MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. It's the holiday season. And, like a broken record, Andy Williams is in every shop reminding us all what it -- makes it the happiest season of all. Kids jingle-belling, holiday greetings, gay, happy meetings and rebalancing your portfolio?

MR. KOJO NNAMDIDon't mean to put a damper on the holiday hustle and bustle, but it's also the most wonderful time of the year to take stock of your year-end finances. From wild stock markets to uncertainty in Congress about taxes and debt, it's been a tough year to plan for and stabilize your finances. But there are still three weeks left in the year to take advantage of lower tax rates, stow a few extra dollars in your retirement account and to make a smart financial plan for 2012.

MR. KOJO NNAMDIHere to help us to get the most for our money by Dec. 31 is Janet Bodnar, editor of Kiplinger's Personal Finance magazine. Janet, good to see you again.

MS. JANET BODNARGood to see you, too, Kojo.

NNAMDIAnd joining us from the studios of WBEZ in Chicago is Christine Benz, director of personal finance at Morningstar, which is an investment research firm in Chicago. She's also author of "30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances." Christine Benz, thank you so much for joining us.

MS. CHRISTINE BENZKojo, it's great to be here. Thank you.

NNAMDIAnd it is my understanding that you and Janet have met. So you know each other.

BENZWe have. We were dinner companions once at our Morningstar conference.

BODNARYes. It was great fun.

NNAMDIAll this full disclosure on this about that.

BENZThat's right.

NNAMDIIf you'd like to join the conversation, call us at 800-433-8850. What financial moves are you making as the year winds down? 800-433-8850. You can go to our website, kojoshow.org. Join the conversation there. Send us a tweet, @kojoshow, or email to kojo@wamu.org. Congress and the White House are grappling with ways to strengthen the federal budget, so it seems like some of our tax breaks and benefits are either ending or up in the air next year.

NNAMDIJanet, let's start with retirement accounts. There's currently a tax reform proposal to scale back 401 (k) contributions. Should we just put as much money as we can into our retirement accounts right now?

BODNARYep. You should.

NNAMDIOne-word answer.

BODNARI will be happy to elaborate a bit. But, yes, I mean, you should always put as much money as you can into your retirement accounts. But now, as you pointed out, it could be a critical time. One thing people may not realize is that if they get year-end bonuses between now and the end of the year and they have not maxed out their 401 (k) or similar workplace retirement contributions, they can put that money into the account.

BODNARThey haven't lost all that time yet. They still have until the end of the year to do that. And I would recommend thinking about it. Most people don't max out their retirement accounts. And so if you have the wherewithal to do that, do so.

NNAMDIIf, as a general rule, we don't contribute the maximum account to our retirement plans each year, what's a good strategy for increasing our contributions comfortably?

BODNARWell, one thing we always recommend at Kiplinger is at least try to contribute as much as you can to get any company match because any company match that you get is free money -- the easiest return you'll ever make. So if they're matching your salary, you know, 3 percent or 4 percent, do try to contribute at least that much. And, again, if you can't contribute anymore than that, think about year-end bonuses and kicking in extra money at the end of the year or perhaps increasing it by 1 percentage point next year.

BODNAROr if you get a raise next year, put maybe not all of the raise, but a portion of that raise to the retirement account. And so you're kicking it up by, say, 1 percentage point a year.

NNAMDIChristine, a lot of people have become self-employed during the economic downturn. If you're doing well and you'd like to set up a retirement account as a self-employed person, what should you know as the year winds down?

BENZWell, the good news is, Kojo, you don't actually have to make contributions to self-employed retirement plans by year end. All you have to do is get them set up, so your contribution deadline is actually your tax filing deadline, which, in 2012, will be April 17. But if you want to set up a self-employed retirement plan for the first time, the end of the year will be your deadline. So if you're doing a solo 401 (k), which I think is a really good, flexible option for self-employed folks who don't expect to hire a lot of people down the line, your deadline for doing that is Dec. 31.

NNAMDIChristine, there's a lot of uncertainty about tax rates going up in the near future, so you're recommending taking advantage of a new tax provision that went into effect this year regarding Roth IRAs. Tell us about that and who should take advantage of it now.

BENZWell, one thing to think about is that the contribution limit. The income limit on Roth IRA contributions has been effectively eliminated, so, regardless of income, you can contribute to a Roth IRA. The trick is, if you earn above the Roth IRA contribution limits, which in 2011 are $120,000 if you're a single filer and $179,000 if you're part of a married couple filing jointly, if you earn above that amount, don't assume that you can't contribute to a Roth IRA. You can. What you have to do is open a traditional, non-deductible IRA and then eventually convert that to Roth status.

BENZAnd the beauty of doing that is that, even though you're paying taxes on the money going into the Roth, you will be able to take tax-free withdrawals in retirement. I think for those of us who suspect that tax rates in the future could be higher than they are today, that's a provision that you definitely want to think about taking advantage of.

NNAMDISo the people who are best suited to Roth IRAs at this point are people who have, well, quite a few years until retirement?

BENZThat's definitely the key category who should take a look at a Roth IRA. The key reason is, especially if you think that your income level and the future will be higher than it is today, you want to be able to take advantage of that tax-free withdrawal status that the Roth IRA buys you. But there are other categories of individuals who should look at Roths, too.

BENZSo, for example, people who have more than enough retirement assets to get them through retirement who are saving mainly on behalf of their heirs, their children and grandchildren, those lucky folks should take a look at Roth IRAs or Roth conversions because there are some really nice estate planning benefits. And also, you don't have to take those required minimum distributions during retirement with a Roth, unlike traditional IRAs.

NNAMDIJanet Bodnar, before we move into investing, let's look at two other tax-related items that seemed to be causing some uncertainty. Congress may eliminate our ability to write off the full value of our mortgage interest next year. Is there anything we can do in the next two weeks to take advantage of this spurt now or any other itemized deductions?

BODNARWell, yes. Well, first of all, if you're talking about immediate things, you could -- you always have the option of prepaying your mortgage, some of the mortgage payment, your January -- let's say your January mortgage payment or if you have property taxes that are due next year, you want to speed those things up. You have the option of doing that. I do want to say it's still not clear that Congress is going to actually do anything about taking away the mortgage interest deduction.

BODNARAnd the secondary thing is, even if they do, it could potentially be part of a broader base tax reform, in which case, you would have, for example, lower -- what a lot of people -- bipartisan committees, in fact -- have recommended is that we lower our tax rates and we have a simpler system. And in return for that, we get rid of a number of deductions. So it wouldn't necessarily be just, oh, tomorrow you can't have this deduction anymore.

BODNARIt could very well be part of a broader tax reform. And some of the tax reforms, the Alice Rivlin-Pete Domenici plan, for example, do include a mortgage tax credit, so people -- which would actually be available to people who don't itemize their deductions. So it's not a given that, even if there is some form of tax reform, you won't have any mortgage deduction at all. It may come in a different form. But, as of right now, if you're worried about that, you can always speed up your mortgage payments.

NNAMDIChristine, more workers are finding themselves newly unemployed or unemployed much longer than they'd anticipated. If you're collecting an unemployment check, how can you avoid any nasty surprises come April?

BENZWell, key thing to be aware of is that you will owe income taxes on your unemployment income. So that's kind of an ugly fact of life. If you're unemployed, you will have to pay taxes on those checks. So just be aware of that. Do what you can to prep for that. But the other thing to know is that you may be able to take advantage of tax credits and deductions, perhaps more than you could when you were earning an income. So there are earned income tax credits, of course, that you can take advantage of. In 2011, if your income falls below $48,362, you can claim that earned income tax credit.

BENZYou may be -- if you're in a lower tax position, you may be able to take advantage of child tax credits. And also, keep track of those job-hunting expenses because, if they exceed 2 percent of your adjusted gross income for this year, you'll be able to write off those costs that are in excess of 2 percent. So definitely save those receipts. Anything you're doing in terms of creating resumes or seeking outside advice to help you find employment, you'll be able to write off those expenses if they do exceed that threshold.

NNAMDIChristine Benz joins us from studios in Chicago. She is director of personal finance at Morningstar, an investment research firm in Chicago. She's also author of "30-Minute Money Solutions: A Step by Step Guide to Managing Your Finances." Joining us in our Washington studio is Janet Bodnar, editor of Kiplinger's Personal Finance magazine. If you've got questions or comments, especially now that we're moving on to your investments, you can call us at 800-433-8850.

NNAMDIHave you lost money in your portfolio this year? What have you done to stem the bleeding? 800-433-8850 or go to our website, kojoshow.org. Send us a tweet, @kojoshow. Christine, we always hear the keyword rebalance as the year comes to an end. After such a rocky year in the markets, how do we go about reviewing our portfolios and rebalancing them if we need to?

BENZWell, the key thing is to make sure that you have that target stock bond cash mix that you're operating with. If you don't have that target, often called an asset allocation plan, it's time to get one. But if you do have some rough allocations to these various categories, it's time to take a look at where you are now in terms of your portfolio's positioning. We've got a tool on morningstar.com, a free tool called instant X-ray. It takes a look at your asset allocation, helps you see whether you're in line with your targets.

BENZIf it turns out that you do have divergences with your targets, you actually want to do something that's pretty counterintuitive. You want to add to the things that haven't performed as well and strip back from the categories that have performed relatively better. So for a lot of investors, looking back on 2011, what they've probably seen is that if they have bonds in their portfolio, that's been a good performing piece. If they haven't taken a look at it for a while, it's probably something you'd want to strip back on.

BENZBy contrast, international stocks in particular have had a very rough go of it due to worries in the eurozone and the Japan crisis. And any number of other problems. So that might be an area to consider actually adding to, given that those international stocks have generally underperformed within people's portfolios.

NNAMDIJanet, since we're on the subject of the markets, Kiplinger's 2012 investing outlook is out right now. Can we expect more of the wild ride the markets experienced this year?

BODNARWell, unfortunately, Kojo, we think that, yes, that's probably the case. As Christine points out, you -- we still have the continuing eurozone problem. Our own is probably -- Kiplinger's doesn't think it's going to do much better than, say, 2 percent next year, which is kind of categorized as the muddling-through category. And then, of course, you have the presidential election, which adds some additional uncertainty.

BODNARSo a lot of the analysts that we talk to for our January outlook story say that they see that the market is going to operate within range. But you're going to have these days of, you know, 3- or 400-point gains and 300 or 400-point losses. It's going to be just crazy in between. And in the end, we think the market will actually be up for the year. And certainly you can always benefit from the dividends that a lot of stocks are paying. And we -- at Kiplinger, we can't write enough about dividends. People really want that. So the point is you're going to face a lot of uncertainty next year.

BODNARAnd one thing I always tell people as far as -- and it ties into actually what Christine says, rebalancing is, you know, keep your powder dry. If you're really nervous about this, if it really makes you nervous, have -- do what corporations are doing. Have a slightly larger cash position than you normally would. And it could be CDs. It could be bank accounts, money market funds, treasury -- short-term treasury bills, that sort of thing. Don't -- you're not in this to try to make money on this because if interest rates rise, longer-term bonds are probably going to go down.

BODNARBut if you have, you know, cash equivalent-type investments that stay fairly stable, you know, it's literally money in your pocket.

NNAMDIWhat's Kiplinger expecting from the housing market next year?

BODNARWe are hoping -- we have our fingers crossed that we have finally hit bottom. People have been predicting this for a number of years, and it's really tough to know because there are just -- you have this overhang of either unsold homes or homes that are in foreclosure. And it's hard to know where the bottom is. And a lot of people think that, yes, the market could go down even further next year, but not hugely down. And we think that it will at least stabilize so that it's bouncing along the bottom, and maybe in 2013, we can look at some gains.

NNAMDIGot to take a short break. When we come back, we'll continue our conversation on year-end personal finance. Taking your calls at 800-433-8850. What will you be doing differently next year than you did this year? 800-433-8850, or go to out website, kojoshow.org. Ask a question or make a comment there. I'm Kojo Nnamdi.

NNAMDIWelcome back to our conversation on year-end personal finance with Janet Bodner, editor of Kiplinger's Personal Finance magazine, and Christine Benz, author of the book "30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances." Christine is director of personal finance at Morningstar, an investment research firm in Chicago. We got an email from Lisa, who says, "Every time I look at my retirement account lately, it's going down, down, down. So why on earth would I put in more money to lose?" Janet?

BODNARYou had to ask me that question.

BODNARWell, as Christine said, things that go down tend to eventually go up. So you have to think like a contrarian. Well, you do have -- I don't know the situation. I don't know how old Lisa is or what she's got in her account. But first of all, let's assume she's a young person and she's a got a couple of decades to go to retirement.

BODNARIf she has her money in the stock market, especially in a broad-based stock market fund that takes in the entire U.S. market, let's say, big companies and small companies, over the next couple of decades, well, nothing is a sure bet, but it's as sure as you can get that those stocks are going to go up. So she should probably just sit tight on what she's got in there because the stock market will bail her out in the end.

BODNARAnd again, this is assuming she's not taking any crazy bets one way or the other. But she's investing in the market as a whole, you know, or -- but it may be that depending -- as we were talking before about rebalancing, maybe she just doesn't have really great investments. Maybe she's been -- you know, she's had all of her money in an international fund, which has gone down this year because international funds have done -- not had a very good year. So it is time for her to rebalance and take some of the money.

BODNARI wouldn't take it all out of international funds 'cause you do want money in there for ballast as we sometimes say or for balance in the portfolio. But, you know, it's time to get into -- we think at Kiplinger, for example, that U.S. stocks are going to do better in 2012. Then stocks will probably do better than bonds, and U.S. stocks will be -- do better than foreign stocks. So she wants to get some money out of the foreign market if she's over-weighted in that and into U.S. stocks. So that's the kind of the whole point of rebalancing.

NNAMDIChristine Benz, Morningstar has a useful tool, it's my understanding, for determining whether a stock is valued fairly. Tell us about it.

BENZWe do. It's a tool, Kojo, called our market fair value graph. And what it does is that it looks what our stock analysts are saying about each of the companies that they cover, and it rules that up as an average and creates a price to fair value for the whole market. So right about now, our analysts think the stock market, in general, is about 10 or 15 percent undervalued. And that's based on the price to fair value for all of the companies that they cover on a stock by stock basis.

NNAMDIHere's Janet.

BODNARI wanted to add something on the -- just the subject of saving for retirement before I forget, and we're talking about rebalancing. One of the things we discovered at Kiplinger is that people don't have a retirement goal. They don't really have -- most people don't ever have a retirement goal, how much money they actually want to save for retirement. We actually have a tool like kiplinger.com, which will let you do that. You can plug in numbers and figure out how much you need and how much you've already saved and then figure out what the difference is and whether you have to put more aside.

BODNARAnd I think that that we have either both. You can use a worksheet if you'd like to do it that way or use the tool. But what that does is give people a little more confidence in where they're going. They may find out that, in fact, they're better off with their retirement savings than they think they are. And if they're not, then, again, they can -- it helps them in rebalancing. And they can say, well, maybe, I need to make more risk, or maybe I need to take lesser. It's depending on how old I am and how many years to retirement.

NNAMDISpeaking of retirement accounts, here is Anne is Cabin John, Md. Anne, you're on the air. Go ahead, please.

ANNEHell, Kojo. I listen to you all time.

NNAMDIThank you.

ANNEI have a question about 401 (k) deferred contribution and year-end bonuses and the relationship. Am I incorrect in being told that you have to -- even you if you don't get a bonus at the end of the year, you can't kick it all in at the end of the year, your deferred amount, that you have to do it ratably with your payroll check?

NNAMDIJanet?

BODNARI do believe -- certainly with regular 401 (k) contributions, you can make contributions up until the end of the year. I'm pretty sure that's the case. I mean, I should preface this by saying I am not a total tax expert. But we are telling people -- actually, one of the tax tips that we had in our December issue was, if you have not maxed out on your 401 (k) contributions, do it now so, even if you don't get a bonus, even if you just want to put in more money, I do believe that you are permitted to do so.

NNAMDIAny word on that, at all, Christine?

BENZMy thought is the same as Janet's. One thing is typically to receive employer matching contributions. That's where you need to have your contributions spaced out through out the year. So one thing you want to be careful about if you receive a bonus in the first quarter is that you don't -- that you can miss out on your matching contributions by contributing too much to that 401 (k) plan early in the year. But I think by making late-year contributions, it doesn't seem like that would be a big risk.

NNAMDIAnne, thank you for -- go ahead, Anne.

ANNEEspecially if it's at the end of the year, you're saying that if you still can do the deferred amount, you can go ahead and do it on that paycheck. But as far as matching goes, it has to be ratably throughout the year.

BODNARThat's my understanding. And in terms of jacking up your contribution limits at the last minute, I believe that's something you absolutely can do. And it's something I've done myself when I've looked at my paycheck and have seen that, oops, I'm not going to be able to hit the max. I have really ratcheted it up my contributions just in those last couple of paychecks, and it worked.

NNAMDIThank you very much Anne, and good luck to you. Here is Emmanuel in Washington, D.C. Emmanuel, you're on the air. Go ahead, please.

EMMANUELThanks for taking my call. Thank you, Kojo, for a great show. I wanted to find out what it means by way of taxes if I can't commit on my 401 (k) to retiring.

NNAMDIAre there any tax implications there at all as far as you know, Christine?

BENZSo, I guess, the question is, are you retired or have you left your employer?

EMMANUELI'm still working, but I'm planning retiring by the end of next year.

BENZOK. So you would need to be separated from service. You'd need to be retired, and you would be able to take that 401 (k) plan amount and convert it to Roth status in an IRA. But I would definitely consult with a tax adviser because they could be significant tax implications. So what I normally tell people to think about is if they want do a conversion to do it over a period of years, and that will allow you to be strategic. And it will also ensure that you don't receive a huge tax bill in a single year.

NNAMDIEmmanuel, thank you very much for your call. Good luck to you. Janet Bodnar, back ton the subject of investing in some, what can I do to be a savvy smart investor in 2012?

BODNARWell, one of the things -- and this is funny. You alluded to this quote at the beginning of the show, which was, I think, really smart that what you want to do as someone said in our outlook story, to preserve capital, to cut down on risk and to "be an opportunistic investor."

NNAMDIYes. That was Barry Ritholtz, CEO of FusionIQ, a research and money management firm that I was quoting.

BODNARAnd I thought that was a really good quote 'cause, first of all, you do want to, you know, preserve your capital and tamp down your risks, certainly, in the times that we live in. But, on the other hand, if -- when you have more, what we mean by being an opportunistic investor, it means that there are going to be days when the market is going to be way up and way down. And so your temptation, your natural psychological temptation is to do exactly the wrong thing.

BODNARIt's to sell when things go down and to buy when things go up, but what you really ought to do is just the opposite. And let's say, for example, that you want to buy a stock. You want to buy Apple. I know I shouldn't use that as an example. You think it's a good buy. You think it's a good stock. You want to own it. The price of Apple is going to go up and down with the rest of the stock market. Believe me. I know this 'cause I've checked. So if you -- you know, if you're looking to buy Apple, and you say, well, I don't want to pay $400 this year for Apple. And right now, it's under $400 this year.

BODNARHave a sort of a target in mind. And when the price gets to that target, then you can leap in and buy it. And it's kind of like buying something on sale. Think of it like buying something on sale. People like holiday bargains. They should like stock market bargains as well. So that's -- and it's the same thing with selling. Maybe you own something that you really don't like anymore. You think it's kind of a dog of a stock, and you want to get rid of it. But you don't want to sell at the bottom.

BODNARWell, wait for a day when the market goes up, and there's a blip up. And you can get a few more bucks on the share price there and sell at that time. So that's what we mean by being an opportunistic investor 'cause we think that's what's going to be happening with the market next year of this whole continuation of this up and down.

NNAMDIChristine, it's been a rough year in the markets, and many of us may be holding on to stocks that have lost a lot of money. If our stocks have decreased in value and we'd like to get rid of them, is it better to donate a stock to charity or to donate the proceeds from selling the stock?

BENZWell, if the stock has decreased in value, Kojo, you definitely want to think about taking the tax loss. So assuming you own the stock in a taxable account, you can take that tax loss. And if you have capital gains or winning securities elsewhere in your portfolio, you can use those losses to offset those gains. So it's kind of a way to find a silver lining in a lousy market. If you don't have any capital gains, you can actually use those losses to offset ordinary income.

BENZSo if you still want to donate to the charity -- and that's a good thing to think about doing -- you would want to take the proceeds from the sale and donate that amount.

NNAMDIIf, on the other hand, I've had stocks that have increased in value, is it better to donate them to charity or to sell them?

BENZIt's a really good strategy if they have increased in value to think about taking the security and donating it outright to the charity. In that way, you will not have to pay taxes on that increase in value, so it's a really nice tax-efficient strategy and also a way to do some good.

NNAMDIWe should remind members of our listening audience that this year and next year, taxpayers in the two lowest income tax brackets can take advantage of the zero percent capital gains rate and sell assets at a profit tax-free. Absolutely correct, right?

BODNARThat is correct, yes. And I think that, you know, people should take advantage of it if they can.

NNAMDI800 -- Go ahead, please, Janet.

BODNARI'm just going to -- just to add one thing on charitable donations, if you would like. If you don't -- if you're not in a position where you're going to be donating stock to a charity, you're just going to be donating the things in your closet that you don't need anymore, just -- and people do that at the end of the year. Just remember that you need to -- if you're going to make a cash donation, you know, keep the check, the cancelled check or the credit card receipt. Have some record of the fact that you made a donation.

BODNARAnd if you make a donation that's over $250, you're going to need an acknowledgment from the charity. And at kiplinger.com, we have some links to some sites that will let you value all that stuff that you have in your closet or in your basement, so you can see how much you're actually giving and do a good valuation of it.

NNAMDIYear-end personal finances is what we're talking about. I'm inviting your calls at 800-433-8850. Have you had to put off retirement or other major plans because of financial volatility this year? Call us, 800-433-8850. Here is Arthur in Lovettsville, Va. Arthur, your turn.

ARTHURHello, Kojo. I have a question. I am retired, and I'm required to take a minimum withdrawal every year. I'd like to know whether it matters whether I take that early in the year or at the very end of the year. Or do I have to distribute it over the year? It would seem to be advantageous to take the whole thing at the end of the year because then, if there were any investment income that were generated by that money during that year, you could capture that.

NNAMDII have no idea. Christine, do you?

BENZYes. You actually have a lot of flexibility with those RMDs. And in terms of the timing, it's really up to you. And also in terms of where you get that money, that's up to you, too. So it's not like you have to take the same percentage from each of your holdings. You can actually be somewhat strategic about where you take that money. So if you have a holding that has gained a lot, you wanted to cut it back anyway, you can take it exclusively from that holding.

BENZSo you have a lot of flexibility. I think investors don't take enough advantage of that ability to be surgical about where they get those distributions from.

NNAMDIAnd, Arthur, thank you very much for your call. On now to revealing some year-end housekeeping basics, starting with health care. We got an email from Michael -- no, an email from A.J. in Annapolis, MD., who says, "Another good way for self-employed individuals to save on taxes is to establish a health savings account that allows individuals to deduct up to $3,050 in contributions. Can you have your guests comment on the requirements for being eligible for this kind of account?" Can you comment on that, Janet?

BODNARWell, let's see. Let me change the question a little bit.

NNAMDISure.

BODNARI think the more common account that people would be eligible for would be -- and perhaps this is what he means -- the flexible...

NNAMDIFlexible spending account.

BODNARRight, exactly.

NNAMDIAs I say.

BODNARRight. So let's -- you know, if you're -- as long as your employer offers this account, you are certainly eligible for it. And, in fact, we just got our papers this week saying, do we want to participate in the flexible account for next year? We think it's a great idea at Kiplinger because it does allow you to put money in this account that you can use for medical expenses that are not going to be otherwise covered by insurance. So they're going to be out-of-pocket expenses, and the money goes into the account.

BODNARYou don't pay tax on that money, so you're getting a break on that money. So we think it's a good idea. It's particularly a good idea. This is an interesting time of year also because some companies will require you to use all your FSA money by the end of the year. So you only have a couple more weeks to use it, or else you will lose it. Now, that's not always the case. Very many companies, including ours, give you until March 15 of the following year to use all your flex account money. So you need to know what your employer's rule is.

BODNARSo you need to know whether you have to spend it now or whether you have until March 15. Then in selecting an account for next year -- it's very interesting. One tax change that is going to go into effect the following year, in 2013, is that the flex accounts are going to be capped at $2,500. So 2012 is an opportunity for you to load up on that account if you want to do something, like dental work, eye surgery, LASIK eye surgery, that sort of thing, something that's going to be costly for next year.

BODNARYou can boost your contributions for 2012 'cause you're not going to have the same opportunity in 2013.

NNAMDIAnd, Christine, it's my understanding that, starting next year, I suspect you will no longer be able to use your flexible spending account dollars to buy over-the-counter drugs unless you had a prescription.

BENZWell, that's actually for this year, Kojo.

NNAMDIThis year.

BENZSo if you are in the habit of buying vitamins and Advil and products like that with your FSA, you cannot do that this year unless you have a doctor's prescription for those items. So that's something to keep in mind. I know my husband and I used to go raid Target on Dec. 29 and buy all that stuff. You can't do that anymore. You need a doctor's prescription for those products.

NNAMDIAnd I know last week, when we discussed the federal employees' open season, that there were some conversations about health savings account. And our guest on that program thought that in some cases, they could work for federal employees. But, Christine, I don't know if you have any general comments on whether they really were for self-employed individuals, as our emailer A.J. in Annapolis was suggesting.

BENZWell, it may. I think that the plans -- so this is a health savings account used in conjunction with a high deductible health care plan. They -- the general rule of thumb is that you're healthy and wealthy. These plans can make sense. So if you're someone who is in a position to pay a very high deductible for your health care costs and you don't expect to have a lot of health care cost within a given year, using such a plan can make sense because the premiums are lower.

BENZYou also are able to put pretax contributions into that health savings account. You can use that money to defray your health care cost that you might incur during the year. But if you don't use that money in contrast with the FSA, it's not a use-it-or-lose-it concept. So it actually can roll over in the years ahead. So if you put $3,000 into that health care savings account -- maybe you'll only use up $2,000 of it -- that $1,000 can actually roll over into the next year. So I think the plans can make sense.

BENZUnfortunately, a lot of employees are not getting a choice. They're getting shoved into these plans. They may not be healthy or wealthy. And they're having to deal with these plans. But certainly for a certain category of individuals, a self-employed individual who is in good financial as well as physical health, I think it can be something to check out.

NNAMDIOne more word on health savings accounts from Steve in Washington, D.C. Steve, your turn. Go ahead, please.

STEVEGreat show. If your primary coverage right now is through your spouse's health plan but you are a small business person, is there a way that you can take advantage of a health savings account?

NNAMDIChristine?

BENZI don't know off the top of my head. I would check with a tax advisor, or your insurance person should be able to guide you in the right direction.

NNAMDIAnd speaking of tax advisor, Mary in Rockville, Md. has a question about that. Mary, you're on the air. Go ahead, please.

MARYYes. I keep hearing references to tax advisors. I don't know what a tax advisor is. I don't find that heading in the yellow pages. I don't know if it's an accountant. Is it a financial planner? How do I find a tax advisor? I don't know what kind of person they are.

NNAMDIJanet Bodnar?

BODNARWell, I can kick this off. And I'm sure Christine has some thoughts on this, too. A tax advisor is, you're right, a very loose term, and it could be any of those people. If you are a business person, maybe it is your accountant who does your taxes every year, or if you use an accountant to do your taxes, that is a person who can advise you. If you have a financial planner who is dealing with all of your financial situation -- your estate planning, your retirement, your investments and your taxes -- he or she could be your tax advisor in that situation.

BODNARSo you're right. There is no -- and then there are -- certainly, there are tax preparers who simply do a tax return. And I would not consider them tax advisors. I mean, if you're paying for tax advice, you should -- well, you're paying for tax advice. It's usually a higher-priced line item, so to speak, and you should be getting good advice from someone who has professional training as an accountant or as a CFP or some other similar designation.

NNAMDIMary, thank you very much for your call. We're going to take a short break. When we come back, our conversation with Janet Bodnar and Christine Benz on year-end personal financial organizing. We'll continue, but we're still taking your calls at 800-433-8850. What financial moves are you making as the year winds down? 800-433-8550. Go to our website kojoshow.org, or send us a tweet, @kojoshow. I'm Kojo Nnamdi.

NNAMDIWelcome back. Janet Bodnar joins us in our Washington studio. She's editor of Kiplinger's Personal Finance magazine. We're talking about year-end personal finances. Christine Benz joins us from studios of WBEZ in Chicago. She is author of "30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances." Christine Benz is director of personal finance at Morningstar, an investment research firm. You can call us at 800-433-8850. Janet, it is -- is it also a good idea to just do a year-end tally of what we spent out of pocket on health care overall?

BODNAROh, yes. I do think it is because, well, first of all, it helps to -- if you haven't had -- if you have not used up your entire flexible spending account but you have receipts from things, like, you know, contact lenses or prescriptions that you have not submitted yet, I mean, you got to really do that tally. That may -- it actually may take you up to the max so that you don't have to worry about losing the money. So I think that that's a really good thing to do.

BODNARAlso, it tells you how much money you should set aside for next year, whether you have an FSA or a health savings account if you have a, you know, high-deductible plan, you might have way underestimated this year what your actual expenses were. And so -- and in fact, most people do. Most people are very conservative about putting their money into their FSAs because it is use it or lose it so they tend to underestimate.

BODNARSo if you've had significantly high expenses that you think might continue into the new year, you would want to take that into account when you have your -- when you fill out your new form for next year.

NNAMDIChristine, a lot of people think that the tax credit for energy efficient improvements to our homes expired last year. When does it indeed expire, and what should we be doing to take advantage?

BENZThat's a great point, Kojo. It actually expires at the end of this year. And so these are energy efficiency credits, and you can earn a credit that is equal to 10 percent of your -- 10 percent of the cost of any energy efficiency improvements you made up to $500. So that might be heating and air-conditioning system improvements. Maybe you put a new insulation in your attic, roofs that help improve your home's energy efficiency, water heaters, windows and doors.

BENZThere's a broad basket of different improvements that you can use to take advantage of this credit. So you definitely should. This one expires at the end of this year. There's also a separate category of what are called renewable energy equipment credits, and these are even more generous. These are for improvements like you install a solar energy system, for example, or put in geothermal heat pumps.

BENZThese are renewable energy improvements, and the credit is equal to 30 percent of your costs, and there's no upper limit. One key thing to know about all of these credits, though, is that you must make these improvements to your primary residence. It's not available for any rental property or any second home type properties. You need to be doing it to your main home.

NNAMDIAnd for those of you who are looking for rebates, you should know that Virginia and Maryland residents should be aware that their energy departments say that their rebate programs are now closed. All rebate funds have been used up. D.C. residents need to act fast because its program's funds are very low. D.C.'s Energy Department says it has about $163,000 left for residents to use up. Let's talk about savings for college, or, better yet, let Sarah in Silver Spring talk about saving for college. Sarah, you're on the air. Go ahead, please.

SARAHHi, Kojo. We have -- and don't currently have any formal college state for them and was wondering if there's any benefit to starting to do that into your tax benefits, et cetera.

NNAMDIJanet Bodnar.

BODNARActually, yes, and especially if you live in the state of Maryland. You do get a tax deduction in the state of Maryland -- I think this is also true of the District and Virginia, but you happen to live in Maryland -- on -- a state tax deduction on money that you contribute to a state-sponsored 529 savings plan. So that's a good thing to do at any time. We think that that -- Kiplinger think that that's really still the best way to save for college.

BODNARAnd if you do this, even if you do it at the end of the year, you still get the tax break. And Maryland has a pretty good plan as well. We like the plan that Maryland has. And so I would say, yes, it is a good time to start.

NNAMDIBut is a 529 plan a good investment now given the volatility of the markets?

BODNARWell, again, it depends -- a couple of things. It depends on the age of your child. If you're talking about a newborn, a child who's 1 or 2 years old, you've got 18 years, and hopefully there will be -- it will be a less volatile market over the course of those 18 years. But, also, if you're close to three-time -- you know, 529 plans got into a bit of trouble in the late unpleasantness of the market downturn of 2008 because what's supposed to happen, you can elect -- usually, you can elect what type of portfolio you have in this plan.

BODNARAnd you can do an all-stock portfolio if you are so inclined, and for a young child, an infant, you might want to do that. But if you're closer to college, you would want a more conservative portfolio. And what happened during the late unpleasantness was that people found that their portfolios were not as conservative as they thought. And so kids within two or three years of retirement still had a lot of money in the stock market and lost a lot of money.

BODNARWell, what 529 plans have done now is they have much more conservative options so that, literally, if you just want -- if your child is 16 years old and you have two years to go toward college, you can literally put your money in a savings account, something that is as safe as a savings account so that, you know, you're not really taking a lot of risks. You won't get a lot of return, but, hey, it's OK.

BODNARYou know, again, capital preservation, risk management. So that's what you're trying to do, and that would be what I would choose. That would be the option I would choose if I were a risk-averse person or if my children were within, say, five years of college.

NNAMDISarah, thank you very much for your call. Is there anything you'd like to add to that, Christine?

BENZWell, a couple of things. I think that anyone who is attempting to save for college also needs to be considering how they're doing on their own retirement savings goals because, really, saving for those two objectives go hand in hand. If it looks like you're not on track with your retirement plan contributions, I would prioritize those, as hard as it is to say. But your child will have other options in terms of paying for college that you will not have in terms of paying for your own retirement. So check that first.

BENZI would also corroborate what Janet said about Maryland's plan. Morningstar thinks it's one of the best 529 plans out there. We also like Virginia's. For your listeners who live in Virginia, we think they've got a really nice 529 plan as well. And, finally, I wanted to just make a quick comment on financial aid eligibility. So for folks who are closing in on college for their kids and they haven't saved much, it's not really something that's going to affect financial aid eligibility.

BENZIf you do put money in a 529 plan, it's considered the asset of the owner, so, in this case, the parents. So even if you are a late-start college saver, saving some money is not going to affect your child's eligibility for financial aid in scholarship.

NNAMDIJanet?

BODNARYeah, that is a great point, Kojo. A lot of people worry about that, and they think that, you know, again, if they're going to save, it's going to hurt their child's chances. That's not the case. And also I would add that one of the things we use -- tell people is that you don't have to save the entire amount for college 'cause, as Christine points out, retirement is probably going to be your primo responsibility.

BODNARBut if you look at the one-third, one-third, one-third rule, it's kind of a good rule of thumb that maybe you want to save one-third of the cost of college. One-third would come out of your current income at the time your child goes to school, and then the other third would come out of some sort of financial aid, which, nowadays, is going to include loans. So your child -- it's likely, not certain, but likely that your child might have to take out loans.

BODNARBut you would want to keep those loans under control. You don't want your child to be borrowing 100 percent of the cost of his or her education. So the one-third, one-third, one-third seems to be a good rule of thumb, at least something that you can -- a goal that you can work toward.

NNAMDISarah, thank you very much for your call.

SARAHThank you.

NNAMDIChristine, we got an FSA question from Darrell. "When flexible spending account money is not used, who keeps the un-reimbursed balance?"

BENZGood question. I don't know, Kojo.

BENZMaybe Janet knows.

NNAMDII think it's an excellent question.

BODNARGee. Thanks, Christine. No. I guess I don't know off the top. Maybe you have to ask your tax adviser what that is.

NNAMDII think it's an excellent question, Darrell. And we also got a call from -- a question from Marjorie, who asks, "What about savings bonds," Janet? "The way the economy is, is this a good time to cash them in?"

BODNARTo cash in savings bonds? Well, again, why not? Savings bonds are one of those things that pay at least a steady, if not high, rate of return. And if you need the money -- so you always know it's there. It's sort of that -- like that risk management thing, you know? You don't know what's going to happen with the stock market tomorrow, but you know that you're always going to have the value of your savings bonds. So, you know, especially if they've matured, you might as well cash them in and use them to pay for college.

NNAMDIChristine, you recently asked posters in Morningstar's Personal Finance forum to tell you what financial tasks were at the top of their year-end to-do lists. What did you hear?

BENZWell, we've got a lot of investing junkies on the site, Kojo, so we had a lot of people who are looking at what's called tax loss harvesting, essentially looking at whether they've got losing positions in their portfolio, selling them out and, in some cases, replacing them with similar securities, not identical securities, but stocks and funds that give them similar market exposure, but they're able to take that tax loss.

BENZSo that was a big financial priority for a lot of our users. Another thing that I heard from users that I thought was very smart was that they were doing a look-back on the previous year's budget and looking at where their savings had fell in line -- had fallen in line with their savings targets, looking at where their spending had exceeded their targets and just kind of doing a state of the state in terms of how they're doing in terms of their budget, also how they're doing in terms of whether they're on track to hit their retirement goals.

BENZSo I always say while you're doing your rebalancing and while you're doing your portfolio checkup, pick your head up and think about the big picture. So are you on track to hit those financial goals? I think that's an excellent year-end task. One thing I would say is that it's been such a...

NNAMDIYou only have about 10 seconds.

BENZSure. Such a volatile market, but I think if you look at how you're doing, you may find that you're doing better than you think you are.

NNAMDIChristine Benz is the author of "30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances." She's director of personal finance at Morningstar, an investment research firm in Chicago. Christine, thank you for joining us.

BENZThank you, Kojo.

NNAMDIJanet Bodnar is editor of Kiplinger's Personal Finance magazine. And, Janet, always a pleasure.

BODNARMy pleasure also.

NNAMDIHappy holidays to you. And thank you all for listening. I'm Kojo Nnamdi.