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MUTUAL FUNDS

A year-end checklist for savvy investors



December can be one of the busiest times of the year for shoppers, and for investors.

Between the holiday parties and shopping, there's plenty of personal business that's needs reminding of---and tending to---in the month of December. So, to help insure that you've got your investment ducks in a row, here's a reminder checklist that could keep you busy until December 31st.

  • Changes in your personal life There can be lots of life changes during any 12-month period. So, if you've gotten married, divorced, had a child, adopted one, invited mom and dad to live with you, lost a spouse, relative or loved one, or, experienced any other life-changing event this year, more than likely you'll need to make changes in things like your will, IRA, 401 (k) and other assets or personal investment accounts.

    The easiest way to start that process is to get organized. One simple way to do that is to make a list of all the on-line and off-line banks, brokers, financial planners, insurance companies, etc. that you deal with. And make sure to include your IRAs, 401 (k), annuities, and other assets you may have. Then, take a look at whether or not there's a need to make any changes---such as changes in account names or beneficiaries ---on any. If so, note the changes necessary on each and start contacting the appropriate firms. This is also a great time to make sure you've created files for all of your investment accounts. And, for those with files already created, to do some year-end discarding of data in each that's no longer necessary to keep.

    You can follow the same get-organized suggestions for any changes in your professional life. For instance, losing a job, changing jobs, starting a new business, selling or closing an existing one often means a change in your investment accounts, too.

  • As markets change, your asset allocation might need tweaking. Because there's no better time than at year-end to review how your money is invested, make sure to take some time to sit down and look at how that money is being allocated in all of your accounts --personal and retirement. While it's not always necessary to change your long-term investment goals, market conditions sometimes dictate a change in how you reach those goals. Keep in mind, any changes in allocations made in nonretirement accounts creates a taxable event of some nature.

  • According to Vanguard, there are a number of financial actions that need to be taken by December 31st. For instance, if you'd like to begin contributing to an Education Savings Account this year, the deadline for doing so is 12/31. Starting with contributions for next year, 2002, that deadline will change to April 15 of the following year. Also in 2002 and going forward, the maximum contribution you'll be able to make for each child is going up to $2000 per year. That's a dramatic leap from the current cap of $500 per year per child.

    December 31st is also the last day to convert to a Roth IRA, and to satisfy Required Minimum Distributions, (RMD), from IRAs and other qualified retirement accounts.

    And, there's even a deadline for letters regarding worthless securities. That date is December 21st.

    For more information about these and other year-end reminders, visit Vanguard's web site at www.vanguard.com . Then click, "personal investors," and then, "Year-End Reminders for Investors."

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    Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.


    To read more articles, please visit the column archive.




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