End of Year Action Items

If you have not already done so, NOW is the time for opening a Roth IRA account.  If you do have existing Roth IRAs, be sure to contribute as much as possible this year so you can enjoy the tax sheltered benefits come tax time.

Also, if you participate in an employer sponsored Flexible Spending Account… NOW is the time to discover your remaining balance and spend it before you lose it!

Roth IRAs

As I mentioned above, now is the time for starting a Roth IRA.  If you are out of debt and/or ready to invest, fund your Roth IRA(s) early and often.

Before Opening Roth IRA:

• Make sure you have some liquid savings set aside for emergencies – in this market I recommend at least 3 months but prefer to have 6 or more.
• Make sure all your high interest debt is paid off.

Roth IRA Info:

Check this link for the latest Roth IRA information.

• Roth IRAs are tax exempt accounts, not tax deferred accounts.  Although your contributions are after tax, as long as you follow the rules and keep your grubby hands off the money until you are 59 1/2, all your principal and gains can be drawn tax free!
• Annual contribution limit is $5,000 for those 59 and younger and $6,000 for those 60+.
• Single filers with an adjusted gross income of $107,000/year or less can contribute the full amount and the AGI phaseout limit for contributing is $122,000.  *In the video I gave last years phaseout numbers, but those listed here are correct.
• Joint filers AGI phaseout range is $169,000 – $179,000.
• Deadline for 2010 contributions is Monday, April 18th, 2011.

Flexible Spending Accounts

Do you take advantage of an employee sponsored FSA?  If so, remember to check your current balance and make sure you spend any remaining amounts before the end of the year.  Why?  Because if you don’t use it… you lose it.  Similar to a Health Savings Account, an FSA is a tax exempt savings for health spending, but unlike HSAs, with FSAs you cannot carry balances over into the next calendar year.

This lack of full consumer control is my fundamental qualm with the FSA structure – people have to guess how much they will spend on health care in yearly intervals and are punished if they guess too high or too low.  With all that said, if you can give a fairly accurate projection of your yearly health spending you stand to realize valuable tax relief… which is the value of the product.

Although I am currently participating in my employer sponsored FSA plan, if I had my druthers I would choose and HSA every time.