Year-End Financial Strategies

It�s hard to believe that another year will soon be coming to an end. In the weeks to come, you�ll likely be busy preparing for the holidays and winter months ahead. Despite the hectic pace this time of year, it�s important to take time to make an assessment of your financial situation and look into implementing strategies before the end of the year that could potentially benefit you during tax season. Schedule a Year-End Review   The end of the year is a great time to schedule a meeting with your Stifel Financial Advisor and your tax professional to talk about your current financial situation and help ensure that the plans you have in place are suitable to help you meet your goals.   Recent market volatility may have significantly impacted your target asset allocations. Revisit your original objectives and analyze your portfolio with your Stifel Financial Advisor to see if any changes need to be made. You�ll also want to determine whether or not now would be a good time to sell underperforming investments or capitalize on assets that have performed well for you. Either scenario will have tax implications that you will want to discuss with your tax professional.

Establish and/or Contribute to an IRA

Take Required Minimum Distributions

Year-End Financial Strategies                                                                    

your choice to take one taxable RMD this year or take two in 2009. All subsequent RMDs must be taken by December 31 each year.

For those already in their RMD payout phase, distributions must continue each year. If an RMD is overlooked or underpaid, a 50% penalty will be due on the unpaid portion for the year.

RMD calculations are based on a factor from the Uniform Life Expectancy tax table. The only exception is if an IRA holder appoints his or her spouse as sole primary beneficiary and that spouse is more than 10 years younger than the IRA holder. In this case, the IRA holder and the spouse�s actual age are used to determine an annual factor from the �Joint and Last Survivor Table.�

To calculate an RMD, the IRA holder simply divides the previous year�s December 31 IRA balance by the life expectancy factor from the Uniform Life Expectancy tax table. Your Stifel Financial Advisor can assist you in calculating your RMD on your Stifel IRA.

If you have multiple IRAs, the IRS requires that the IRA balances are aggregated to determine a year�s RMD.

An IRA owner must tally the December 31 value of all IRAs and take the combined total RMD from one or more of the IRAs. If one of these IRAs is overlooked, the 50% penalty will be due on the neglected amount. For this reason, it makes sense to consolidate your IRAs with Stifel should you have any held with other firms.

It�s important to note that IRA balances cannot be aggregated with qualified retirement plan balances to determine an RMD. RMDs for IRAs and qualified retirement plans must be satisfied independently.

Convert to a Roth IRA

If you qualify, you may want to consider converting your traditional IRA to a Roth IRA. This option is currently available to anyone whose tax filing status is single, married filing jointly, or head of household and whose adjusted gross income is $100,000 or less. If you file as married filing separately and/or make more than $100,000, you are not eligible to convert to a Roth IRA. Starting in 2010, however, everyone will have the opportunity to convert to a Roth, regardless of income.

Unlike with traditional IRAs, there are no required minimum distributions for Roth IRAs. Also, assuming the same gross contribution, a Roth IRA enables most savers to amass a greater nest egg, because (assuming that certain conditions are met) withdrawals from earnings during retirement are income tax-free. It is important to consider, however, that conversion is a taxable event and the income generated is considered ordinary income. However, if you are eligible, you may be able to use the current bear market to your advantage. By converting devalued securities now, you would pay less income tax than you would when the market was at its peak, and with a Roth, you will have the potential to recoup your losses on a tax-free basis.

Thanks to the Pension Protection Act of 2006, certain IRA holders have the opportunity to donate assets in their IRA to qualified charitable organizations. If it�s done correctly, the distributions are tax-free. The provision applies for traditional and Roth IRAs and does not typically apply to distributions from active SEP or SIMPLE IRAs unless an employer contribution was not made to the SEP or SIMPLE IRA during or for the year the charitable distributions are made. To qualify, IRA holders must be at least 70 � years of age on or before the actual day the donation is made.