The fact of the matter is that LTC insurance is something that nearly all of us are going to need. Whether we spend our later years in a nursing home, an assisted-living facility or live them out in our own home, we are probably going to need some sort of care.

What long-term care covers:
Long-term care insurance is specifically designed to fill in the gaps between what your care costs and what is actually available to pay for those costs. Keep in mind that Medicaid is probably going to pay a small fixed amount for your care and unless you have very limited assets, you may be ineligible for coverage for your care.

Who needs long-term care insurance?
Chances are if you are in your 20s or 30s, the last thing on your mind is worrying about long-term care as you approach your 70s or 80s. You can worry about it now, or you can worry about it as you approach your 50s and 60s though you will probably pay a lot more in out of pocket expenses if you wait. While you may be in great health today and not thinking about potential medical costs you may incur in the future, today is the time to consider long-term care insurance. Some of the factors that may impact your decision include:

• Family longevity – if your family has a history of living until a very old age, you may need to consider long-term insurance to protect your assets and provide for your care
• If you are female – overall, women tend to live longer than men meaning they are more likely to need long-term care
• Health of family – those who have family members who have suffered from heart disease, cancer or diabetes are more likely to require long-term care
• Singles – if you do not have children, you probably will require a third-party to provide care as you age

Cost considerations
While it is true that your age will have an impact on what you pay for long-term care insurance, there are other factors that will impact the cost including:

• Elimination periods – the younger you are, the elimination period can be longer. This is the amount of time required by the insurer before benefits will be paid for care.
• Benefit limits – daily, weekly and monthly benefit limits are another way of controlling the overall cost of a policy. Whether you use the basic nursing home care costs or the costs of getting care at home will determine what limits you will be subject to.

Pay attention to exclusions
Most long-term care policies have certain limitations including:

• Addiction – when you require long-term care for drug or alcohol addiction, long-term care policies may not be the right option.
• Mental health – many policies have mental health exclusions but will include long-term schizophrenia or Alzheimer’s provided you are not already suffering from Alzheimer’s.
• Family care – most policies will not pay if your family will be caring for you

Long-term care insurance is a safety net. These policies can protect your retirement income and your assets. While they may not be right for everyone, you will not know that unless you evaluate these policies today. It is important to carefully evaluate exclusions and benefit limits to ensure you get the policy that is right for your individual needs.

Here are some commonly held assumptions – suppositions that may or may not prove true for you, depending on your financial and lifestyle circumstances.

#1. You should take Social Security as late as possible. Generally speaking, this is a smart move. If you were born in the years from 1943-1954, your monthly benefit will be 25% smaller if you claim Social Security at 62 instead of your “full” retirement age of 66. If you wait until 70 to take Social Security, your monthly benefit will be 32% larger than if you had taken it at 66.

So why would anyone apply for Social Security benefits in their early 60s? The fact is, some seniors really need the income now. Some have health issues or the prospect of hereditary diseases influencing their choice. Single retirees don’t have a second, spousal income to count on, and that is another factor in the decision. For most people, waiting longer implies a larger lifetime payout from America’s retirement trust. Not everyone can bank on longevity or relative affluence, however.

#2. You’ll probably live 15-20 years after you retire. You may live much longer, especially if you are a woman. According to the Census Bureau, the population of Americans 100 or older grew 65.8% between 1980 and 2010, and 82.8% of centenarians were women in 2010. The real eye-opener: in 2010, slightly more than a third of America’s centenarians lived alone in their own homes. Had their retirement expenses lessened with time? Doubtful to say the least.

#3. You should step back from growth investing as you get older. As many investors age, they shift portfolio assets into investment vehicles that offer less risk than stocks and stock funds. This is a well-regarded, long-established tenet of asset allocation. Does it apply for everyone? No. Some retirees may need to invest for growth well into their 60s or 70s because their retirement savings are meager. There are retirement planners who actually favor aggressive growth investing for life, arguing that the rewards outweigh the risks at any age.

#4. The way most people invest is the way you should invest. Again, just as there is no typical retirement, there is no typical asset allocation strategy or investment that works for everyone. Your time horizon, your risk tolerance, and your current retirement nest egg represent just three of the variables to consider when you evaluate whether you should or should not enter into a particular investment.

#5. Going Roth is a no-brainer. Not necessarily. If you are mulling a Roth IRA or Roth 401(k) conversion, the big question is whether the tax savings in the end will be worth the tax you will pay on the conversion today. The younger you are – roughly speaking – the greater the possibility the answer will be “yes”, as your highest-earning years are likely in the future. If you are older and at or near your peak earning potential, the conversion may not be worth it at all.

#6. A lump sum payout represents a good deal. Some corporations are offering current and/or former workers a choice of receiving pension plan assets in a lump sum payout instead of periodic payments. They aren’t doing this out of generosity; they are doing it because actuaries have advised them to lessen their retirement obligations to loyal employees. For many pension plan participants, electing not to take the lump sum and sticking with the lifelong periodic payments may make more sense in the long run. The question is, can the retiree invest the lump sum in such a way that might produce more money over the long run, or not? The lump sum payout does offer liquidity and flexibility that the periodic payments don’t, but there are few things as economically reassuring as predictable, recurring retirement income. Longevity is another factor in this decision.

#7. Living it up in your 60s won’t hurt you in your 80s. Some couples withdraw much more than they should from their savings in the early years of retirement. After a few years, they notice a drawdown happening – their portfolio isn’t returning enough to replenish their retirement nest egg, and so the fear of outliving their money grows. This is a good argument for living beneath your means while still carefully planning and budgeting some “epic adventures” along the way.

Your retirement plan should be created and periodically revised with an understanding of the unique circumstances of your life and your unique financial objectives. There is no such thing as generic retirement planning, and that is because none of us will have generic retirements. The bottom line: What makes financial sense for some baby boomers may not make sense for you.

Age: 55
People who leave their job for one reason or other can elect to take funds from their 401 (k) without penalty if they are age 55 or older. This “separation from service” clause comes along with a requirement to pay income taxes on the funds, but rolling funds over into another retirement plan is often allowed, keeping the tax man away from the door for a longer period.

Age: 59 ½
Hallelujah! At age 59 1/2, savers can withdraw funds from a retirement account without incurring penalties. Income taxes will be due on withdrawn funds from most of these retirement accounts.

Age: 62
Although it may not be the best option, people — other than those who are disabled — may begin to collect Social Security payments. Benefits will be roughly 25% less than if they had waited until full retirement age. For some, the income may be a lifesaver.

Age: 65
To begin receiving Medicare benefits, those who aren’t already receiving Social Security should apply for Medicare three months before their 65th birthday. A visit to a local Social Security office will provide additional help.

Age: 66-67
This is the age people can now qualify for full Social Security benefits, called Full Retirement Age (FRA) or Normal Retirement Age (NRA). The precise age depends upon the year in which a person was born. These benefits can come to recipients whether they are still on the job or not. Some people elect to delay filing for these benefits to receive approximately 8% increase each year they wait from their FRA until the age of 70.

Age: 70 ½
At age 70 1/2, it is mandatory that people begin withdrawing from their tax-advantaged retirement accounts. Special considerations apply for people who are still working, and different rules apply for those with Roth IRA accounts. If you don’t take out the required minimum amount the IRS will assess a 50% penalty on the amount that should have been withdrawn.

The bottom line is this: each financial, retirement, and investment decision usually has a tax ramification. Please consult with your trusted advisors before making a choice that could squander your hard earned money.

The passing of a loved one irrevocably alters family life. After a death, there is so much to attend to that addressing financial matters related to a family member’s passing may be put on hold. This should be done, though, and it is better to do it sooner rather than later. Here, then, is a list of what commonly needs to be looked after.

Request copies of the death certificate. Depending on where you live, you have two or three places to turn to for this document. You can phone, email or personally visit the office of the county recorder (or county clerk, as the term may be). You can alternately contact your state’s vital records department (sometimes called the state registrar or department of health), though it may take a little longer to get the document this way. In addition, some large and mid-sized cities maintain their own registrars of births and deaths.

Call advisors, executors & business partners as applicable. The deceased’s lawyer and CPA should be quickly notified, along with any business partners and the executor of his or her estate. You must have a say in the decision-making that follows. The goals of protecting family assets, carrying out your loved one’s bequests, and determining the next steps for a business will follow.

Call your loved one’s current or former employer(s). Notify them even if he or she left the work force years ago, as retirement savings or pension payments may be involved. As the conversation develops, it is perfectly appropriate to ask about pertinent financial matters – say, 401(k) or 403(b) savings that will be inherited by a beneficiary or what will happen to unused vacation time and/or unpaid bonuses.

Funds amassed in a qualified retirement plan sponsored by an employer (or an IRA, for that matter) commonly go to the primary beneficiary who has been named on the most recent beneficiary form filled out by the account owner. That sounds simple enough – but certain rules and regulations can make things complicated.

As a general rule, if the late 401(k) or 403(b) account owner was your spouse, then you are the presumed beneficiary of the 401(k) or 403(b) assets. Under the Employee Retirement Income Security Act (ERISA), workplace retirement plans are directed to abide by this guideline. If someone else has been named as the primary beneficiary of the account with your consent, then the assets will go that person.

If the late 401(k) or 403(b) account owner was single, the assets in the account will go to whoever is designated as the primary beneficiary. The beneficiary designation will override any wishes stated in a will (for the record, the Supreme Court ruled so in 2009).

To arrange and confirm the transfer or distribution of such assets, the beneficiary form must be found. If you can’t locate it, the employer and/or the financial firm overseeing the retirement plan should provide access to a copy. The financial firm should ask you to supply:

*A certified copy of the account owner’s death certificate

*A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)

If the named beneficiary of the retirement plan assets is a minor, his or her birth certificate will be requested. If the named beneficiary is a trust, the financial firm will want to see a W-9 form and a copy of the trust agreement.

As to what to do with the retirement plan assets, there are really only three courses of action: you can a) transfer the assets into an IRA, b) transfer them into an IRA you own if the account owner was your spouse, or c) take the assets as a lump sum and pay the resulting income tax on that money, with the possibility of moving into a higher tax bracket.

The value of these assets will be included in the estate of the deceased, unless the named beneficiary is a spouse or a charity.

If you have been widowed, call Social Security. If you already receive benefits, you may now be eligible for greater benefits.

If your spouse received Social Security and you did not, you may now qualify for survivors benefits – and you should let Social Security know as soon as possible, as these benefits may be paid out relative to your application date rather than the date of your loved one’s death.

If this is the case, you may apply for survivors benefits by phone or by visiting a Social Security office. You will need to have some extensive paperwork on hand, specifically:

*Proof of the death (death certificate, funeral home documentation)

*Your late spouse’s Social Security #

*His/her most recent W-2 forms or federal self-employment tax return

*Your own Social Security # & birth certificate

*Social Security #s & birth certificates of any dependent children

*Your marriage certificate or divorce papers, as relevant

*The name of your bank & the number of your bank account for direct deposit purposes

If you have reached full retirement age, you will likely get 100% of the basic benefit amount that your late spouse was receiving. If you are in your sixties but haven’t yet reached full retirement age, you may receive anywhere from 71-99% of that amount. If you have a child younger than 16, you will get 75% of your late spouse’s basic benefit amount and so will your child.

Call the insurance company. Assuming your loved one had some form of life insurance, contact the policyholder services department of that insurer and confirm the steps for claiming the death benefit. A claimant’s statement will have to be filled out, signed and presented to the insurance company (one for each named beneficiary of the policy), and a certified copy of the death certificate must be attached to said statement(s). Some insurers also want you to fill out a W-9 form, which tells the IRS about any interest paid on the value of the policy.

Death benefits are generally paid out within days of a claim. Presumably, they will be paid out in a lump sum. If that is the case, they won’t be taxable. Occasionally, insurers will allow the beneficiary to receive the payout as a stream of monthly income.

It isn’t unusual for people to own multiple life insurance policies. The AARP, AAA and myriad banks and non-profits market group life coverage to members/customers, and mortgage lenders and credit issuers offer forms of life insurance for borrowers. Tracking all of this coverage down is the problem, and canceled checks and bank records don’t always provide ready clues. Not surprisingly, companies have appeared that will help you search for obscure life insurance policies (for a fee, of course), and you should be able to locate these businesses through your state insurance department.

If the family member was a veteran, call the VA. Your family may be entitled to funeral and burial benefits. In addition, the Veterans Administration offers Death Pensions and Aid & Attendance and Housebound Pensions to lower-income widows of deceased wartime veterans and their unmarried children.

These pensions are needs-based. To be eligible for the Death Pension, a widow or child’s “countable” income must fall below a certain yearly limit set by Congress. (A “child” as old as 22 may be eligible for the Death Pension.) The deceased veteran must not have received a dishonorable discharge, and he or she must have served 90 or more days of active duty, at least 1 day of it during wartime. If he or she entered active duty after September 7, 1980, then in most cases 24 months or more of active duty service are necessary for a Death Pension to eventually be paid. The Aid & Attendance and Housebound Pensions provide some recurring income to pay for licensed home health aide or homemaker services.

It is wise to contact a Veterans Services Officer before you file such a pension claim, as he or she can be a big help during the process. You can find a VSO through your state veterans’ affairs department of or through the VFW, the Order of the Purple Heart, the American Legion or the non-profit National Veterans Foundation.

A final individual income tax return may be required for the deceased. You or your tax advisor should consult IRS Publication 17 for more detail. Also, search for “Topic 356 – Decedents” on the IRS website. Deductible expenses paid by the deceased before death can generally be claimed as deductions on such a return.

If you have been widowed, consider the future. In the coming days or weeks, you should arrange a meeting to review your retirement planning strategy, and your will, beneficiary designations and estate plan may also need to be updated. The passing of your spouse may necessitate a new executor for your own estate. Any durable powers of attorney may also need to be revised.

According to Money magazine, if you had invested $10,000 in a money-market account 20 years ago, you’d have almost $19,000 today. That’s a safe bet, but not a tremendous amount of growth. Avoiding retirement strategies that involve stock investment can drastically affect your standard of living upon retirement. On the other hand, no one can give you 100 percent assurance that stock investments will flourish. How can you strike a balance? Consider the following tips.

• Keep it simple. Trying to predict the unpredictable will lead to disappointment. Those who trade often and constantly analyze irrelevant data points will experience unpleasant surprises. Instead, keep things simple. Look for economically stable companies or a broadly based index fund, and invest with a long-term goal in mind. No stock investment is guaranteed, but your odds of success are certainly increased
• Be realistic. Set up your stock portfolio or retirement investment plan in a way that respects that risk is involved, but recognizes that higher gains are also possible. Stocks are able to generate higher returns because of the risk involved. If you remove the risk, you also remove the potential for a higher yield. Balance your feelings of distrust with a realistic outlook.
• Offset risk by diversifying. Regardless of what kind of investing you are doing, placing all your eggs in one basket is never a good idea. Invest a portion of your savings in stocks with the balance in bonds and cash. Diversification also applies to your stock investments themselves. Get a good mix of investments based on your risk tolerance. Consider large cap, mid cap, and small cap funds that are both growth and value oriented.  If you are young, decades away from retirement, you can afford a riskier portfolio more heavily weighted to stocks. As you near retirement, you may want to decrease your stock exposure and the overall risk of your entire portfolio.
• Invest in different industries and countries. Having a variety of industries in your portfolio helps to insulate you from disaster. When one industry tanks, you have others to make up the difference. Also, invest in different countries to reduce risk.  For example, my Private Clients have exposure to nearly 100 different countries by investing in only two different mutual funds.
• Get help. A good financial advisor is a valuable asset. Be wary of anyone who promises a fool-proof stock investment. No such thing exists. Look for someone who will speak openly, make wise suggestions and respect your risk tolerance. Do your research about the firm and don’t be afraid to ask for references.

So for 2013, the average monthly Social Security payment going to a single retiree is $1,261 ($21 larger than last year). The average retired couple gets $2,048 per month in 2013 (a $34 monthly increase). A single retiree claiming benefits at the full retirement age of 66 this year could get a maximum monthly Social Security payment of $2,533.
Of course, COLAs have also occurred to Medicare premiums and the payroll tax ceiling for employees.

However, Medicare premiums are eating into that COLA. The good news for 2013 is that Part B premiums didn’t rise as much as some analysts expected. Medicare’s trustees, for example, anticipated a $9 monthly increase in these premiums. Instead, the increase was slightly more than $5. Part B premiums are now $104.90 per month, as opposed to $99.90 in 2012. (The annual Part B deductible is $7 greater for 2013 at $147, and the Part A deductible is $28 greater at $1,184.)

So how much does the rise in Part B premiums reduce the 2013 Social Security COLA? If you receive S2,000 a month in Social Security benefits, your effective COLA for 2013 is 1.45% ($29 a month more). If you get $1,000 of Social Security benefits each month, your net COLA is actually 1.2% ($12 a month more).

Few Social Security recipients have annual ordinary incomes in excess of $85,000 (single filers) or $170,000 (joint filers). Unfortunately, those that do will see their total Part B monthly premiums rise anywhere from $147-336 a month thanks to surcharges (and that isn’t counting surcharges paid on Part D prescription drug plans).

Social Security’s retirement earnings test amounts have also risen. If you receive Social Security benefits and you will be younger than full retirement age at the end of 2013, $1 of your benefits will be withheld for every $2 that you earn above $15,120 (the 2012 limit was $14,640).

If you receive Social Security benefits and reach full retirement age during 2013, $1 of your benefits will be withheld for every $3 that you earn above $40,080 – but that restriction applies only to earnings in the months prior to attaining full retirement age. (The applicable 2012 threshold was $38,880.) There is no limit on earnings starting the month an individual attains full retirement age.

As always, part of your Social Security benefits may be taxed. This may happen if you exceed the program’s “combined income” threshold. (Combined income = adjusted gross income + non-taxable interest + 50% of Social Security benefits.)

If you are a single filer with a combined income between $25,000-34,000, you may have to pay federal income tax on up to 50% of your Social Security benefits this year. That also goes for joint filers with combined incomes of $32,000-44,000.

If you are a single filer with a combined income of more than $34,000, you may have to pay federal income tax on up to 85% of your 2013 Social Security benefits. Likewise for joint filers whose combined incomes top $44,000.

Those married and filing separately will “probably” have their Social Security benefits taxed in 2013, according to the program’s website.

The Social Security wage base is 3.3% higher for 2013. In 2012, the federal government levied payroll tax on the first $110,100 of employee income. In 2013, individual wages up until $113,700 are subject to the tax. The payroll tax for employees is also back to 6.2% this year. So an individual worker could pay as much as $7,049.40 in Social Security taxes in 2013 as opposed to a maximum of $4,624.20 in 2012.

How will the sequester cuts affect Social Security? Basically, they won’t. There will be no reduction in Social Security, Supplemental Security Income, Veterans Affairs or SNAP benefits under such circumstances. However, the Social Security Administration may suffer budget cuts that result in reduced hours (or closed doors) at its offices and an even longer wait to process disability claims. The sequester cuts will not affect Medicare or Medicaid benefits either, though Medicare payments to doctors face a 2% cut.

What about Social Security’s projected long-range shortfall? Social Security projects that it can tap its surplus of roughly $2.7 trillion to pay 100% of scheduled retirement benefits through 2032. Yet in 2010, it began paying out more than it took in, a condition that may last for decades thanks to the aging of the baby boomer demographic. Because of this reality, Social Security’s trustees have forecast a $623 billion deficit for 2033, expanding to $1 trillion by 2045 and almost $7 trillion by 2086.

How does America fix that? The simple fix many legislators have suggested is to hike the full retirement age to 70 from 67. If that happened now, the Congressional Budget Office says the program could keep about 13% more money each year. Of course, the social and economic effects of this could be devastating for many retirees.

The White House fiscal commission has proposed raising the FICA cap – that is, the payroll tax cap would gradually increase between now and 2050 so that 90% of wages earned in America would be subject to Social Security tax by the middle of the century. (This is how it used to be.) Under this plan, the taxable maximum would be $190,000 by 2020.

Another fix that has been proposed is indexing Social Security COLAs to price growth instead of average wage growth – that is, to “chained” CPI rather than the Consumer Price Index. Rep. Paul Ryan (R-WI) mentioned the idea in his controversial “Path to Prosperity” plan (the so-called “Ryan roadmap”) late in the 2000s. The Business Roundtable, a coalition of 210 CEOs of major American companies, has also pitched the idea. Detractors note that linking COLAs to chained CPI means lower COLAs and a marked reduction in Social Security benefits especially affecting women.

The conservative Heritage Foundation recently advanced the idea of cutting Social Security benefits for the richest 9% of retirees, offering a $10,000 tax exemption for seniors who work past Social Security’s full retirement age, and protecting all Social Security income from taxation.

Other pundits want to see retirement planning left solely to individuals. They cite what Chile did in the early 1980s: it replaced its federal pension program with a system of privately managed personal retirement investment accounts, allowing participants to set their own contribution levels, risk tolerance and retirement date. The effort yielded better than a 9.2% compounded annual return across its first 30 years.

Several fixes were suggested in a 2010 report issued by the U.S. Senate Special Committee on Aging, including: 1) a 3% cut in benefits, 2) raising the payroll tax to 7.3%, 3) hiking the full retirement age to 68 or older, 4) increasing the Social Security averaging period that determines SSI, 5) reducing the typical yearly COLA by 1% or .5%, 6) reducing spousal benefits, 7) investing some of Social Security’s trust funds in equities, 8) directing some estate tax revenues into Social Security’s trust fund.
Perhaps a fix lies somewhere within these proposals; unmodified or altered, alone or in combination.

How much retirement income do you have these days? With Social Security’s future still a question mark, you may be thinking about where your retirement income will come from in the years ahead. A chat with the financial professional you know and trust may lead to some ideas.

While the IRS has occasionally fixed taxpayer mistakes in the past for taxpayer benefit (as was the case when some filers ignored the Making Work Pay Credit), you can’t count on such benevolence. As a reminder, here are some potential tax breaks that often go unnoticed – and this is by no means the whole list.

Expenses related to a job search. Did you find a new job in the same line of work in 2012? If you itemize, you can deduct the job-hunting costs as miscellaneous expenses. The deductions can’t surpass 2% of your adjusted gross income. Even if you didn’t land a new job in 2012, you can still write off qualified job search expenses. Many expenses qualify: overnight lodging, mileage, cab fares, resume printing, headhunter fees and more. Didn’t keep track of these expenses? You and your CPA can estimate them. If your new job prompted you to relocate 50 or more miles from your previous residence in 2012, you can take a deduction for job-related moving expenses even if you don’t itemize.

Home office expenses. Do you work from home? If so, first figure out what percentage of the square footage in your house is used for work-related activities. (Bathrooms and other “break areas” can count in the calculation.) If you use 15% of your home’s square footage for business, then 15% of your homeowners insurance, home maintenance costs, utility bills, ISP bills, property tax and mortgage/rent may be deducted.

Health insurance & Medicare costs. About 7% of us pay health coverage costs out of pocket. If you are in that 7%, you may write off 100% of your premiums as an adjustment to your business income per the Small Business Jobs Act of 2010. That write-off privilege extends to you, your spouse and 100% of your dependents.

Some small business owners have qualified for Medicare. If you are one of them, and you and/or your spouse aren’t eligible for coverage under an employer-subsidized health plan, then you may deduct premiums paid for Medicare Part B, Medicare Part D and Medigap policies. You don’t have to itemize to get this deduction, and the 7.5%-of-AGI test for itemized medical costs isn’t relevant to this.

State sales taxes. If you live in a state that collects no income tax from its residents, you have the option to deduct state sales taxes paid in 2012 per the fiscal cliff bill passed into law on January 2.

Student loan interest paid by parents. Did you happen to make student loan payments on behalf of your son or daughter in 2012? If so (and if you can’t claim your son or daughter as a dependent), that child may be able to write off up to $2,500 of student-loan interest. Itemizing the deduction isn’t necessary.

Education & training expenses. Did you take any classes related to your career in 2012? How about courses that added value to your business or potentially increased your employability? You can deduct the tuition paid and the related textbook and travel costs. Even certain periodical subscriptions may qualify for such deductions.

Eating out on business. The cost of a business lunch, breakfast or dinner – or a lunch, breakfast or dinner associated with business development – qualifies for an itemized deduction.

Those small charitable contributions. We all seem to make out-of-pocket charitable donations, and we can fully deduct them (although few of us ask for receipts needed to itemize them). However, we can also itemize expenses incurred in the course of charitable work (i.e., volunteering at a toy drive, soup kitchen, relief effort, etc.) and mileage accumulated in such efforts ($0.14 per mile for 2012, and tolls and parking fees qualify as well).

Superstorm Sandy losses. The IRS allows filers living in federally declared disaster areas to file casualty claims for the year in which the disaster occurred, and the flexibility to amend the previous year’s return. This means that you can deduct 2012 casualty losses on either your 2011 or 2012 federal tax return.

Armed forces reserve travel expenses. Are you a reservist or a member of the National Guard? Did you travel more than 100 miles from home and spend one or more nights away from home to drill or attend meetings? If that is the case, you may write off 100% of related lodging costs and 50% of meal costs  and take a 2012 mileage deduction ($0.555 per mile plus tolls and parking fees).

Estate tax on income in respect of a decedent. Have you inherited an IRA? Was the estate of the original IRA owner large enough to be subject to federal estate tax? If so, you have the option to claim a federal income tax write-off for the amount of the estate tax paid on those inherited IRA assets. If you inherited a $100,000 IRA that was part of the original IRA owner’s taxable estate and thereby hit with $35,000 in death taxes, you can deduct that $35,000 on Schedule A as you withdraw that $100,000 from the inherited IRA, $17,500 on Schedule A as you withdraw $50,000 from the inherited IRA, and so on. If you withdrew such inherited assets in 2012, you have the opportunity to claim the appropriate deduction for the 2012 tax year.

And now, some opportunities for quasi-deductions that often go overlooked…

The child care credit. If you paid for child care while you worked in 2012, you can qualify for a tax credit worth 20-35% of that amount. (The child, or children, must be no older than 12.) Tax credits are superior to tax deductions, as they cut your tax bill dollar-for-dollar.

Parents as dependents. If you have parents whose taxable incomes are underneath the $3,800 personal exemption for 2012 and you pay more than half of their support, they might qualify as dependents on your federal return even if they live at a different address.

Filing status shifts. Are you a single filer? Do you have a relative or one or more children who qualifies as a dependent? If so, you could change your filing status to head of household, which could save you some tax dollars.

Reinvested dividends. If your mutual fund dividends are routinely used to purchase further shares, don’t forget that this incrementally increases your tax basis in the fund. If you do forget to include the reinvested dividends in your basis, you leave yourself open for a double hit – your dividends will be taxed once at payout and immediate reinvestment, and then taxed again at some future point when they are counted as proceeds of sale. Remember that as your basis in the fund grows, the taxable capital gain when you redeem shares will be reduced. (Or if the fund is a loser, the tax-saving loss is increased.)

As a precaution, check with your tax professional before claiming the above deductions on your federal income tax return.

Your choices may need to change with the times. When did you open your first IRA? When did you buy your life insurance policy? Was it back in the Eighties? Are you still living in the same home and working at the same job as you did back then? Have your priorities changed a bit – perhaps more than a bit?

While your beneficiary choices may seem obvious and rock-solid when you initially make them, time has a way of altering things. In a stretch of five or ten years, some major changes can occur in your life – and they may warrant changes in your beneficiary decisions.

In fact, you might want to review them annually. Here’s why: companies frequently change custodians when it comes to retirement plans and insurance policies. When a new custodian comes on board, a beneficiary designation can get lost in the paper shuffle. (It has happened.) If you don’t have a designated beneficiary on your 401(k), the assets may go to the “default” beneficiary when you pass away, which might throw a wrench into your estate planning.

How your choices affect your loved ones. The beneficiary of your IRA, annuity, 401(k) or life insurance policy may be your spouse, your child, maybe another loved one or maybe even an institution. Naming a beneficiary helps to keep these assets out of probate when you pass away.

Beneficiary designations commonly take priority over bequests made in a will or living trust. For example, if you long ago named a son or daughter who is now estranged from you as the beneficiary of your life insurance policy, he or she is in line to receive the death benefit when you die, regardless of what your will states. Beneficiary designations allow life insurance proceeds to transfer automatically to heirs; these assets do not have go through probate.

You may have even chosen the “smartest financial mind” in your family as your beneficiary, thinking that he or she has the knowledge to carry out your financial wishes in the event of your death. But what if this person passes away before you do? What if you change your mind about the way you want your assets distributed, and are unable to communicate your intentions in time? And what if he or she inherits tax problems as a result of receiving your assets? (See below.)

How your choices affect your estate. Virtually any inheritance carries a tax consequence. (Of course, through careful estate planning, you can try to defer or even eliminate that consequence.)

If you are simply naming your spouse as your beneficiary, the tax consequences are less thorny. Assets you inherit from your spouse aren’t subject to estate tax, as long as you are a U.S. citizen.

When the beneficiary isn’t your spouse, things get a little more complicated for your estate, and for your beneficiary’s estate. If you name, for example, your son or your sister as the beneficiary of your retirement plan assets, the amount of those assets will be included in the value of your taxable estate. (This might mean a higher estate tax bill for your heirs.) And the problem will persist: when your non-spouse beneficiary inherits those retirement plan assets, those assets become part of his or her taxable estate, and his or her heirs might face higher estate taxes. Your non-spouse heir might also have to take required income distributions from that retirement plan someday, and pay the required taxes on that income.

If you designate a charity or other 501(c)(3) non-profit organization as a beneficiary, the assets involved can pass to the charity without being taxed, and your estate can qualify for a charitable deduction.

Are your beneficiary designations up to date? Don’t assume. Don’t guess. Make sure your assets are set to transfer to the people or institutions you prefer. Let’s check up and make sure your beneficiary choices make sense for the future. Just give me a call or send me an e-mail – I’m happy to help you.

On January 17, interest rates on 30-year FRMs dropped to 3.38%. This is down 0.5%  from a year ago at this time. Many have already taken advantage; the Mortgage Bankers Association reported a 15.2% increase in mortgage loan applications last week, while refinancing saw a 15% bump from the previous week. In fact, 82% of all applications were attempts to refinance.

With interest rates down across the board, it’s easy to see why homeowners still so low: Freddie Mac is reporting 15-year FRMs are down to 2.66%, while 5/1-year ARMs and 1-year ARMs were down to 2.67%. A year ago, the rates were 3.17%, 2.82%, and 2.76%, respectively.

Keep your eye on the big picture. While it might seem to your advantage to take your interest rate down a few percentage points, you need to know the answers to these three questions: 1) How much will you really save per month? 2) What are the lender points and fees? 3) How long will you be living in your current home?

For example: Knocking off a hundred dollars or more from your monthly payment might seem like a great idea, but how long are you planning to stay in your current home? As part of your agreement, your mortgage company could add a lender point (potentially thousands of dollars) and hundreds more in fees, making a refi short-sighted if there’s a new house on your horizon.

On the other hand, if you’re planning on staying in your home for several years, a refinance has the potential for big savings. If you’re moving to a 15-year loan from your 30-year loan (or vice-versa) or from an Adjustable-Rate Mortgage into a Fixed-Rate, a long-term homeowner has a different scenario to consider.

Rates won’t stay low forever. There’s no way to tell how long the trend will continue. An April 2010 headline in the New York Times proclaimed “Interest Rates Have Nowhere to Go but Up.” At that time, the average rate for a 30-year fixed mortgage was 5.31%. By the end of January 2012, the rate had fallen to 3.98%.

Where advantageous rates are concerned, what comes down usually goes up. While you do have time to get on board with these low rates, nobody knows when they might take off again.

Consider your next move carefully. Refinancing may be an option, but it’s always a good idea to be fully informed before making such an important financial decision. Work with a qualified mortgage specialist to determine your options for refinancing, and then speak to your financial consultant for the big picture on how such a move might affect your financial future.

Even as House GOP leaders announced plans Friday to approve a three-month increase in the federal debt limit, tension remains  – and that tension could  provoke a debt ceiling battle on Capitol Hill reminiscent of the impasse of 2011 later this year.

President Obama has again presented a debt ceiling hike as an essential move needed to pay America’s bills. House Republicans do not want to see a long-term increase in the debt limit without corresponding spending cuts, and some conservatives have characterized the Obama administration’s warnings as more posturing than fact.

A new plan to deal with critical fiscal deadlines. Sometime between February 15 and March 15, the federal government’s borrowing capacity will (in theory) be exhausted. March 1 now represents the start of the “sequester” – the automatic spending cuts detailed in the 2011 deficit accord. On March 27, a six-month measure passed to fund federal government operations expires.

Last week, House Majority Leader Eric Cantor (R-VA) unveiled a plan for a three-month extension of the debt limit, which would offer Congress additional time to pass a budget. Under the plan, Senators and Representatives would work without pay if Congress failed to approve a budget within the three-month window. Any further extension of the debt ceiling window would be contingent on Democrats approving significant federal spending cuts.

Will an extended battle be averted? Hopefully so – prolonging the debt ceiling fight into spring could do far more economic damage than that threatened by the fiscal cliff. In a recent Wall Street Journal commentary, Princeton University economist Alan Blinder envisioned a 6% GDP contraction “if the government hits the debt ceiling at full speed” in 2013, as a forced 26% cut in federal outlays would result. An outright drop off the fiscal cliff, in Blinder’s view, would have reduced U.S. growth by 4.5%.

A true default could invite a harsh recession – jobless benefits could be reduced or curtailed, and Social Security checks and pay to soldiers could even be delayed. Consumer spending could decrease along with federal tax revenues.

The risk of an outright default may be overblown. Addressing the media on January 14, the President seemed to hint that the government would prioritize interest payments on Treasuries over other debt obligations in a worst-case scenario. Some congressional Republicans have called for such prioritization in a crisis – that is, the Treasury simply making selective payments on what America owes first, with other debts to be addressed later. The question is, would that be enough to preclude another downgrade by the major credit ratings firms? (Beyond that question, there is an issue of legality: President Obama lacks a distinct legal authority to prioritize certain debt payments over others.)

Is the White House overstating the threat? Some conservatives believe so. As Cato Institute fellow Michael D. Tanner recently noted, the federal government will owe somewhere around $38.1 billion in interest payments between February 15 and March 15. If it doesn’t pay them, it will default. Almost unpublicized, however, is the federal government’s projected receipt of $277 billion in taxes and other revenue within that same interval.

That isn’t enough to fuel the $452 billion in federal spending stipulated between February 15 and March 15, but it would be enough to pay the interest on the debt and keep Medicare, Social Security and servicemember payments on track. About $500 billion in debt will mature between February 15 and March 15 – but the federal government routinely rolls over such debt rather than paying it off, swapping new debt for maturing debt.

Multiple solutions have been suggested. In addition to the GOP proposal, some “quick fixes” for the issue have been suggested, some bordering on the sensational.

House Minority Leader Nancy Pelosi (D-CA) would like to see the President invoke the 14th Amendment to the Constitution to raise the debt limit – specifically Section 4, which reads “The validity of the public debt of the United States…shall not be questioned.” The White House has rejected that idea.

Citing a clause in the Coinage Act of 1996, a Georgia lawyer named Carlos Mucha has proposed that the Treasury Secretary authorize the U.S. Mint to make a $1 trillion platinum coin which could be deposited at the Federal Reserve. Mucha claims that the Fed could credit the account of the U.S. government for that $1 trillion and solve the whole problem in one fell swoop. The Treasury has rejected the idea.

The GOP proposal announced on January 18 could be a step toward a bipartisan compromise on the debt limit – which hopefully will occur before summer arrives.

January is an ideal time to max out your annual IRA contribution. If you are in the habit of making a single annual contribution to your IRA rather than monthly or quarterly contributions, try to make the maximum contribution as early as you can in a year. More of your money should have an opportunity for tax-deferred growth, not less. While you can delay making your 2013 IRA contribution until April 15, 2014, there is no advantage in waiting – you will stunt the compounding potential of those assets, and time is your friend here.

Do you own multiple IRAs? If you do, remember that your total IRA contributions for 2013 cannot exceed the relevant $5,500/$6,500 contribution limit.

Your IRA contribution may be tax-deductible. Are you a single filer or a head of household? If you contribute to both a workplace retirement plan and a traditional IRA in 2013, you will be able to deduct the full amount of your IRA contribution if your modified adjusted gross income is $59,000 or less. A partial deduction is available to such filers with MAGI between $59,001-69,000.

The 2013 phase-outs are higher for married couples filing jointly. If the spouse making the IRA contribution also participates in a workplace retirement plan, the traditional IRA contribution is fully deductible if the couple’s MAGI is $95,000 or less. A partial deduction is available if the couple’s MAGI is between $95,001-115,000.

If the spouse making a 2013 IRA contribution doesn’t participate in a workplace retirement plan but the other spouse does, the IRA contribution may be wholly deducted if the couple’s MAGI is $178,000 or less. A partial deduction can be had if the couple’s MAGI is between $178,001-188,000. (The formula for calculating reduced IRA contribution amounts is found IRS Publication 590.)

You cannot contribute to a traditional IRA in the year in which you turn 70½ or in subsequent years. You can contribute to a Roth IRA at any age, assuming your income permits it.

What are the income caps on Roth IRA contributions this year? Single filers and heads of household can make a full Roth IRA contribution for 2013 if their MAGI is less than $112,000; the phase-out range is from $112,000-127,000. For joint filers, the MAGI phase-out occurs at $178,000-188,000 in 2013; couples with MAGI of less than $178,000 can make a full contribution. (To figure reduced contribution amounts, see Publication 590.) Those who can’t contribute to a Roth IRA due to income limits do have the option of converting a traditional IRA to a Roth.

As a reminder, Roth IRA contributions aren’t tax-deductible – that is the price you pay today for the possibility of tax-free IRA withdrawals tomorrow.

Can you put money in an IRA even if you don’t work? There is a provision for that. Generally speaking, you need to have taxable earned income to make a Roth or traditional IRA contribution. The IRS defines taxable earned income as…

*Wages, salaries and tips.

*Union strike benefits.

*Long-term disability benefits received before minimum retirement age.

*Net earnings resulting from self-employment.

Also, you can’t put more in your IRA(s) than you earn in a given year. (For example, if you are 25 and your taxable earned income for 2013 amounts to $2,592, your IRA contributions for this year can’t exceed $2,592.)

However, a spousal IRA can be created to let a working spouse contribute to a nonworking spouse’s retirement savings. That working spouse can make up to the maximum IRA contribution on behalf of the stay-at-home spouse (which does not affect the working spouse’s ability to contribute to his or her own IRA).

Married couples who file jointly can do this. The IRS rule is that you can contribute the maximum into this IRA for each spouse as long as the working spouse has income equal to both contributions. So if both spouses will be older than 50 at the end of 2013, the working spouse would have to earn taxable income of $13,000 or more to make two maximum IRA contributions ($12,000 if only one spouse is age 50 or older at the end of 2013, $11,000 if both spouses will be younger than 50 at the end of the year).

So, to sum up … make your 2013 IRA contribution as soon as you can, the larger the better.

1.  The deadline for your 2012 IRA contribution is April 15, 2013. For tax year 2012, you can contribute up to $5,000 to your Roth or traditional IRA. One exception: If you turned 50 in 2012, your Roth or traditional IRA contribution limit for 2012 is $6,000. You get 15½ months to make your IRA contribution for a given tax year. You can make your 2013 IRA contribution at any time until Monday, April 15, 2014.

Have you already made your IRA contributions? Hopefully, you contribute the maximum annually and make your contribution soon; the earlier that money is invested, the longer it can work for you.

Be sure to indicate the year of the IRA contribution on the check. This seems pretty basic, yet is too often overlooked. Write “2012 IRA contribution” or “2013 IRA contribution” or something equally simple and clear on your check (and include your account number on the check to help your IRA custodian). If you’re making your contribution electronically, be sure this gets communicated. If you don’t tell your IRA custodian what year the contribution is for, it will be accepted as an IRA contribution for the current year per IRS guidelines.

Avoid racing against the clock. If you wait until the last minute, you may feel safe mailing your 2012 IRA contribution check to your IRA custodian with an April 15, 2013 postmark. That feeling might be unwarranted. Postmark deadlines for prior-year contributions vary among IRA custodians, and sometimes checks that arrive after the deadline count as current-year contributions regardless of postmark. Why not save yourself the risk and mail your 2012 contribution in with plenty of time to spare?

2.  The recharacterization deadline for 2012 Roth IRA conversions is October 15. If you converted a traditional IRA to a Roth IRA last year and need to undo it for tax purposes, October 15 is the absolute deadline to “recharacterize” the Roth account. If you need to do this, please request a recharacterization with your IRA custodian well before October 15.

3.  The RMD deadline is April 1. If you turned 70½ in 2012, you have until April 1 of this year to take your first Required Minimum Distribution from your traditional IRA; that is, your first mandatory income withdrawal. Your IRA custodian should have notified you of this deadline at the end of January, and many IRA custodians will typically calculate your annual RMD for you and offer to send you a check for the amount. (If not, many of them have online calculators or similar tools that will help you figure out your RMD amount.) If you have a Roth IRA, you are never required to take an RMD (during your lifetime) and you can still keep contributing to it after age 70½. Keep the deadlines in mind; April will be here before you know it.

The Bush-era tax cuts will be preserved for at least 98% of taxpayers. Individuals with incomes of $400,000 or less and households with incomes of $450,000 or less will not see their federal income tax rates rise. The EGTRRA/JGTRRA cuts have been made permanent for such earners.

The wealthiest Americans are looking at a major income tax hike. The top marginal tax rate will rise 4.6% in 2013 to 39.6%. Individuals with more than $400,000 in taxable income and couples with more than $450,000 in taxable income will be affected. This is the first major income tax increase on the highest-earning taxpayers in 20 years.

Now when you take that 39.6% top rate and pair it with the oncoming 3.8% Medicare surtax, what is the impact for the wealthiest taxpayers in dollar terms? It is major. The non-partisan Tax Policy Center calculates that in 2013, households with incomes between $500,000 and $1 million should see their federal income taxes rise by an average of $14,812. What about households with incomes above $1 million? The TPC projects taxes rising an average of $170,341 for these couples and families this year.

Practically speaking, all working Americans will see taxes rise in 2013. The payroll tax holiday of the past two years officially ends with the new bill’s passage. In 2011 and 2012, employee payroll taxes were reduced by 2% as an economic stimulus – an idea that came from the White House. In 2013, the payroll tax rate returns to its old level and employees will pay 6.2% in Social Security taxes rather than 4.2%. This tax break saved a worker making $50,000 annually about $1,000 last year. Employee earnings up to $113,700 will be taxed.

Estate taxes now top out at 40%. Additionally, the individual estate tax exemption falls slightly to $5 million. Both of these changes are permanent.

The AMT has been patched – permanently. Congress no longer has to arrange an annual fix for the Alternative Minimum Tax that was never indexed to inflation. This patch is retroactive to 2012, of course.

The Pease provision & personal exemption phase-outs are back. As a result of the deal, 80% of itemized deductions will be eliminated in 2013 for individuals with adjusted gross incomes of more than $250,000 and couples with adjusted gross incomes of more than $300,000. That threshold is also where personal exemption phase-outs will start in 2013.

Dividends will not be taxed as ordinary income. Single filers with taxable incomes of more than $35,350 and joint filers with table incomes above $70,700 will see a top dividend tax rate of 15% this year. Dividends coming to individuals making more than $400,000 and households making more than $450,000 will return to the 20% level, 5% higher than they were in 2012. Investors in the 10% and 15% tax brackets will pay no taxes on dividends.

The top capital gains tax rate is now 20%. Wealthy investors paid a 15% tax on long-term capital gains and qualified dividends in 2012. That will rise 5% this year. Single filers making more than $400,000 and joint filers making more than $450,000 will face this tax hike. Those in the 25%, 28%, 33% and 35% federal tax brackets will pay 15%, and those in the 10% and 15% brackets will face no capital gains taxes.

Long-term unemployment benefits live on. They will be sustained through the end of 2013 for roughly 2 million people.

Another “doc fix” has been made. Drastic cuts in Medicare payments to physicians will be avoided for 2013 as a result of the new legislation.

The EITC, AOTC & Child Tax Credit will be extended through 2017. President Obama has long sought to preserve the $2,500 American Opportunity Tax Credit for college expenses, the Earned Income Tax Credit and the Child Tax Credit – and that will occur thanks to the fiscal cliff deal. The $250 deductions for teachers’ classroom expenses will also be extended into 2013.

50% bonus depreciation is preserved for 2013. The tax break that permits companies to accelerate depreciation schedules for major capital investments lives on for another year.

The R&E tax credit & wind production tax credit are both sustained. Both federal tax breaks are available again for 2013.

The charitable IRA rollover provision returns. You can practically hear the cheers ringing out at non-profits across the country: thanks to the fiscal cliff deal, people over age 70½ will again be permitted to make tax-free transfers from an IRA to a charity, university, or other qualified non-profit organization in 2013.

The “sequester” will be delayed 2 months. The automatic federal spending cuts that were set to occur January 2 will be postponed until March while Congress tries to craft a plan to replace them.

1) When is it time? If an elder is a) safe and content at home, b) in reasonably stable health, c) can draw on personal or family resources for in-home care, d) has a sufficient “rotation” of family or professional caregivers available so as not to exhaust loved ones, then there may be no compelling reason for that elder to enter a nursing home or assisted living facility.

If, on the other hand, an elder’s health notably worsens and caregiving strains your own health, relationships and/or resources, then the time may have arrived.

2) If it is time, is a nursing home really necessary? It may not be. Keep in mind that long term care insurance will often pay for home health aides, adult day care, and forms of at-home nursing. This is called respite care, and perhaps 10-15 hours of these services per week will do. Even without LTC coverage, this level of care may fit into your budget.

Trying to provide the equivalent of 24/7 nursing home care at home is much more expensive. Round-the-clock skilled nursing care delivered to a private residence can easily cost more than $100,000 a year.

3) Will an assisted living facility suffice? If an elder is ambulatory and reasonably healthy, it might. Assisted living (allowing an elder to have their own space plus quality care) costs much less than nursing home care, usually tens of thousands of dollars less annually. Most people pay for it using a combination of long term care insurance and private funds; in recent years, Medicaid has even begun to pick up the tab for select assisted living costs in some states.

4) Is an assisted living facility several steps above a nursing home? Its marketing will tell you so; truth be told, many assisted living facilities are comparatively brighter, more comfortable and cheaper than nursing homes.

Keep in mind, however: assisted-living facilities are not exactly remedies to the nursing home “problem.” Many of these facilities do not offer their residents 24/7 medical attention and costs may climb if your loved one needs or wants more than the basics in terms of care or comfort.

5) How do you fund nursing home care? According to Genworth’s 2012 Cost of Care Survey, the median yearly cost of nursing home residency is now about $75,000. How much of that cost will a long term care policy absorb? Well, the benefit is usually a fixed dollar amount per day; $150 is a common figure, with benefits available for three years. If the daily benefit is $150, it means that LTC coverage can pick up 70-80% of typical annual nursing home expenses.

Are insurers raising premiums for LTC policies? Yes, significantly. As Money Magazine notes, the average annual premium that a healthy 55-year-old paid for a policy with a 3-year, $150-a-day benefit, 90-day deductible and 5% compound inflation protection was $1,524 in 2007. In 2012, it was $2,269; 49% higher. Money also notes that three years of LTC coverage is sufficient for 92% of elders.

Is long term care insurance worth the cost, and the possibility that the benefits may go unused? It may be if you are in the middle class. A recent report from the Society of Actuaries expresses the belief that households with $2 million or more in assets may not need LTC coverage at all, while those with savings of less than $250,000 may get much of the help they need from Medicaid when the time comes.

6) What isn’t said? Nursing homes and assisted living facilities are not predisposed to tell you about the downsides to their communities. So what isn’t usually expressed on the tour or in the brochure?

First, let’s talk about nursing homes. Genworth’s 2012 survey notes that the national median price for the typical shared room at a nursing home is $200 per day. Imagine handling that without help from LTC insurance or Medicaid. (Medicare will only help you meet nursing home expenses for less than a month.)

The Centers for Disease Control and Prevention state that an elder is twice as likely to suffer a fall in a nursing home as he or she is in the community. In fact, the CDC says that the average nursing home patient suffers 2.6 falls per year and that physical restraints do nothing to reduce the risk. If you have ever visited a nursing home and noticed a preponderance of residents in wheelchairs, it may be a response to liability as much as disability. A corollary to this: if residents are discouraged from being ambulatory, their leg strength may quickly diminish.

If your parent or grandparent has known and trusted a family doctor for decades, there is a risk that the relationship may wane or end after a move to an eldercare facility. Nursing home residents are placed under the care of one or more staff physicians who more or less become their primary doctors.

The rules and regulations governing care at assisted living facilities can vary greatly among states and counties, and while nursing home ratings are relatively easy to find online, reviews of assisted living facilities are not.

It is worth noting that 82% of assisted living facilities are for-profit businesses; on average, they draw about 19% of their incomes from Medicaid. In contrast, 68% of nursing homes are non-profits, and about 70% of their revenues come from Medicaid recipients.

You may know someone whose parent or grandparent was asked to leave a nursing home or assisted living community. This circumstance isn’t all that rare, especially if an elder copes poorly with the advance of Alzheimer’s disease. If a resident is particularly difficult, the possibility of eviction may come up; in most states, an eldercare facility doesn’t need to go to court for this.

When the time comes, stay involved. Our lives are often busier than we want them to be, but our elders count on us to be visible and engaged in their lives after they enter assisted living facilities or nursing homes. Your vigilance and support can make a difference in the experience for the one you love.

1. Put tax refunds & tax savings to work. If you get a few hundred back from the IRS, that is not an insignificant sum. You could save it or you could invest it with the potential to compound that money. The same goes for the dollars you save as a result of tax credits or tax breaks.

2. Relocation. Ever thought about living where lifestyle costs are less? Moving to a cheaper part of the country might cost you a few thousand dollars, but the long-run savings could end up dwarfing that expense; you could free up thousands of dollars annually toward your retirement savings effort.

As an example, Zillow’s Q3 2012 Home Value Index showed the median home value in San Jose as $525,000 and the median home value at $356,100 in Boston. A San Jose resident could move to Reno (Q3 median home value: $145,700) and a Boston resident could move to Nashua (Q3 median home value: $186,300).

You could also downsize as you relocate; moving into a smaller residence could free up even more cash.

3. Rental income. While property management means occasional headaches even when a third party assumes the duty, a steady stream of income from a rental home or condo may give you another solid way to ramp up your savings efforts.

4. Redirecting some of your inheritance. If you receive any kind of wealth, think about assigning part of it to your retirement strategy. In fact, this is a good idea for any kind of sudden wealth you come into, whether it comes from a relative, a settlement, a casino, or simply your own talent and initiative.

5. Sell products or services, not simply your time. Most people sell their time for money. One of the characteristics of the wealthy is the entrepreneurial ability to sell products and services with a value indirectly related or unrelated to a time investment. Consider what products or services you could sell to make more money and build greater retirement savings, with the possibility of positively altering the way you work and live. The start-up costs of such a move may be less than you think.

6. Stay healthy. Hospitalization costs can be a real setback for retirement savers. Good health (indirectly) pays off as we age. Reasonable daily exercise and smart eating may help to reduce the risk of major hospital, drug, and therapy expenses between now and retirement.

7. Halt or modify some recurring discretionary expenses. Do you really need cable? Do you have to belong to the most opulent health club in town? Must you have season tickets? Fewer such expenses today can translate to additional money you can invest and save for your future.

8. Refrain from picking up your child’s college costs. If you started a college savings account long ago, that’s a different story; you have already dedicated money for this purpose. If you haven’t, remember that no one offers “retirement loans” or “retirement financial aid”. Your son or daughter may have a decade or longer to repay a college loan, and their incomes may rise significantly during that time. If you elect to pay some of their tuition or housing costs, you have comparatively fewer years to recover from the impact of those expenses. Encouraging self-reliance can lead to you retaining more of your savings for the third act of your life.

In the worst-case scenario, Congress argues and deadlocks. Tax hikes and roughly $109 billion in federal spending cuts take a bite out of GDP and another recession becomes a possibility.

There are other possibilities, however. The fiscal cliff may yet be averted, or at least we might back away from its edge. One of several scenarios might come to pass.

Scenario A: Congress buys time. Many analysts think this is exactly what will happen. Congress is in a lame-duck session. The option for legislators to “pass the buck” may prove tantalizing. So we could see a short-term, stopgap deal with the idea that the next session of Congress will tackle the problem later in 2013. The debt ceiling could be raised, and a “down payment” might be made on longer-term liabilities.

Scenario B: Congress can’t make a deal. This may not be so improbable; if you remember the “super committee” assigned to craft a deficit reduction plan in 2011, you will also remember that it didn’t accomplish the set task. In fact, we are facing the fiscal cliff because of that committee’s failure.

The “fiscal cliff” already amounts to Plan B. When Congress and the White House reached an accord to raise the debt ceiling back in August 2011, $1 trillion in federal spending cuts were greenlighted and Congress was told to find $1.2 trillion more to slash. As that didn’t happen, $1.2 trillion in automatic cuts are set to begin next year. So Congress would actually be following federal law if it did nothing to respond to the issue.

Doing nothing seems unsuitable, but there is the risk that history could repeat itself. Election outcomes may alter political assumptions and interfere with consensus. If it looks like we will go over the cliff in the waning days of 2012, there is a strong possibility that the incoming 113th Congress could vote quickly to reinstate select spending levels and tax breaks. That might mute some of the clamor from global financial markets.

Scenario C: Middle ground is reached. Some degree of compromise occurs that leaves no one particularly satisfied. Certain short-term provisions are phased out, such as the payroll tax holiday, the recent increases for small business expensing, and assorted tax credits and tax breaks for education. The Bush-era tax cuts are preserved (at least temporarily) for the middle class, but rates rise for those making $1 million or more per year. The clock turns back to 2009 with regard to estate taxes. The rich face higher taxes on capital gains and dividends. Perhaps some defense cuts are postponed.

Scenario D: The “Grand Bargain.” Congress and the White House boldly arrive at a something more than an incrementally enacted deficit reduction plan. They reach a “grand bargain,” a deal designed to cut the deficit by $4 trillion by the mid-2020s, after historic, long-range compromises are made to reach stability on assorted tax and spending issues. With a lame-duck Congress, this may be a longshot.

Scenario E: The “Down Payment.” Legislators could always tear a page from another playbook in trying to solve this problem. The Bipartisan Policy Center, for example, thinks a “grand bargain,” or anything approximating a real deal on the fiscal cliff, is unlikely given the short interval between the election and 2013. It recommends a “down payment” of deficit cuts that could be approved by a fast-tracked simple majority vote. If Congress didn’t take further steps to cut the deficit next year, then certain tax breaks would disappear and cuts would hit social welfare programs (excepting Social Security).

Whatever happens in Washington, this is a prime time to consider financial moves with the potential to lower your taxes and insulate your wealth. Explore the possibilities before 2013 arrives.

*Make a charitable gift before New Year’s Day. You can claim the deduction on your 2012 return, provided you use Schedule A. The paper trail is important here.

If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity in December but only end up gifting $500 before 2012 ends, you can only deduct $500.

Are you gifting appreciated securities? If you have owned them for more than a year, you will be in line to take a deduction for 100% of their fair market value and avoid capital gains tax that would have resulted from simply selling the stock, fund or bond and then donating those proceeds. (Of course, if your investment is a loser, then it might be better to sell it and donate the money so you can claim a loss on the sale and deduct a charitable contribution equivalent to the proceeds.)

Does the value of your gift exceed $250? It may, and if you gift that amount or larger to a qualified charitable organization, you will need a receipt or a detailed verification form from the charity. You also have to file Form 8283 when your total deduction for non-cash contributions or property in a year exceeds $500.

If you aren’t sure if an organization is eligible to receive charitable gifts, check it out at www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.

*Contribute more to your retirement plan. If you haven’t turned 70½ and you participate in a traditional (i.e., non-Roth) qualified retirement plan or have a traditional IRA, you can reduce your 2012 taxable income by the amount of your contribution. If you are self-employed and don’t have a solo 401(k), a SIMPLE plan or something similar, consider establishing and funding one before the end of the year. Also, keep in mind that your 2012 tax year contribution to an IRA or solo 401(k) may be made as late as April 15, 2013 (or October 15, 2013 if you file Form 4868).

In 2012, you can contribute up to $17,000 in a 401(k), 403(b) or profit-sharing plan, with a $5,500 catch-up contribution also allowed if you are age 50 or older. You can put up to $11,500 in a SIMPLE IRA in 2012, $14,000 if you are 50 or older.

*Make a capital purchase. If you buy assets for your business that have a useful life of more than one year – a truck, a computer, furniture, a rototiller, whatever – those purchases are commonly characterized as capital expenses. For 2012, the Section 179 deduction can be as much as $139,000 (although it is ultimately limited to your net taxable business income). First-year bonus depreciation is set at 50% for most purchases of new equipment and software in 2012. The way it looks now, the 2013 deductions may be much less generous.

*Open an HSA. If you work for yourself or have a very small business, you may pay for your own health coverage. By establishing and funding a Health Savings Account in 2012, you could make fully deductible HSA contributions of up to $3,100 (singles) or $6,250 (married couples). Catch-up contributions are allowed if you are 50 or older.

*Practice tax loss harvesting. You could sell underperforming stocks in your portfolio – enough to rack up at least $3,000 in capital losses. If it ends up that your total capital losses top all of your capital gains in 2012, you can deduct up to $3,000 of capital losses from your 2012 ordinary income. If you have over $3,000 in capital losses, the excess rolls over into 2013.

Are there other major moves that you should consider? Your to-do list might be long, for much financial change may occur in 2013…

*Pay attention to asset location. Here are two big reasons why tax efficiency should be a priority as 2012 leads into 2013:

Next year, dividend income is slated to be taxed as regular income. So tax on qualified stock dividends could nearly triple for the wealthiest Americans.

Capital gains taxes for high earners are scheduled to jump 33% in 2013. Long-term capital gains are now taxed at 15% for those in the highest four income brackets; that rate is supposed to rise to 20% next year.

*Can you contribute the maximum to your IRA on January 1? The rationale behind this is that the sooner you make your contribution, the more interest those assets will earn. If you haven’t made your 2012 IRA contribution, you still have until April 15, 2013 to do that.

In 2012 you can contribute up to $5,000 to a Roth or traditional IRA if you are age 49 or younger, and up to $6,000 if you are age 50 and older (though your MAGI may affect how much you can put into a Roth IRA).

What are the income limits on tax deductions for traditional IRA contributions? If you participate in a workplace retirement plan, the 2012 MAGI phase-out ranges are $58,000-68,000 for singles and heads of households and $92,000-112,000 for couples.

*Should you go Roth before 2013 gets here? We all know federal taxes are poised to rise next year, but one little detail isn’t getting enough publicity: the planned 3.8% Medicare surtax scheduled to hit single/joint filers with AGIs over $200,000/$250,000 will not apply to qualified payouts from Roth accounts.

MAGI phase-out limits affect Roth IRA contributions. In 2012, phase-outs kick in at $173,000 for joint filers and $110,000 for single filers. Should your MAGI prevent you from contributing to a Roth IRA at all, you still have a chance to contribute to a traditional IRA in 2012 and then roll those assets over into a Roth.

Consult a tax or financial professional before you make any IRA moves to see how it may affect your overall financial picture. If you have a large traditional IRA, the projected tax resulting from the conversion may make you think twice.

What else should you consider as 2012 turns into 2013? There are some other important things to note…

*Payroll taxes are slated to increase 2% next year. The payroll tax cut of 2011-12 has slim chance of extending into 2013. The maximum payroll tax paid by high earners is slated to be $7049.40 next year, $2,425 above 2012 levels. That isn’t just because Social Security taxes for employees are returning to the 6.2% level; it also reflects a 3.3% increase in the upper salary limit subject to the tax to $113,700.

*Review your withholding status. Aside from the presumed end of the payroll tax holiday, there are other reasons you may want to adjust your withholding status…

• You tend to pay a great deal of income tax each year.
• You tend to get a big federal tax refund each year.
• You recently married or divorced.
• A family member recently passed away.
• You have a new job at a much greater salary.
• You started a business venture or became self-employed.

*If you are retired and older than 70½, remember your RMD. Retirees over age 70½ must take Required Minimum Distributions from traditional IRAs and Roth 401(k)s and all employer-sponsored retirement plans by December 31, 2013. The IRS penalty for failing to take an RMD equals 50% of the RMD amount.

If you have turned or will turn 70½ in 2012, you can postpone your first IRA RMD until April 1, 2013. The downside of that is that you will have to take two IRA RMDs next year, both taxable events – you will have to make your 2012 tax year withdrawal by April 1, 2013 and your 2013 tax year withdrawal by December 31, 2013.

Plan your RMDs wisely. If you do so, you may end up limiting or avoiding possible taxes on your Social Security income. Some Social Security recipients don’t know about the ‘provisional income’ rule – if your modified AGI plus 50% of your Social Security benefits surpasses a certain level, then a portion of your Social Security benefits become taxable. For tax year 2012, Social Security benefits start to be taxed at provisional income levels of $32,000 for joint filers and $25,000 for single filers.

*Consider the tax impact of any 2012 transactions. Did you sell real property this year – or do you plan to before 2012 ends? Did you start a business? Are you thinking about exercising a stock option? Could any large commissions or bonuses come your way before January? Did you sell an investment held outside of a tax-deferred account? Any of this might significantly affect your 2012 taxes.

*Would it be worth making a 13th mortgage payment this year? If your house is underwater, there’s no sense in doing it – and you could also argue that the dollars might be better off invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January mortgage payment in December. If you have a fixed-rate loan, a lump sum payment can reduce the principal and the total interest paid on it by that much more.

*Are you marrying in 2013? If so, why not review the beneficiaries of your workplace retirement plan account, your IRA, and other assets? In light of your marriage, you may want to make changes to the relevant beneficiary forms. The same goes for your insurance coverage. If you will have a new last name in 2013, you will need a new Social Security card. Additionally, you and your spouse no doubt have individually particular retirement saving and investment strategies. Will they need to be revised or adjusted with marriage?

*Are you coming home from active duty? If so, go ahead and check the status of your credit, and the state of any tax and legal proceedings that might have been preempted by your orders. Make sure your employee health insurance is still there, and revoke any power of attorney you may have granted to another person.

Talk with a qualified financial or tax professional today. Vow to focus on being healthy and wealthy in the New Year.

The 2013 IRA contribution limit: $5,500. This is a $500 increase from 2012, and it applies to both Roth and traditional IRAs. The IRA catch-up contribution limit for those 50 and older remains $1,000.

The 2013 contribution limit for 401(k), 403(b), TSP & most 457 plans: $17,500. For the second year in a row, we see a $500 increase. The catch-up contribution limit on these plans for participants 50 and older remains $5,500.

The phase-out range on Roth IRA contributions has increased. It starts $5,000 higher in 2013 than in 2012 for married couples filing jointly ($178,000-$188,000) and $2,000 higher for single filers and heads of household ($112,000-$127,000).

The phase-out range on deductible contributions to traditional IRAs has risen. In 2013 it increases by $1,000 for single filers ($59,000-$69,000) and $3,000 for married couples filing jointly ($95,000-$115,000), provided the spouse making the contribution is covered by a workplace retirement plan. If not, the deduction is phased out if the couple’s income is between $178,000-$188,000 – up $5,000 from 2012.

The annual gift tax exclusion rises to $14,000 next year. The IRS has kept this at $13,000 for several years; no more. In 2013, a taxpayer can gift up to $14,000 each to as many different people as he or she wishes, tax-free.

You may be able to deduct a greater portion of LTCI premiums. For 2013, the deductible portion of eligible long term care insurance premiums that may be included as medical expenses on Schedule A rises. The new limits are $360 for taxpayers 40 or less, $680 for taxpayers aged 41-50, $1,360 for taxpayers aged 51-60, $3,640 for taxpayers aged 61-70, and $4,550 for taxpayers age 71 or older.

The kiddie tax exemption increases to $1,000. It was set at $950 in 2012.

The foreign earned income exclusion rises to $97,600. That is a $2,600 increase over 2012.

In addition to these 2013 IRS adjustments, Social Security recipients will see a 1.7% rise in their benefits next year.

Some key dates to remember. This fall and winter, there are three periods in which Medicare beneficiaries can either enroll or disenroll in forms of coverage:

* Now through December 7: Open enrollment period. This is when you can elect to leave Original Medicare (Parts A and B) for a Medicare Advantage Plan (Part C) and change your prescription drug coverage (Part D). You can also elect to get out of a Part C plan and go back to Parts A and B during this period.

* December 8: Annual enrollment period begins for 5-star plans. As you probably know, Part C and Part D plans are assigned ratings. Beginning December 8, 2012 and ending November 30, 2013, a window opens for you to enroll in a 5-star Part C or Part D plan. You can do this once per 365 days. How do you find the 5-star plans? Visitwww.medicare.gov/find-a-plan.

* January 1-February 14: Disenrollment period. If you join a Part C plan in late 2012 and want to reverse that decision, you can disenroll from that Medicare Advantage plan in this window of time and go back to Original Medicare with a stand-alone Prescription Drug Plan (Part D).

What should you look for in a Part C or Part D plan? Be sure to take a look at a few key factors.

* While premiums matter, overall plan expenses ultimately matter most; scrutinize the copays, the co-insurance and the yearly deductibles as well. Attractively low premiums might not tell you the whole story about the value of a Medicare Advantage plan.

* How inclusive is the plan network? Assuming the plan has one, does it include the hospitals you would choose and the physicians that now treat you?

* Regarding Part D, how wide-ranging is the prescription drug coverage? Look at the list of approved drugs (the formulary). If the drugs you want or need aren’t listed, you are probably going to have to open your wallet to pay for them. The frustrating thing about formularies is how they change; drugs on this year’s list may not always be on next year’s list.

* Every fall, Medicare plans mail out Annual Notice of Change (ANOC) letters to their plan members. Use this notice to determine if your current plan is still right for you and your medical care needs. If you didn’t receive such a letter in September, contact your plan.

Premiums are rising. A report from Avalere Health, a prominent healthcare advisory company, advises that some Medicare prescription drug plans will see premiums rise by as much as 23%. The report goes on to state that the jump can be attributed not to the Affordable Care Act, but market dynamics. Regardless of the reason, this turn of events underlines the wisdom in taking the opportunity to review your Medicare plans during the open enrollment period; a better rate could give you a lot more room to move, in terms of your day-to-day finances.

Is that conventional thinking flawed? It might be. It isn’t simply a matter of looking at the future; you may also want to look at the past.

What’s the price of playing not to lose? It could be significant – at least in terms of opportunity cost. At this moment, how many people really want to shift money into fixed-rate investments?

Obviously, bonds, CDs and money market accounts will always hold some appeal as they tout protection of principal. Aside from that sense of safety, how does a 1% or 2% return sound? As we enter Q4 2012, the highest-paying 5-year CDs yield less than 2%.

Who would want to be locked into these yields for five whole years when the Federal Reserve is going in for open-ended easing? With QE3, the Fed just opened a door to inflation – and it may have to leave it open for some time.

On October 1, Chicago Fed President Charles Evans told CNBC that the central bank will keep buying mortgages until unemployment falls below 7%. That might take a while: while the jobless rate fell to 7.8% in September, it was 8% or higher for the previous 42 months.

With the Fed and the European Central Bank flooding the global economy with cheap money, the tame inflation of the past few years may give way to something greater. Fixed-rate investments are great tools for diversifying a portfolio, but retirees and pre-retirees with significant assets in investments yielding 1-2% will start wincing if inflation gets back to 4-5%.

As interest rates are so low now, some conservative investors are thinking about adding riskier bonds to their portfolios. The central problem with that is that corporate bonds don’t act like Treasuries. Lower-quality bonds can have stock-like risks, and those risks become more evident when the stock market is slumping. Stocks are also more tax-efficient – bond interest is typically taxed as ordinary income whereas stock returns are taxed as capital gains.

Is the “glide path” strategy overrated? You may or may not have heard of this term; it refers to a gradual adjustment in asset allocation across an investor’s time horizon. With time, the asset allocation mix within the portfolio includes more fixed-income assets and fewer equities, becoming more conservative. (This is the whole idea behind target date funds.)

A recent article in Investment News questions the glide path approach.  Research Affiliates chairman (and former global equity strategist) Rob Arnott looked at a whopping 140 years of bond and stock market returns (1871-2011) and ran model scenarios using three different asset allocation approaches across 41 years of hypothetical retirement saving and investing. The findings?

**”Prudent Polly” saves $1,000 annually and practices “classic glide path investing”, gradually devoting more and more of her portfolio assets to bonds after age 40. This way, she winds up with an average portfolio of $124,460 at age 63 (with a $37,670 standard deviation across assorted 40-year windows).

**”Balanced Burt” also saves $1,000 annually, but he invests it in an unchanging 50/50 mix of equities and bonds across 41 years. He ends up with an average portfolio of $137,870 at age 63. In terms of deviation, his worst-case scenario, 10th percentile outcome and median outcome are all better than Polly’s.

**”Contrary Connie” saves $1,000 annually while  practicing the inverse of the classic glide path strategy – her portfolio tilts more and more toward stocks after age 40. She ends up with an average portfolio of $152,060 at age 63 and her worst-case, median and best-case scenarios all give her more retirement funds than Polly’s.

A recent CBS MoneyWatch article noted the risk-adjusted returns (i.e., annualized Sharpe ratios) of the equity premium (0.43), investment grade credit premium (0.07) and high-yield credit premium (0.21) from August 1998-June 2012. Stocks look good next to all that. (For that matter, who have predicted that the 10-year Treasury would someday have a negative real yield?)

As many people haven’t saved enough for retirement to begin with, they more or less have to stay in stocks or other forms of equity investment. Instead of shifting their focus from wealth accumulation to wealth preservation, they need to focus on both. Accepting more risk may be necessary as they seek suitable returns.

1. You may want to prioritize tax reduction. If the Bush-era tax cuts sunset, everyone will see higher taxes. The federal income tax brackets (10%, 15%, 25%, 28%, 33%, 35%) that we have known for the last nine years would be replaced by five higher ones (15%, 28%, 31%, 36%, 39.6%) come 2013.

2. High earners may want to watch their incomes. If your earned income for 2013 tops $200,000 – or exceeds $250,000, in the case of a couple – you may face two Medicare surtaxes. While the Medicare payroll tax on earned incomes above these levels is set to rise to 2.35% from the current 1.45%, the second surtax may prove to be the real annoyance: there is scheduled to be a 3.8% charge on net investment income for individuals and couples whose modified adjusted gross incomes surpass these levels.

Some fine points about this second surtax must be mentioned. It would actually be levied on the lesser of two amounts – either your net investment income or excess MAGI above the $200,000/$250,000 levels. Most investment income derived from material participation in a business activity would be exempt from the 3.8% surtax, along with tax-exempt interest income, tax-exempt gains realized from selling your home, retirement plan distributions and income that would already be subject to self-employed Social Security tax.

The bottom line is that a bonus, an IRA distribution, or a sizable capital gain may push your earned income above these thresholds – and it will be wise to consider the impact that would have.

3. You may have less take-home pay next year. Social Security taxes for paycheck employees are slated to return to the 6.2% level in 2013. They’ve been at 4.2% since the start of 2011. If you earn $75,000 during 2013, you will take home about $1,500 less of it than you would have in 2012. If you earn $50,000, we’re talking $1,000 less.

4. Any 2013 Social Security COLA may be minor. In 2012, the cost of living adjustment to Social Security benefits was 3.6%. Before that, Social Security recipients went three years without a COLA. As inflation is mild, whatever COLA is announced this fall in tandem with Medicare premium changes may not amount to much.

5. Next year, medical expense deductions may shrink. If you are thinking about delaying a procedure or surgery until 2013, remember that next year you may only get to deduct unreimbursed medical expenses that exceed 7.5% – rather than 10% – of your taxable income. (This is assuming you like to itemize deductions, of course.) If you are 65 or older, you get a bit of a break: you will still be able to deduct unreimbursed medical expenses up to10% of your taxable income on your federal return through 2016.

6. You may be able to find a better Medicare Advantage plan for 2013. The Affordable Care Act has altered the landscape for these plans (and their prescription drug coverage). Using Medicare’s Plan Finder (click on the “Find health & drug plans” link at Medicare.gov), you may discover similar or better coverage at lower premiums. The enrollment period for 2013 coverage runs from October 15 to December 7.

7. Those without work may find a safety net gone. Extended jobless benefits may disappear for the long-term unemployed at the start of 2013. Will Congress extend them once again? Possibly – but that isn’t a given.

8. The estate & gift tax exemptions may shrink significantly. The (unified) lifetime federal gift and estate tax exemption is currently set at $5.12 million – and it will drop to $1 million in 2013 if Congress stands pat. Federal gift tax and estate tax rates are also slated to max out at 55% in 2013, as opposed to 35% in 2012. Right now, an unused portion of a $5.12 million lifetime exemption is portable to a surviving spouse; in 2013, that portability is supposed to disappear.

Many analysts and economists think that Congress will eventually abide by President Obama’s wishes and take things back to 2009 instead of 2001 – that is, a $3.5 million estate tax exemption, a $1 million lifetime gift tax exemption, and a 45% maximum estate and gift tax rate.

Prepare for year-end drama … and for 2013. The last two months of 2012 will surely bring political theatre to Capitol Hill. As it unfolds, you may want to look ahead to next year and consider the impact that these potential changes could have on your financial life.

Unexpected? You might say so. You can’t predict how the market will behave. This summer, stocks are managing to advance despite lingering threats.

Shouldn’t Wall Street be more pessimistic? After all, the “fiscal cliff” is drawing closer, the risk of a crack in the eurozone hasn’t exactly faded, and the European Central Bank and the Federal Reserve have not yet boldly responded to disappointing economic signals. Did Wall Street just collectively dismiss all of this in recent weeks?

Few saw this rally coming. The prevailing opinion – at least in spring – was that stocks would limp along through the summer, possibly retreating in reaction to news from Europe and subpar U.S. indicators. That was essentially the story in 2010 and 2011. In 2010, the S&P saw an April-May selloff and didn’t recover until that November. In 2011, a May-June selloff preceded a disastrous July; it took until February 2012 for stocks to get back to where they had been ten months earlier.

This year, the S&P hit a peak in April and a valley in June – and just two months later, it returned to its YTD high.

What factors are buoying the market? ECB President Mario Draghi’s (vague) pledge to do whatever is necessary to support the euro has certainly calmed some nerves. Investors continue to anticipate that the Fed will ease in the near term. The real estate sector appears to be healing, even as other economic indicators show sluggishness.

Some analysts think that the market simply wants to move higher – bullish sentiment has prevailed, even with all this uncertainty. In fact, a few analysts wonder if this summer’s advance mirrors a longstanding pattern.

Will history repeat? While it is far too early to answer “yes” to that question, it is interesting to note some past tendencies of “mature” bull markets. According to research from Bespoke Investment Group, we are now in the ninth longest and ninth strongest bull market since 1928 (nearly 1,300 days old with 110% appreciation).

Mature bull markets witness corrections. In June, we more or less saw one – the S&P dropped 9.9% from its April high, actually 10.9% on an intraday basis. According to Bespoke, this was the twentieth bull market correction in the past 84 years. In the 19 previous corrections, the S&P took an average of 98 days to fully rebound from its low. This year, only 81 days were required.

So what happened once the S&P recaptured its highs after these corrections? The index rose during the following month in 84% of these instances, with the average gain in those 30 days being 2.1%. Stretch that window of time out to three months, and data shows the index advancing 65% of the time with an average gain of 1.3%. Six months after such a rebound, the S&P was higher 84% of the time with the average advance at 5.5%.

This data suggests that once a bull market is entrenched, a correction doesn’t shake the confidence of investors. There is still the perception of an upside.

A steepening VIX curve may be cause for concern. The CBOE VIX (the so-called “fear index” indicating expected volatility) fell below 14 in mid-August. This month, the VIX futures curve has shown a steepness not seen in several years, with VIX futures prices for October above 20 and in the vicinity of 25 for January. Some analysts wonder if complacency is about to give way to greater anxiety, since the VIX has shown longer-term volatility at a higher premium than short-term volatility.

Yesterday’s statistics don’t equal tomorrow’s reality; nobody knows what the market will do this fall and winter. What we do know is that this summer, stocks have nicely exceeded expectations.

There are warning signs of cybercrime. Watching out for them just might save you money and headaches. If you notice any of the following conditions, pay attention.

Odd little charges appear on your credit card. Big charges are of course a giveaway, but criminals might first venture some little charges. This often happens when more sophisticated identity thieves buy or obtain credit or debit card numbers through syndicates or online forums (they do exist).

You stop getting credit or debit card statements. A thief may have changed the billing address. What time of the month do these bills arrive? Knowing when may alert you to something fishy.

Weird packages show up at your home or office. “I didn’t order a new PC,” you react when the truck pulls up at your door. Well, maybe a thief did and forgot to change the default shipping address on your online profile at a retailer.

Bizarre calls & emails enter your life. Your friends get spam in their inboxes; you get calls from debt collection agencies. At first, you may categorize the calls as simple mistakes and apologize for the spam. Instead, check it out – it may indicate crime.

Your loan apps get rejected. Your credit score can plunge as a result of a thief’s extravagance and detachment. If you can’t get a loan or your credit report shows a plunging score, something may be up.

Victimization can be quite subtle. Some identity thieves never progress to shopping sprees or draining bank balances. They have other goals in mind, just as ignoble.

Some people steal personal information so that they can hide from creditors. They would like to plug in your address or phone number on assorted financial, federal and state documents for purposes of evasion as well as future opportunity. If you suspect this may be happening, file an identity theft report with the U.S. Postal Service (or a police report, but some identity theft experts think notifying the USPS may be just as effective). You can also let bill collectors who mistakenly call know that you have done so, out of a belief that you have been victimized.

Tax refund identity theft rose 97% last year. The Taxpayer Advocate Service (an independent agency within the Internal Revenue Service) looked into more than 34,000 cases of such theft in fiscal year 2011, nearly double the amount from fiscal year 2010. Certain taxpayers logged into the IRS website this year to see the status of their refunds only to be asked to verify essential information. Identity thieves had filed online income tax returns in their name and using their Social Security numbers, but the crooks had directed the tax refunds toward new addresses. The IRS is finding it hard to resolve such issues as speedily as it used to: its workload has increased in recent years, but its funding has not.  Be careful out there!

Retiring alone presents unique challenges. Singles who retire may lack a spousal and familial support network other retirees count on. If a lone retiree faces sizable medical bills, he or she can’t draw on the financial resources of a spouse. Unmarried, childless retirees also lack adult sons and daughters who might be able to offer them financial help or serve as executors of their estates one day.

Singles must plan ahead for them. The earlier, the better: if you anticipate a solo retirement, it might be very wise to plan for it decades in advance.

A basic financial truth can’t be dismissed: single retirees will need to amass savings comparable to those of a retired couple.

Why? It is because many retirement costs are fixed. Hospitals, universities, banks, pharmacies, mechanics and home improvement specialists do not offer discounts to single parents or lone retirees. Usually, a couple can absorb these costs more effectively than an individual.

Some steps to consider. Those looking at the possibility of a solo retirement may want to think about these factors…

The need to save early & consistently. Sometimes young singles are bad with credit, or spend whole paychecks without regard to putting anything away. You are different, right? Think about increasing your savings rate. It is possible: look at how much parents save for their kids’ tuition, food, clothing and child care, in the face of economic pressures that may exceed your own.

The possibility of building wealth through real estate. Astute real estate investment may provide a single individual with a place to live, a steady income stream and the equity to pad retirement savings.

The possible need for long-term care coverage. According to NPR, only about 8 million of 313 million Americans have any long-term care insurance. The average private room accommodation in a nursing home is currently $87,000 a year. The 2012 Long-Term Care Insurance Price Index of the American Association for Long-Term Care Insurance (AALTCI) estimates that a single 55-year-old would pay an average of $1,720 a year for LTCI with an immediate value of $170,000 and a value of $354,000 at age 80 – a purchase that may very well be worth it given trends in American longevity. Many people investigate buying LTCI as they turn 50; you may want to take a look at it in your forties.

The value of a social circle. “Family” has many different definitions today – and increasingly, single retirees are creating family-like bonds by moving in with one another, and saving household expenses as well. This can be good for the soul, and some solo retirees with few or no living relatives go so far as to assign power of attorney to a close friend in case of emergency.

What if you are divorcing without kids? A divorce earlier in life is often more bearable financially than a divorce later in life. In the financial aftermath of divorce, the key is whether the settlement reached is truly equitable. Not equal – equitable. While assets may be divided equally, the lesser-earning spouse may be left with less income and less potential to accumulate wealth in the future. (This is often the case if one spouse has helped the other build a business or a professional practice.) An equitable settlement considers and addresses these factors, especially in view of retirement savings needs.

These are all crucial factors to think about if you find yourself thinking that you may retire alone. Contemplate them, and consider planning accordingly.

Estate taxes are at 80-year lows. At the end of 2010, Congress reset the estate, gift and generation-skipping tax (GST) rates at 35% and raised the lifetime federal gift, estate and GST tax exemptions to $5,120,000 until January 1, 2013. Some Capitol Hill legislators want to see these rates retained, even made permanent. Two other scenarios may be more likely.

In the first scenario, the Bush-era tax cuts expire at the end of 2012 and it becomes 2001 all over again: the lifetime estate and gift tax exemptions fall to $1 million and estate taxes are reset to 55% (60% for some households).

In the second scenario, Congress makes good on President Obama’s request to turn the clock back to 2009: estate taxes reset to a top rate of 45% with a $3.5 million personal exemption. (The lifetime gift tax exemption would still fall to $1 million.)

The current $5.12 million personal exemption is portable between spouses. This represents a major tax break for wealthy families – an opportunity to transfer significantly greater amounts of wealth without triggering transfer taxes.

Currently, executors have an option to transfer an unused portion of a deceased spouse’s $5.12 million lifetime unified gift/estate/GST exemption to a surviving spouse. So with this new portability, a married couple can potentially transfer up to $10.24 million of assets without incurring any federal estate tax. In 2013, this portability is scheduled to disappear.

Portability is not automatic. When the first spouse passes away, the executor of his or her estate must file a federal estate tax return even if no estate tax is owed. That move formally notifies the IRS that you are transferring the unused or partially used personal exemption to the surviving spouse. This estate tax return is due nine months after the death of the first spouse, with a six-month extension permissible.

If some planning needs to be done to bring the value of your taxable estate under $5.12 million (or $10.24 million), your executor could make donations to qualified charities or non-profits on your behalf to lower the taxable value of your estate, although your heirs would consequently be left with less.

You can shrink your taxable estate without reducing the lifetime exemption. In 2012, the annual federal gift tax exclusion is set at $13,000. So you (and your spouse) may gift up to $13,000 each to an unlimited number of individuals in 2012 without reducing your lifetime $5.12 million gift/estate tax exemption. Those gifts can even be made as payments for school expenses (except housing costs) or medical bills.

Keep the $13,000 annual exclusion limit in mind: in 2012, gifts in excess of $13,000 per individual do cut into the $5.12 million lifetime exemption dollar-for-dollar.

Even so, you still might want to make large gifts of appreciating assets this year. Why? Here’s an illustration: if you gift shares valued at $52,000 to a relative, you will draw down your $5.12 million lifetime gift/estate tax exemption by $39,000 ($52,000-$13,000). Yet the future appreciation of these shares will not be included within your taxable estate. This year, you and your spouse can each give away up to $5.12 million worth of appreciating assets without incurring federal gift taxes.

An ILIT may be worth a look. Death benefits from life insurance policies are rarely subject to federal tax. However, if you have any “incidents of ownership” (i.e., have or have had the ability to make beneficiary, payment, loan or cancellation decisions), the policy proceeds may end up in your taxable estate.

This problem tends to affect unmarried taxpayers most, though married couples may also face it. One response is to create an irrevocable life insurance trust (ILIT) – a trust that owns an individual or couple’s life insurance policy/policies. Upon the death of the insured, the policy proceeds go into the trust rather than the insured’s taxable estate. The proceeds can subsequently be directed to the named beneficiaries of the ILIT. Two asterisks here: you have to stay alive for at least three years after moving any existing life insurance policies into the ILIT to keep the insurance proceeds out of your estate, and you don’t want to name the trust as the policy beneficiary as that negates the whole purpose of the ILIT.

It is time to carefully review your estate planning strategy in light of the potential changes ahead and the window of opportunity that may soon close.