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4 Things to Get Done Before 2012 Ends

Dan Caplinger
November 23, 2012

The holiday season is in full swing. But for investors, the end of the year is fast approaching, and that means you have just a little more than a month left in the year to take care of all the financial matters that need attending before 2013 rolls in.

It's not just about the fiscal cliff
Many investors have held off on planning because of all the tax provisions that are set to expire at the end of the year. Despite that uncertainty, though, the fiscal cliff doesn't change all the rules about traditional year-end planning. So before 2012 ends, take some time and make sure you pay attention to these four financial areas:

1. Fund your retirement accounts.
Taxes may rise and fall over the years, but if you don't take advantage of your chance each year to contribute to tax-favored retirement accounts, then you lose that opportunity forever. If you skip out on adding to your retirement accounts for 2012, you'll miss out on as much as $22,000 in extra retirement savings -- or $28,500 if you're 50 or older.

But not all retirement accounts get treated the same way. With 401(k) plans and other work-sponsored retirement plans, Dec. 31 is the drop-dead date for getting money set aside for retirement. For IRAs, on the other hand, the IRS gives you until April 15 to make contributions for the prior year. Still, even with IRAs, the earlier you can get money into your retirement account, the greater the benefit of tax-deferred or tax-free savings.

2. Rebalance your portfolio.
Many investors look at their portfolios on an annual basis to judge whether their risk levels are still within their comfort level. During strong market years, it's easy for portfolios to get out of whack, with winning asset categories suddenly representing a larger proportion of your overall portfolio than you'd typically want. Rebalancing involves selling off some of your winning investments to buy underperforming asset classes when they're relatively cheap. Often, those weaker performers will catch up in subsequent years, making the decision to buy low a smart one.

This year, both the stock and bond markets have posted modest gains, making broad-based rebalancing less vital. But if you make sector-specific calls with individual stocks in your portfolio, your success stories may leave you with highly concentrated positions. For instance, even after its recent pullback, Apple's(NASDAQ: AAPL)continued success this year has created concentration problems even in passively managed exchange-traded funds, as well as individual portfolios. Also, signs of