Halloween's ghosts and goblins may be headed back into the closet, but for some, an even scarier task awaits: taking care of year-end finances. Before you know it, the holidays will start taking all your attention, so now's the time to get a jump on crossing these items off your to-do list to avoid a panic later on.
1. Deal with your health insurance
If you're fortunate enough to get health insurance at work, then you probably have some decisions to make. At many companies, open enrollment happens in November, giving you your one chance each year to make changes to your health coverage.
The easiest thing to do may be just to leave everything the same, but that can be a big mistake. If you pay for expensive coverage that you never use, then you may be able to save on premiums by getting a less comprehensive health plan. On the other hand, if you know you'll have higher medical expenses in the future -- the most common example is choosing to have a baby -- then paying up for better coverage may save you thousands in medical bills later.
A related decision you may need to make has to do with your flexible spending account. These accounts let you set aside pre-tax money for medical expenses, but you have to use up that money or else you lose it. Although you don't have to spend everything by Dec. 31, you probably do have to decide now how much you'll set aside for 2011. Compare your actual expenses with how much you funded your FSA last year and see how they match up, and if necessary, make adjustments to make sure you don't end up forfeiting any money. With over-the-counter drugs no longer eligible as of Jan. 1, you may also want to make cuts.
2. Get those 401(k)s funded!
As tough as times are right now, it's still important to look forward to long-range financial goals like retirement. With just two months left in the year, you can still ramp up your 401(k) contributions by talking to your HR or payroll department. With maximums of $16,500 for 2010 -- $22,000 if you're age 50 or older -- many workers can boost their contributions quite a bit without maxing out their 401(k)s.
Especially if your employer provides matching contributions, you can't afford not to contribute to your 401(k) right now. Get in touch with whoever runs your 401(k) and find out how to boost your contributions.
3. Protect your big gains
Quite a few investors have seen huge stock price increases in the past year. But many wonder if the recent rally of the past few months has already seen its best days.
If you had the foresight to buy any of the stocks below -- the biggest 10 stocks in the U.S. market that have gained 50% or more -- then you might want to consider protecting those gains from a potential swoon by buying short-term put options. For just a fraction of your profits, you can lock in your gains against a future loss, while also retaining the ability to benefit if the stock keeps rising. Take a look:
|
Stock |
12-Month Return |
$ Per Share Gain Since Last October |
Cost of at-the-Money Put Option |
|---|---|---|---|
| Apple (Nasdaq: AAPL) | 59.7% | 112.48 | 17.20 |
| Ford (NYSE: F) | 101.9% | 7.13 | 0.84 |
| Union Pacific | 61.9% | 33.51 | 5.86 |
| DuPont (NYSE: DD) | 55.4% | 16.86 | 2.46 |
| DIRECTV | 65.2% | 17.15 | 1.66 |
| Mosaic (NYSE: MOS) | 61.4% | 27.82 | 7.35 |
| Deere (NYSE: DE) | 71.8% | 32.10 | 3.80 |
| VMware (NYSE: VMW) | 99.0% | 38.03 | 5.40 |
| Las Vegas Sands (NYSE: LVS) | 204.0% | 30.79 | 4.48 |
| Yum! Brands | 53.6% | 17.30 | 2.53 |
Source: Capital IQ, a division of Standard & Poor's, and Yahoo! Finance. Put option is for January option with strike price closest to current share price.
Admittedly, buying put options can be an expensive way to get portfolio insurance. But with such big gains in the bank, you can afford to give some of them back to ensure an incredibly positive result for your portfolio. And if you've owned these stocks for less than a year and don't want the big short-term capital gains hit from selling them outright, buying puts can be a great way to lock in gains without the tax hassle.
Get going!
The end of the year is still 60 days away, but it's never too early to get a head start on finishing your year-end financial planning. That way, even if you're scrambling through the mall on Christmas Eve, at least you'll know your money's in good shape.
Another way to protect gains is to turn to stocks that will do well in the next bull run. Click here to get The Motley Fool's free report, 5 Stocks the Motley Fool Owns ... and You Should, Too.
Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.
