$ Tip: 2013 Year-End Tax Planning

At this time of year you will see many articles written about selling losing stock positions against stock gains you have made during the year to reduce your tax bill. That is, if you are fortunate enough to hold stock positions, winning or losing!

One of the easiest ways to lower taxable income is to increase your contributions to your 401k or 403b. For every dollar you contribute, that's a dollar not included on your W-2.

Here's an example:
Kelsey makes $65,000 and contributes $10,000 to a 401k. (That's app. $384 per pay check. But because it's pretax Kelsey's take home pay is only $257 less because $127 was not withheld for taxes). Kelsey contributed $384 twice a month over the year, so the W-2 for 2013 will read "taxable income" $55,000.

Call HR to open a 401k or 403b or to learn when you may increase your contribution to pay less in taxes in 2014.

FYI
If you run your own company and want to contribute to a tax-deferred plan like a SEP IRA (simplified employee plan) for 2012, you MUST open that account before Dec. 31, 2013. Don't wait until April, you'll be too late!

If this $ Tip does not apply to you, pass it along to a daughter, son, nephew, cousin, friend who might benefit by paying less in taxes.

Having that important talk about money...

Money, like politics, sex and religion, brings up all sorts of emotional reactions.

Why do we shy away from THAT topic? Some reasons might be:
It makes you feel awkward or uncomfortable.
It's a very personal subject.
It's definitely not polite.

How will you know about a partner's money style or credit history if you don't ask?
Many a relationship goes on the rocks as a result of different spending and saving styles. When you marry you take on responsibility for the other's financial decisions - for good (a healthy 401k) or bad (bankruptcy or credit card debt).

How will you know if your parents have enough money to retire if you don't ask?
You may be surprised to discover they have not saved enough and will expect you to "help out" once they run out of money.

How will your child know what colleges to apply to if you don't have an honest conversation about what you can afford?
Setting expectations for a youngster can avoid disappointment and carrying student loans into their future and into your retirement.

In an emergency, how will you know how to pay the bills, manage a portfolio or check your bank account balance if you and your partner never talk about money.
A division of labor is natural and healthy but both spouses should have a basic understanding of family finances. Once or twice a year, plan a specific time to sit down and go over it all.

Put your feelings aside and have that money conversation. It will clear the air and help you plan ahead.