It's time to gather your wits and face the market. After last year's harrowing plunge, it looks like most of us will finish 2009 with a small gain--Fidelity Investments reports that its retirement investors' median return for the 12 months ending Sept. 30 was 0.4 percent. OK. it's not much to write home about but it's a gain nonetheless.

If you're ready to start thinking about your portfolio again, let's start with this year's checklist for year-end investment and tax planning:

Required Minimum Distributions

Under normal circumstances, if you're over age 70-1/2, you must take a Required Minimum Distribution (RMD) from your traditional IRA or 401(k) funds, and report it as income. The rule also applies to younger people who may have inherited an IRA from someone who had reached the age of RMD. But Congress suspended the RMD for 2009 in order to help battered investors recover from the market meltdown.

The waiver expires on Dec. 31, so start making your plans now for 2010 RMDs. Your RMD is determined using an IRS formula that divides your account balance by life expectancy calculated using an actuarial projection. You can determine the minimum to withdraw using any number of good online calculators or by downloading IRS Publication 590, which contains the tables (http://bit.ly/FexJB)

If you fail to take your RMD, you'll pay a stiff penalty--50 percent of the amount you failed to withdraw. Talk with your retirement account custodian about the various options available to make sure you comply--but remember that the responsibility to take an RMD ultimately is yours.

Also, remember that the law doesn't require that you take an RMD for each IRA you own. If you have more than one IRA account, you can simply add them all together, calculate your RMD and make the withdrawal from a single account.

Maximize your contribution

Take full advantage of tax-advantaged saving by contributing the maximum amount for 2009 to your 401(k) or IRA plan. If that's not possible, try to contribute at least to the limit of any employer match that may be available. For 401(k) accounts, the contribution limit this year is $16,500, with a possible catch-up contribution up to $5,500 if you're over age 50. For traditional IRAs and Roth IRAs, the limit is $5,000, with a catch-up contribution of $1,000.

Harvest the losses and rebalance

If your taxable investment accounts contain some losers (I'm betting they do), consider the opportunity to do some tax loss selling. With a taxable account, you can use losses to deduct up to $3,000 in ordinary income, and $1,500 for married couples filing separately each year.

If you plan on holding the same fund or stock in the future, you can buy it back 31 days later. Remember that any losses that you cannot use to offset gains this year can be carried forward and used in future years.

Also use the selling to re-balance your portfolio's mix to its target asset allocation. "You get a double benefit if you do tax loss harvesting in coordination with your annual portfolio rebalancing efforts," says Gwen Gepfert, a certified financial planner based in Basking Ridge, N.J.

Get ready for Roth conversions

A change in federal law next year lifts the household income limit ($100,000 in household modified adjusted gross income) for eligibility to convert traditional IRAs to Roth accounts. Retirement investors should give serious consideration to the opportunity to convert some portion of their savings to a Roth. With a Roth IRA, you've paid the income tax upfront, since you invested post-tax dollars. That means your withdrawals are tax-free, so long as the account has been open five years and you're at least 59-1/2 years old.

Roth IRAs, with a few exceptions, grow income tax free and owners are not required to begin taking minimum distributions at age 70-1/2. While you don't receive the tax deduction of a traditional IRA at the time of your initial investment, your Roth IRA can continue to grow tax-free for as long as you own it.

Tax-free charitable contributions

Finally, in the spirit of the season, time is running out to take advantage of the IRA Charitable Rollover provision. This allows individuals age 70-1/2 and up to make charitable donations up to $100,000 from IRAs and Roth accounts without counting the distributions as taxable income. That provision expires Dec. 31, so use it before you lose it!

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© Mark Miller