When it comes to making financial decisions, procrastination is perhaps most common obstacle to overcome. There are numerous factors to consider when planning for your financial future such as changes in your lifestyle, the economy, monetary and fiscal policy, and elections. Let’s take a look at how the aforementioned factors may affect you in 2013.
First, the Bush tax cuts are set to expire at the end of 2012, unless the government can get its act together during 3 weeks following the election, which isn’t likely. Among other things, this has the potential to raise the long term capital gains tax rate from 15% to 25% and dividend income from 15% up to 43%. Second, President Obama wants to raise the marginal tax rates for the top 1%. Lastly, Congress and the Senate would also like to limit tax deductions such as mortgage interest, dependent care and more.
The bottom line is that the United States cannot afford to continue to fund Medicare and Social Security with the current tax base. We have 2 choices: raise taxes or cut spending. The latter does not seem to be an option for the current administration, while the former is inevitable. Those tax implications will force everyone to re-evaluate their investment allocations. Instead of focusing solely on end of year tax loss selling, it may be wise to consider the idea of tax gain selling?
So what should you do? The key is to be proactive in your planning. Get organized, consolidate your investments and focus on your financial goals. Are you working to save more for retirement or fund your children’s education? Now is the time to start planning and make adjustments your portfolio. Once 2012 is over, procrastination will come with a higher price.