Get Ready for Your Year-End Review

The last few months of a year often prompt people to think about goals they want to pursue in the year ahead. If your goals include investment issues, an annual review with your financial advisor is an excellent opportunity to focus on what you need to do to pursue them. Every person’s goals are unique, but you may want to think about the following areas when preparing for your review.

Building Retirement Assets

Your advisor can help you calculate how much you need to save for your later years. If you are coming up short, funding an IRA may help you close the gap.1 For the 2013 tax year, you may contribute a maximum of $5,500 to a traditional IRA or to a Roth IRA — plus a $1,000 catch-up contribution if you are age 50 or older. If you haven’t yet made your 2013 contribution, you may do so up until April 15, 2014.

Preparing for Education

College costs continue to increase faster than the rate of inflation, which presents a challenge for academically minded families. In addition to saving as much as you can afford and pursuing financial aid, you may want to consider either a Coverdell Education Savings Account or a 529 Plan.

A Coverdell account permits you to save $2,000 annually per beneficiary. Withdrawals are tax free as long as they are used for qualified expenses associated with elementary, secondary, or higher education.

A 529 Plan allows a person to contribute up to $14,000 annually per beneficiary. There are no income limits to use a 529 Plan and allow you to make substantial contributions over time. Depending on your state, these plans have the potential to provide signficant state tax advantages among other benefits. 529 Plan earnings are not subject to federal tax and typically not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board.

Evaluating Your Estate

When crafting your financial plan, take a moment to consider whether your investments complement the provisions of your will. As part of this exercise, your financial advisor can help you review the potential estate-planning benefits of stretch IRAs, Roth IRAs, and other accounts. Don’t forget to review beneficiary designations to make sure they are up-to-date.

Assessing Your Asset Allocation

Your financial advisor can make sure your combination of stock funds, bond funds, and cash investments is on target given your risk tolerance and time horizon. A more aggressive mix may be appropriate for longer-term goals that are 10 or more years away, while being more conservative may be desirable for shorter-term objectives.

There may be other areas you want to pursue, but these may provide initial food for thought. By capitalizing on the goal-setting opportunities of your annual review, you’ll improve your chances of making the coming year a building year for your financial future.

1Withdrawals of earnings or other taxable amounts are subject to income tax and if made prior to age 59½, may be subject to an additional 10% federal tax penalty.

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© 2012 S&P Capital IQ Financial Communications. All rights reserved.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

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