End-of-the-Year Deadlines

Nov 2016

By the time you read this article, the election will be over (yay) and we will have a short reprieve until they start talking about the next election. There’s no doubt that elections are important and their outcomes do affect us. That being said, there are some deadlines that are rapidly approaching that in a way can affect our day-to-day lives much more than a presidential election. The first of these deadlines is a little less than a month away.

December 7 is the deadline for seniors to decide on their Medicare Prescription D Plan. This is the only time of the year when you can make changes in your plan and that is why it is so important that you don’t miss this deadline. If you currently have a Medicare Prescription D Plan and you do nothing you will be automatically renewed for another year. For many people that may not be a problem but for others it could result in substantially higher fees and costs than they are currently paying. My recommendation is that you take this opportunity to do a new search to determine what would be the best Medicare Prescription D Plan for you. Not what was the best plan for you last year but rather, the best plan for you moving forward. Companies change their cost structure and their plans and that is why it is important to redo your search. You have until December 7 and therefore, the sooner you begin the process, the better. I recommend that you start your search on Medicare’s website at www.medicare.gov/find-a-plan.

Remember, when you do your search for a new prescription drug plan, focus on the medications you are frequently taking. Keep in mind that what is good for one spouse doesn’t make it good for the other spouse. Each spouse must do their search independently.

Another deadline is rapidly approaching and this one is December 31st and it deals with Roth IRA conversions. Converting traditional IRAs into Roth IRAs can be a substantial benefit. After all, you’re moving money that was growing tax deferred into money that will grow tax free. In addition, Roth IRAs are not subject to minimum required distributions and thus, you can let the money grow tax free for as long as you choose.

A Roth IRA conversion is not for everyone and you need to look at your individual situation to make sure that it’s economically feasible. My general rules are that you must have the money without touching the funds that you are converting to pay the additional tax liability. In addition, by converting money into a Roth IRA you don’t put yourself into a higher tax bracket and you can leave the money in the Roth IRA for at least five to seven years. If you meet these criteria, a Roth IRA conversion can be beneficial.

Unlike new contributions into a Roth IRA, just about everyone is eligible for a Roth IRA conversion. However, one thing to keep in mind is that if you are over 70½ and are taking required minimum distributions, you cannot convert that amount. You can convert anything above and beyond that amount if you choose.

For those of you who have flexible spending plans, many of you are facing a December 31st deadline to spend the money within the plan or you lose it. Some plans allow you to extend the period but many do not. Therefore, this is an excellent time to review your flexible spending plan so you can understand the terms and conditions. If you find that you have a December 31st deadline, now is the time to make sure that you spend that money wisely. You don’t want to wait for the last second and either lose the money or spend it on something you really don’t need.

Deadlines are serious and in most situations there are no extensions. Therefore, if you are affected by one of the rapidly approaching deadlines, there is no longer time to procrastinate; now is the time to get it taken care of.

Good luck!

Rick is a fee-only financial advisor. His website is www.bloomassetmanagement.com. If you would like Rick to respond to your questions, please email Rick at -.