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Post-Cliff Financial Plans for 2013

Roger Wohlner

It's 2013. The world did not end in December and our "leaders" in Washington seem to have averted the fiscal cliff, at least for now. Against this backdrop there are a number of financial planning opportunities for this new year.

Some opportunities born out of the bill passed by the House and the Senate:

--There will be increased opportunities for investors to do Roth conversions. This may or may not be a good idea for you and should be looked at carefully before going this route.

--The estate tax rate increases to 40 percent and the estate tax exemption remains at $5 million. This now allows for some certainty in estate planning which was lacking with the pending expiration of the old rates.

--The income tax rates on the highest earners will rise to 39.6 percent from 35 percent and the tax rates on dividends rise to 20 percent from 15 percent. Together these increases might influence your investing activities in terms of the types of investments held in taxable vs. tax deferred accounts and in the types of investment vehicles in your portfolio.

--Congress has also made permanent a fix to the Alternative Minimum Tax for the next ten years. Again this might make certain investments more desirable and others less so in your taxable portfolio.

There are other opportunities that are timeless and the New Year is always a good time to address these:

--If you aren't contributing the maximum to your 401(k) or similar company retirement account, increase your contribution to the extent that you can. The maximum deferral rates for 2013 are $17,500 and $23,000 for those who will be 50 at any point in 2013. At the very least try to contribute enough to receive the maximum match offered by your plan.

--Get a financial plan in place or review your existing plan if you have one. This should be the basis of your investing and financial activity. In periods of financial uncertainty a financial plan can be the basis of sound personal financial management.

--Review and rebalance your investment portfolio as needed. The markets have been pretty volatile of late, how has this impacted your portfolio?

--If you have a number of accounts, such as old 401(k)s, multiple IRAs, etc. organize and consolidate those accounts as appropriate. This will make it easier to review and manage these accounts and to look at all of your investment holdings as a total portfolio versus a collection of investments.

--Hire a financial professional if you need help.

Here's wishing everyone a happy, healthy, and prosperous 2013.

Roger Wohlner, CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill., where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. Read more about Roger here.

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