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Glide into Tax Season with Solid Financial Planning by: ARA Content (ARA) - With good planning, you can start the year off right by making sure you and your family are financially fit and ready for the new year, and possibly reduce your tax bill. Here is a financial checklist to consider: Tap into the Power of Tax-Deferral If you are thinking of investing in mutual funds for long-term or retirement savings, purchase a variable annuity. You've got the 1099 forms for 2000 already from any mutual funds you own. If you have a tax bill this year, you'll likely wait until April 15 to pay it, to give the money extra time to work for you. What if you had the option to wait 10 or 20 years to pay? That's tax-deferral. You control when you pay taxes on your money so you can get the maximum mileage out of your investment earnings. Variable annuities provide tax-deferred investments -- you pay no taxes on the earnings until you actually withdraw the money, and you receive no tax assessment during the accumulation phase. You can also move money between the funds within your annuity without incurring taxes, and you can invest in VAs at any time without negative tax consequences. Many mutual funds pay taxable dividends and you will be taxed on any gains from stocks or funds sold during the year. Keep in mind that variable annuities typically carry mortality and expense charges, administrative fees, and deferred sales charges that can reduce tax-deferred performance. Withdrawals of the tax-deferred earnings are taxed as ordinary income, and surrender charges may apply, in addition to a 10 percent tax penalty for withdrawals before age 59 1/2. Protection for You and Your Family Review your insurance and savings plans, including homeowners, auto, life, health and disability insurance, retirement plans and investments to make sure you have done everything necessary to prepare for the future. Insurance protects against unforeseen events, such as storms, accidents, disability, illness or death. Check Your Reimbursable Medical and Child Care Accounts If, by year-end, you haven't used all the dollars in a pre-tax medical or child care spending account, you could forfeit all the money remaining. Near year-end, if you have money remaining, you may want to schedule an eye, dental or physical exam, or stock up on prescriptions. Put Your Bonus in Your Employer-Sponsored Pension Plan If you haven't maxed out on your pre-tax contribution allowable (usually $'10
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