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• Year End Financial Reminders

Year End Financial Reminders

written on December 20, 2010 by Frank Fantozzi

As entrepreneurs our engines are always running at full speed.  With that in mind, I want to provide you with a few thoughts as year-end approaches and the new year begins.

1. Investment Tax Harvesting is an important year-end consideration.  Begin by reviewing your portfolio to determine if it makes sense to sell off portfolio gains and take advantage of purging your portfolio of losses to better position it.  Keep in mind capital gains rates are increasing from 15% to 20% in 2011.

2. In past years it has been fashionable to accelerate losses and defer gains. With the individual marginal tax rate increasing from 35% to 39.6% this should be carefully reviewed. With the Republican House though, keep an eye on the extension of the Bush tax rates.

3. “Buy, diversify and hope” is not a well-conceived investment strategy.  While proper investment diversification plays a significant role in managing risk, ignoring current political, economic and monetary policies will make your investment waters choppier. Review current holdings and consider whether certain areas are forecast to be less favorable in the coming year.  If so, you may want to decrease your short-term exposure.  Consider alternative asset classes to help manage risk over the short term.  This does not detract from your core-based, results-driven investment strategy.  Consistency in performance is critical.

4.  Beneficiary designations should be reviewed annually.  Changes in marital status, family dynamics and other circumstances may impact the ultimate distribution of your investment assets.  A common financial planning strategy is incorporating stretch IRAs which helps to prolong distributions to beneficiaries, taking advantage of the tax deferred status of IRA accounts.  Some financial institutions, including your 401(k) provider, may not allow certain provisions in their standard beneficiary forms, requiring custom beneficiary forms.

5. Maximizing contributions to tax-deferred accounts is a must if cash is available.  After maximizing contributions to your 401(k) plan ($16,500 in tax year 2010; $22,500 if age 50 or older) consider maximizing your profit sharing plan to $49,500 ($54,500 if age 50 or older).  If cash flow is strong, investigate a cash balance plan which can push your contribution into six-digit territory if your compensation is in the $160,000 range or better.

6. Planning for the unexpected is another critical area.  Do you have adequate life, medical and long-term care insurance that reflects your current financial situation?  Your life should be insured to cover, at the very least, the cost of replacing your talents and overall responsibilities whether you are the homemaker or wage earner in your family.

Like your other investments, life insurance policies should be reviewed regularly.  If your lifestyle, family situation or personal and financial objectives have changed, it may be time for your life insurance policies to change as well.  The good news is that life insurance premiums have been decreasing.  Also determine if your disability insurance premiums can be paid with after-tax dollars. This can change your benefit from taxable to tax-free.

7. Have you updated your estate plan?  The only way to ensure clarity concerning  who will benefit, when they will benefit and how your estate, business and personal affairs will be handled is to put it in writing.  If you do not make these decisions, the state you reside in will.  You estate is a dynamic situation so make sure your intentions are properly reflected and updated regularly.

8. Surprisingly, many business owners do not have a succession plan.  What happens if you die, become disabled or just want to retire?  How will you and your family realize the value of your hard work?  If you have partners it is easiest to agree on terms and conditions when things are going well.  Emotions or problems are less likely to take precedence over thoughtful, rational decision-making.  If you are a 100% owner, it becomes more challenging.  Have you put an internal succession plan in place?  Can you enter into a buy-sell arrangement with a friendly competitor to ensure the transition of the business or practice?  In the end you may simply need to consider providing for the sale of your business under a controlled wind-out so it does not become a fire sale.


Frank Fantozzi is President of Planned Financial Services (PFS).  He is a Personal Financial Specialist as well as an LPL Investment Advisor Representative, a CPA with a Masters in Taxation and a Certified Divorce Financial Analyst.  Frank believes that achieving your goals and dreams does not happen by simply handing over control of your assets and your future, but in part by ensuring your unique voice is heard and your vision reflected in every decision.  This philosophy helps to shape your unique Return on Life^TM, an individually-defined measure of success that goes well beyond investment performance.  Frank can be reached at 440-740-0130 or by e-mail at frank@plannedfinancial.com. Or visit us anytime at www.plannedfinancial.com.
Securities offered through LPL Financial. Member FINRA/SIPC.