Posted 5:42 PM 12/27/2012 : Advice on dealing with the fiscal cliff
With just days to go until the country goes over the fiscal cliff and no deal in sight in congress, local financial planners are getting a lot of questions about what the automatic spending cuts and tax increases could mean for people in Colorado.
The cliff has been looming for over a year now and Craig Carnick with Carnick & Company has been preparing his clients.
"People are very confused, so is our congress and president, we have a few days left," Carnick explained. "Nobody really knows if they're going to pull something out of the fire."
Carnick has cautioned clients not to make drastic changes until the end result is clear.
"But there are some things we can depend on that are really going to happen," he explained.
According to Carnick, one of the biggest and most widespread impacts will be a raise in the social security tax and other possible changes that have forced payroll companies to wait until the last minute to make changes.
"Payroll software hasn't been updated yet because all the companies are waiting on what the legislation is going to be," he described.
That means your first paycheck next year won't have the right amount of money withheld for taxes so it will be bigger than it's supposed to see. Once companies know how much to withhold they'll make up for it in the next few checks, so save as much as you can.
"Paychecks could be a little bit smaller in January," Carnick explained. "You might want to be careful."
But, when it comes to changing investment accounts, selling stocks, adjusting your 401(k) or just worrying sick about taxes in anticipation of the fiscal cliff Carnick advises everyone to avoid panic and wait to see what happens.
"It's not like the Mayan calendar, the world's not going to end," he described. "Right now it's just a time to stay calm, watch the ball fall in time's square and see what congress produces in the next few weeks."
Carnick said he was hopeful that low holiday shopping sales, while bad for the economy, mean people have saved money and are prepared to deal with the fiscal cliff whether congress comes up with a solution before or after the country goes over the cliff.