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Year-End Personal Finance Moves to Consider

As the end of the year nears, here are five personal finance moves to consider:

Be sure you’ve taken the Required Minimum Distribution (RMD) from an IRA. You have until December 31 to withdraw the minimum amount from an IRA. The RMD rules apply if you’re older than age 70 or if you have an inherited IRA from someone other than a spouse. The IRS has stiff penalties for not taking the RMD so be sure you’ve acted on an IRA if you’re in one of these two situations.

This is an obvious one, but it bears repeating: make charitable contributions in cash or goods by the end of the year so you can deduct them on your 2012 tax return. This time of year especially, charities that take care of the less fortunate need help. If you’ve been waiting to make a deductible contribution to the Salvation Army, a food bank or any other worthy charity, now is the time.

Make a contribution to an IRA. Anyone with income can make a contribution to a traditional IRA. This is true even if you participate in a company-sponsored savings plan like a 401(k) or 403(b) plan. It may be a non-deductible contribution, if you save through your employer plan. But you can still make the contribution for yourself and your spouse.

Want to diversify your retirement savings? You can convert a traditional IRA account balance to a Roth IRA. One tactic that many people are following is to make a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA. Since 2010, anyone can follow this approach to fund a Roth IRA no matter their income level. As a tax-diversification strategy, consider this as a way to create a Roth IRA for yourself and your spouse.

If you’re sitting on a long-term capital gain on a security you are thinking about selling anyway, consider selling the security before the end of the year. This allows you to take advantage of the low capital gains tax rate that is set to expire at the end of the year. We don’t know what Congress will do with capital gains rates for 2013 so this is one way to lock in a gain at a relatively low rate. Of course, don’t sell something this year just to sell it. Tax impact is just one of the factors to consider when selling assets.