus to invest in your child’s future.
6. Plan Year-End Giving
- Identify whom you want to give to.
- Determin what assets you want to give away.
7. Do a Year-End Tax Projection
- Gather paystubs to project 2006 income.
- Check your 2005 1040 tax return for any carry overs.
- Adjust your withholding rate if necessary.
8. Consider a Roth Conversion
- Determine if you meet the criteria to convert (AGI under $100,000).
- Consider whether a Roth IRA is suitable for you.
- Consider a Roth conversion in 2010 if you don’t qualify now.
9. Plan Year-End Stock Option Transactions
- Determin your taxable income for the year.
- Project your tax if you plan to exercise incentive stock options.
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