Money Magazine suggests eight money moves people should consider for the end of the year. Here are some thoughts.
1. Take your losses. Money suggests selling poor-performing stock to offset ordinary income for tax purposes. In my opinion, this depends on the stock. If the future does look bleak, go for it, but if there is some reason to believe there is a comeback around the corner, hold on. (Efficient market theory suggests that any widely-known “comeback” is already represented in the stock’s price, so this may not work for you.)
2. Buy some aspirin. If you have any money left over in your flexible spending plan, particularly if yours is of the use-it-or-lose-it variety, stock up on eligible pharmaceutical items you know you’ll use before they expire, like aspirin. Your deadline for using the funds may extend into next year, so the push may not be as urgent — check your company’s policy.
3. Be generous. Give money to your favorite charity or non-profit organization, and you can reduce your tax liability. I would like to think that isn’t the only reason people support causes, but it does help. Money suggests setting the money aside in a Charitable Gift Fund to get the tax deduction now while postponing the distribution to a later date, when the donor has had time to determine where it should be sent.
4. Get IRA smart. Anyone 70 1/2 or older must start taking the required minimum distribution from IRAs. If the minimum isn’t met, there is a significant penalty. Alternatively, you can donate your distribution to charity and avoid withdrawal taxes.
Part 2 will summarize the second half of Money Magazine’s year-end money moves.
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Substantial penalty for late withdrawal!