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5 money saving opportunities before 2013 is over

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As we rapidly approach the end of 2013, it's easy to put life on cruise control and mentally "check out" until next year.

However, although you're likely well under way with enjoying holiday parties, egg nog, and other festivities, there are a few things you should consider to ensure your financial house is in order before the end of the year.

If you miss the December 31st deadline for the following actions, you could end up costing yourself a sizeable sum of money.

Before we jump into the list of year-end items, there are a couple things readers should be aware of. First, always consult your tax, legal, and/or investment advisors before making any decisions.

Second, keep in mind that the stock and bond markets both close early on Dec. 24 and are completely closed on Dec. 25. Thus, there are less than seven trading days left in 2013.

With that said, here are five things you should review before the ball drops on Dec. 31:

1) Take the Required Minimum Distribution (RMD) from your tax-deferred retirement accounts

If you are over age 70 1/2 and have money in an employer-sponsored retirement account or an IRA, you are likely required to withdraw (and pay taxes on) a minimum amount of your account each year. This is known as your Required Minimum Distribution (RMD).

The exact dollar amount is determined by an IRS formula and is adjusted each year based on your account balance and your age. If you miss the Dec. 31 deadline, the IRS imposes a steep 50% penalty on the amount that was required to be withdrawn.

2) Contribute to a 529 plan to take advantage of your state's income tax deduction

The vast majority of states allow you to deduct contributions to a 529 college savings plan from your state income taxes. However, in order to take advantage of the deduction for 2013, you must make your contribution before Dec. 31.

3) Take advantage of the annual gift tax exclusion

If you are fortunate enough to have the means to share your wealth with others, Dec. 31 represents an important deadline for you. That's because the IRS allows you to gift up to $14,000 per individual to as many people as you like and pay no gift tax (and avoid using your lifetime exemption). However, if you miss the year-end deadline, the 2013 exclusion will be gone forever.

4) Defer income into 2014

If you anticipate being in a lower tax bracket next year, you might be able to reduce the amount you send to the tax man by deferring some of your income until 2014. For example, if you are planning to take a distribution from an IRA or other retirement account, waiting just 2 weeks could significantly lower your tax bill. Keep in mind that, if applicable, you must always take a distribution at least as large your RMD.

5) Take advantage of charitable contributions before year end

Similar to #4, if you expect to be in a lower tax bracket in 2014, now is the time to make your charitable contributions. The organizations you are supporting will be thrilled to get a nice year-end boost and you will get to take advantage of a more valuable deduction.

Hopefully you've already discussed most of these items with your financial planner or CPA. If not, give them a call as soon as possible to ensure you don't miss out on a valuable planning opportunity.



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