Avoid the Four Biggest Pitfalls of Year-End Tax/Financial Planning

EXPERTS: AVOID THE FOUR BIGGEST PITFALLS
OF YEAR-END TAX/FINANCIAL PLANNING

Leading Financial Planners from Florida, Iowa and Washington State Warn of Most Common Errors; How to Give "Tax Friendly" Holiday Gifts and Avoid Blowing Your Bonus

WASHINGTON, D.C.//October 12, 2005//Too many Americans will get distracted by the year-end holiday season and only realize too late that they have fallen into one or more of four tax and financial planning pitfalls, according to a warning issued today by three leading U.S. investment advisors. The experts are from three firms - Resource Consulting Group, Orlando, FL.; The Foster Group, Inc., West Des Moines, Iowa, and Petersen Hastings Investment Management, Kennewick, Washington State - that are members of the Zero Alpha Group (ZAG), a nationwide network of eight fee-only investment advisory firms (http://www.zeroalphagroup.com) that manage more than $3.5 billion in assets.

Kimberly Sterling, CPA, CFP and vice president, Resource Consulting Group, Orlando, FL., said: "The year-end holiday period is when investors tend to make some of their biggest mistakes when it comes to tax and long-term financial planning. What people fail to address is that this is the time when they need to be figuring out key tax and retirement plan issues. These financial matters really should be resolved first before investors start spending thousands of dollars on holiday gifts for family and friends."

The four biggest year-end pitfalls highlighted by the three financial experts include: blowing your bonus; giving holiday gifts without an eye to cutting your taxes; cluelessness on the alternative minimum tax (AMT); and "playing Santa Claus" rather than funding your retirement account.

THE FOUR BIGGEST YEAR-END TAX/FINANCIAL PLANNING PITFALLS

Blowing your bonus. Too many Americans spend their hard-earned bonus all at once on a luxury item and don't consider how to apply a bonus to their financial plan in a smart way. Here's one approach: first, maximize your tax-deductible contribution to an IRA/401(k) and then take a smart approach to dividing up the rest, as in: 50 percent to debt reduction; 25 percent to short-term savings goals (e.g., travel, auto or child's education); and 25 percent to spending.
Giving gifts without an eye to cutting your taxes. Here's something most people miss: Fully utilizing the annual exclusion for gifting amount ($11,000/$22,000 split gifting). You should think about moving money to children and grandchildren now if you have a potentially taxable estate. Another financially astute approach to holiday gifting: Look for securities with appreciated gains and use them for year-end gifting - take cash to replace the gifted security or rebalance your portfolio.

Scott Sarber, vice president, Petersen Hastings Investment Management, of Kennewick, Washington, said: "There are a number of very helpful tax and financial planning moves that an investor can make at year-end that also create significant gifting opportunities that will be appreciated by family members and others. In this case, we are not talking about spending less money on gifts. Instead, it's a question of identifying those gifts that are tax-advantaged or will allow you to make needed portfolio adjustments. These are still great gifts, so everyone comes out a winner in the process."

Cluelessness on AMT. Here's a really costly pitfall for the unwary: Not knowing what your tax situation is so that you are unable to assess whether or not you will be clobbered by the dreaded Alternative Minimum Tax (AMT). You need to know whether AMT is in play in your situation so that you can accelerate or postpone deductions or income accordingly.
"Playing Santa Claus" at the expense of your retirement plan. The costly holiday gift buying season coincides with the period of time when people who want to fully fund their 401(k) or IRA have to come up with the cash to do so. Many Americans make the mistake of focusing on holiday gift buying or travel first and then hope that they can figure out later how to scrape up the needed money for their retirement account. The not surprising result: many retirement accounts end up not being fully funded and investors end up shortchanging themselves at the point when they will need the money the most.

Kent Kramer, CFP and senior financial analyst, The Foster Group, said: "The key here is to pay yourself first - fully fund your retirement plan and then worry about playing Santa Claus. The gift you buy now may be forgotten in six months, but you will suffer much longer than that if your retirement plan is anemic. This is an excellent illustration of the need for the discipline of a long-term financial plan."

For more about today's most dangerous investment pitfalls and the need for long-term financial planning, go to the Zero Alpha Group Web site at http://www.zeroalphagroup.com.

ABOUT ZAG AND MEMBER FIRMS

Founded in 1995, the Zero Alpha Group, which is not an investment advisory firm itself, was created to serve as a nationwide network for eight independent investment advisory firms that manage a total of more than $3.5 billion in assets. Members of the Group are committed to providing objective, long-term private wealth management solutions to investors, focusing on asset allocation and a structured, quantitative approach to investing. The eight firms in the Zero Alpha Group network share a common philosophy about investing and client service - a commitment to passive, tax-managed investment strategies while providing an independent financial planning solution for investors. Visit ZAG online at http://www.zeroalphagroup.com.

Orlando-based Resource Consulting Group is a fee-only financial planning and investment advisory firm established in 1988 to provide low cost, asset class investing for their clients, using the firm's Systematic Financial Solution. Resource Consulting Group's Web site is http://www.resourceconsulting.com.

The Foster Group, of West Des Moines, IA., provides fee-only independent investment management and comprehensive financial expertise, utilizing asset-class investing strategies. The Group provides investment, retirement, and estate planning, as well as charitable giving. The Foster Group is on the Web at http://www.fostergrp.com.

Petersen Hastings Investment Management, of Kennewick, WA., is an independent investment advisor founded in 1962 that manages assets through a strategy of asset allocation and indexing. The firm serves its clients - including retirement plans, trusts, non-profit organizations, foundations and established individuals - using its proprietary Disciplined Wealth Solution and Core Values Investment Program, which is a solution for socially responsible investing. Petersen Hastings is on the Web at http://www.petersenhastings.com.

CONTACT: Patrick Mitchell, (703) 276-3266 or pmitchell@hastingsgroup.com

EDITOR'S NOTE: A streaming audio replay of a related news event will be available on the Web as of 6 p.m. ET/3:00 p.m. PT on October 12, 2005 at http://www.zeroalphagroup.com.