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Jim Lentini: A few tips for year-end planning

Posted: November 30, 2009 10:05 p.m.
Updated: December 1, 2009 4:55 a.m.
Year-end planning is more important than ever, with the increase in taxes we are paying here in California and what can be expected with the new additional tax and spending programs being planned from Congress.

So it is important for your personal tax savings to begin planning before the year's end.

Because the year's end means decisions and deadlines, it's a good idea to get started now. There are steps you can take and strategies that can help you save on taxes, maximize retirement resources and build college savings. Don't wait until December.

Here are a few things you can do to get off to a good start.

n Keep retirement savings working after a job change. If you changed jobs or left a job in 2009, it is important to keep your retirement savings working toward your goals. Rolling your old 401(k) into a Rollover IRA is an easy way to preserve tax-deferred growth potential, flexibility and control.

n Weigh the benefits of a Roth IRA conversion. In 2010, the adjusted growth income limits on Roth IRA conversions lift, making it possible for anyone to convert and reap the benefits of a Roth IRA. With the recent market decline and within the limits of conversion, it may be more affordable to make conversions.

n Maximum retirement savings and catch-up contributions. Dec. 31 is the deadline for workplace retirement savings contributions and certain small business retirement plans. One of the best ways to rebuild your retirement savings after a bear market is to increase your contributions to any tax-advantaged savings plan for which you qualify. And if you are age 50 or older, your catch-up contributions can add to the amount you can save.

n Consider a 529 plan for college savings. This holiday season, consider a gift that can build college saving for your child, grandchildren or a child you care about. 529 plans can also serve as effective estate planning tools, as all contributions reduce a person's federal taxable estate.

There are dozens of year-end strategies that make sense, depending on your individual financial situation. Talk with your tax professional and financial advisor well before Dec. 31 this year and every year.

With what we can expect from Sacramento and Washington, I believe it is imperative to research and consider any tax advantage planning to minimize federal and state taxes.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.


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