“There are two things certain in life - death and taxes”

December 5th, 2007 at 07:30am Dick Bennett

 Richard A. Bennett, CFSC, CFP®, AIF® 

As the old saying goes, “there are only two things certain in life - death and taxes.”  With the end of the year fast approaching, it is time to make plans for both. 

There is still time to execute your 2007 tax savings strategies.  These strategies may include selling investments that have declined in value, making last minute charitable gifts to your favorite charity, determining if you have fully funded your individual retirement account or qualified retirement plans, and prepaying some of your deductible expenses.  Following through with these items may help reduce or allow you to defer the tax bite on April 15^th.   

This is also the time of year when most of us are asked to make an election to participate in our company’s 401(k) plan.  Making the decision to defer a portion of your 2008 compensation into the plan can reduce your 2008 tax obligation and provide an investment vehicle where earnings are sheltered from income tax until you reach retirement.  In addition, many plans also offer a company matching contribution.  These contributions are provided as an enticement to encourage employees to save in the company’s plan.  Not taking advantage of these contributions is the equivalent of giving up a guaranteed return on your investments.  If at all possible, you should elect now to participate in the company’s plan up to at least the percentage where the company match is provided.    

If you are unclear about any of these tax planning issues, you should consult with your tax advisor or financial planner. 

Entry Filed under: Tax, Retirement Planning, Financial Planning, Investments