RETIREMENT PLANNING MOVES FOR 2008 (FROM MARKETWATCH)

ROBERT POWELL
An end and a beginning
Eleven retirement-planning moves to make by year-end or early 2008
By Robert Powell, MarketWatch
Last update: 7:42 p.m. EST Dec. 12, 2007
BOSTON (MarketWatch) -- For procrastinators, these are the best of times, or least abundant times. There are hundreds of last-minute financial tips and barely any time to do any of them before 2007 ends.
But rather than be overwhelmed into a state of inertia, experts have offered the following list of things to do to end (or start) the year on the right foot. If you can't get to all of them, getting started on even a few will set you up for a more prosperous 2008.
1. The plan
Chuck Yanikoski of Still River Retirement Planning Software said job No. 1, especially for anyone who is 60 or older, is to schedule a review of your financial plan.
"Even if nothing else changed, the fact that someone is a year older means that their life expectancy, in terms of age at death, is greater than it was before," he said.
But other things, such as market value of assets, Social Security benefits and federal income tax brackets, have definitely changed and many other things -- such as health, expenses, debts and family situation -- have may have changed as well.
"Most retirees are not going to be dealt any new cards to play, so they have to be smart and diligent about playing the cards they still have left," Yanikoski said. "Periodically reviewing and updating one's plan is an essential, though often neglected, part of managing one's retirement."
2. Asset allocation
The end of the year is also an ideal time to review your investment plan. Indeed, gurus suggest that the biggest decision investors can make is not which investments they buy or hold, but how they allocate their assets -- what percent goes into stocks, what percent goes into bonds and what percent goes into cash.
Paul Merriman, author of "Live it Up without Outliving Your Money," said year-end is a good time to create or revisit an investment-policy statement and to invest in the right asset classes. "Sometimes a lot of inappropriate investments make their way into a portfolio," he said.
Equally important, he said is the need for investors to better understand why they are investing in those asset classes.
3. Charitable deductions
Barring an extension, Dec. 31 is the last day that IRA owners who are over 70 1/2 can give up to $100,000 to their favorite charity directly from their IRA account, without the distribution being taxed as income, said Andrew Benedict, director of research and planning for Macro Consulting Group.
"There is no tax deduction for the gift, but it's a great option for charitably inclined investors -- and if the investor has no real need for their required minimum distribution this year, they can reduce their taxable income by gifting their RMD rather than taking it themselves," he said.
4. Check those beneficiaries
Retirement plan and life insurance owners should make sure all their beneficiary designations line up with their estate planning documents, said Eva Ribarits of Creative Transitions.
5. 401(k) and Roth 401(k) plans
Plan participants have until Dec. 31 to invest the maximum possible in their 401(k) or Roth 401(k) (if available) plans. The limits are $15,500 for 2007, or $20,500 for those over age 50. Also, this is the time to schedule next year's contributions, said Bruce Steiner of Kleinberg, Kaplan, Wolff & Cohen.
6. Required minimum distributions
If you're required to take a minimum distribution from an IRA or retirement account, make sure you take it before Dec. 31, said Barry Picker, author of "Barry Picker's Guide to Retirement Distribution Planning."
According to the IRS, an IRA (other than a Roth IRA) owner must begin taking distributions for each calendar year beginning with the calendar year in which the participant attains age 70 1/2. The distribution for the 70 1/2 year must be made no later than April 1 of the following calendar year; RMDs for any other year must be made no later than Dec. 31 of the year.
7. Roth conversions
If you are semiretired and think you might want to convert some of your regular IRA funds to a Roth IRA, December is the month to do your best to figure out your 2007 taxes and see if you have any room to convert traditional IRA funds to Roth at lower tax brackets, according to Bob Clyatt, author of "Work Less, Live More."
"Savvy semiretirees check this each December in order to 'mop up' any unused 10% or 15% federal tax bracket; funds converted at these low federal tax rates are almost always advantageous over the long run. However, these conversions must be entered during calendar 2007, and many financial institutions get backed up and won't accept these conversions in the last week or two of December, so act soon. If you end up converting too much, you can always re-characterize (un-do) the conversion next year."
8. Investments
Those who invest in mutual funds in taxable accounts should check whether they are reinvesting the capital gains and dividend distributions back into the very same mutual fund. If so, Benedict suggests a different tack. Those investors would "be better served investing the distributions into a more tax-efficient mutual fund or other investment," he said.
One reason: Investors who reinvest distributions sometimes have to pay the income due on the distribution by selling the very mutual fund to raise cash. That can be even more unpleasant when the share price of the fund is below what the investor originally paid for the shares.
Many fund companies distribute their gains this time of year. "Find out who has or has not distributed for the year before you buy a fund," said Benedict. "You don't want to be paying taxes on a distribution from a fund that you just bought."
9. Don't retire yet
People should carefully consider at what age they plan to retire and should understand how the age of claiming Social Security will affect the size of their monthly check, said Andy Eschtruth of the Center for Retirement Research at Boston College. "The bottom line is that the decision of when to leave the work force has a tremendous impact on retirement security."
10. Working in retirement
Art Koff, author of "Invent Your Retirement" and founder of RetiredBrains.com, said "Anyone with an accounting background who is retired and is possibly interested in working in tax preparation during tax season should contact the local office of the major tax preparers or any independent firm that does tax preparation as they start the hiring process early in the year for these temporary jobs. Registering with temp agencies is also a good idea as some temp firms work with these offices as well."
Of note, sites that cater to retirees looking for part-time, temporary and full time jobs and project assignments, include RetiredBrains.com, RetirementJobs.com, and Seniors4Hire.org. Koff recommends that those interested in working other than full-time must state that on their resume.
11. Planning for a new kind of future
Many experts suggest that retirement has or will be retired. "The best retirement tip is to understand that retirement is a dead end," said Dan Taylor, author of "The Parent Care Solution."
"Making sure you have money is only one piece. You have to have community, compensation and conviction in retirement to make it meaningful. Work on a plan to reinvent yourself, use some of your money, make some money and continue with learning, growth and progress."
Others agree. "Plan to take a class that might go toward a degree or certificate or a new professional you," said Joe Coughlin, director of the MIT AgeLab.
"Ask in the new year: If I retired today who would I want to be? What plans did I forget along the way? The class or program may retrain or renew. Either way, science tells us that at the very least it will recharge your aging brain and probably your attitude about the future too."
Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.