HOUSEKEEPING
Review your W-4
If you are getting a big tax refund or owe Uncle Sam a big check for underpaying your taxes this year, your paycheck and W-4 form could help you smooth out your tax picture for next year.
Your W-4 is a withholding form. If you have a spouse, children and a mortgage, you may be able to claim exemptions to reduce your withholding. If your family has grown or changed since you last signed a W-4 form, changing your exemptions could make things easier along the way and at tax time next year.
Discuss your W-4 with your tax preparer. Knowing the deductions you qualify for — even if they are one-time-only — can help pinpoint your tax obligations much better than the common, impersonal estimate.
SHORT COURSE
Laddering
Laddering is a specific way of structuring a portfolio of bonds or certificates of deposit that have different maturities. The concept — sometimes called “staggering maturities” or “liquidity diversification” — builds a portfolio that mixes short- and longer-term interest rates.
For example, say an investor has $30,000 to invest in bonds. The money can be divided into three equal portions invested in, say, one-year, two-year and three-year Treasury securities. The income is either reinvested or spent; each time a bond matures, it is rolled over into the longest time frame in the ladder, in this case three years.
The result is a portfolio that hedges interest rates, offering short-term liquidity and longer-term stability.
