Military Officer - December 2006 - (Page 46)

financialforum Year-End Checklist It’s not too late to make ﬁnancial changes. Before saying goodbye to 2006, Phil Dyer, CFP, suggests you use the questions below to make sure you haven’t overlooked anything. T An RMD Hint for Those Age 70 1⁄2+ ■ Many brokerage and investment firms are overwhelmed with last-minute required minimum distribution (RMD) requests, which can lead to paperwork errors. Consider taking your RMDs by Dec. 15 to avoid this risk. he year is drawing to a close, but you have a few short weeks left to make year-end ﬁnancial moves for 2006 and do some advance planning for 2007. Let’s look at some opportunities: Did you turn 70 1⁄2 this year? If so, make sure you take the required minimum distributions (RMDs) from all IRAs and qualiﬁed retirement plans before Dec. 31. RMD rules technically allow you to delay RMDs until 1 April 1 of the year after you turn 70⁄ but 2, doing so means you would need to take two distributions that year (one by April 1 and a second by Dec. 31). Failing to take RMDs results in a 50-percent penalty tax. Have you spent your ﬂexible spending account (FSA) money? If you have an FSA through your employer, spend any remaining funds. Most employers have amended their plans to take advantage of an IRS rule extending the usage deadline from Dec. 31, 2006, to March 15, 2007. Remember, FSA plans are “use or lose.” Going to make a large charitable deduction in 2006? Highly appreciated stock and $15,000 annually, plus a $5,000 catch-up provision if you are age 50 or older. Look into changing your contribution level for the last one or two pay periods of 2006 and setting up higher contributions for 2007. Money put into these plans lowers your AGI and builds for future retirement. Have a stay-at-home spouse? If so, you are eligible to make a fully deductible spousal IRA contribution of up to $4,000, plus an additional $1,000 if your spouse is age 50 or older. Your AGI must be under $150,000 for a full contribution (phaseout is between $150,000 and $160,000 AGI), and there must be enough earned income (from wages) to cover the contribution. Military retired pay and other pension and IRA income does not meet the earned income test. Have capital loss carryforward from the 2000-02 bear market? Stocks have re- mutual funds in taxable accounts are good for charitable deductions. You can contribute appreciated assets equal to 30 percent of your adjusted gross income (AGI) to a public charity in a calendar year. By donating appreciated assets you get a full tax deduction for the fair-market value of the gift without paying any capital gains taxes. Did you turn 50 in 2006? If you are still working and contributing to a deﬁned contribution retirement plan (TSP, 401(k), 403(b), or 457(k)), you now can contribute 46 MILITARY OFFICER DECEMBER 2006 bounded strongly since 2003, so rebalance your portfolio. Don’t forget any unused capital loss carryforwards you still might have to offset gains from sales this year. Also, remember that up to $3,000 of capital losses can be used to reduce ordinary income. Take a few minutes to plan with your ﬁnancial and tax advisors before Dec. 31 — it deﬁnitely can pay off! MO — Former Army Capt. Phil Dyer, CFP®, is deputy director for ﬁnancial education, Beneﬁts Information. To ﬁnd a ﬁnancial planner near you, contact Garrett Planning Network at (866) MOAA-GPN (662-2476) or www.moaa .org/garrett, or visit www.moaa.org/ﬁnancial center for other resources. PHOTO: GREG SCHALER http://www.moaa.org/garrett http://www.moaa.org/financialcenter http://www.moaa.org/garrett http://www.moaa.org/financialcenter

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Military Officer - December 2006

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