What's more important - saving for children's college or your retirement?

A college education. Retirement. What do these major life events have in common?

One shared characteristic is that each comes with a price tag. Here's another: If you have school-age kids, you might be facing the challenge of having to decide which goal to save for. They're both important. So how do you make the choice?

Here are some suggestions that can help you reach a sensible solution.

* Eliminate excuses for not making a decision. Procrastination can be costly. For example, to accumulate $100,000 in five years, you'd have to deposit a little over $1,500 every month in an account that earns 4%. But with a ten-year time horizon, assuming the same return, you can build up $100,000 by socking away less than half that amount, or approximately $700 per month.

What you need to know: Estimate the total amount required for both goals, how much time you have, and how much cash you'll need to set aside on a regular basis.

* Expand your resource horizon. Once you've computed the expense side of the equation, figure out how much you can afford to save. You may find that, with one pool of income and two goals, there's not enough money to fully fund both goals.

But who says you have to pay for everything yourself? Turn an obstacle into an opportunity by searching out alternatives. For instance, while your income in retirement may be dependent in large part on your savings, there are plenty of options for paying

college tuition.

Where to look: Investigate the possibility of advanced placement credits while your child is still in high school. Other potential sources of help include scholarship prospects, federal work/study programs, and summer internships.

* Adopt a flexible approach. Broadly speaking, you have three alternatives for divvying up your available savings between the two goals. You can save for retirement only, save for college only, or opt to do both.

Yet within each alternative are creative strategies. As an illustration, you could start out by saving strictly for retirement, shift toward saving for college when your child reaches a certain age, then switch back after graduation.

Caution: Be careful of falling into the deadline trap. It's likely your kids will attend college before you retire. Since the tuition deadline is closer, you might be tempted to reduce or eliminate retirement plan contributions in the early years of your savings plan in order to focus on education savings.

But consider this: A typical retirement will generally last longer and cost more than your child's education. By putting college tuition first, you could end up with less than you need in your retirement nest egg. Instead, take your overall time horizon into account.

Capital gains and losses: New twists for 2012

The end of the year is the traditional time for securities investors to "harvest" capital losses for federal income tax purposes. But there's an added wrinkle in 2012: Due to pending tax law changes, you might try to reap more capital gains than losses. Thus, the usual strategy of harvesting losses could be turned upside down.

Here's a recap of the basic rules. The capital gains and capital losses you realize during the year are "netted" under complex rules when you file your tax return. A gain or loss is treated as being long-term if you've held the securities for more than one year. For 2012, net long-term capital gain is taxed at a maximum tax rate of 15% (0% for investors in the regular 10% and 15% tax brackets).

If you're showing a net capital gain on paper as year-end approaches, any capital losses you realize will reduce the amount of the taxable gain or offset it completely. An excess loss can then offset up to $3,000 of highly taxed ordinary income before any remainder is carried over to next year. However, the usual strategy of harvesting losses is complicated this year by three key tax law changes scheduled for 2013.

1. The maximum tax rate for net long-term capital gain will increase to 20% (10% for investors in the lower tax brackets).

2. Ordinary tax rates are going up. For example, the top rates of 33% and 35% will increase to 36% and 39.6%, respectively.

3. A special 3.8% Medicare surtax will apply to the lesser of net investment income for the year or the amount by which modified adjusted gross income (MAGI) exceeds $250,000 ($200,000 for single filers).

Barring any late legislation by Congress, investors may be inclined to harvest capital gains instead of losses at year-end. As a result, you can benefit from the favorable tax rates in effect for 2012. If you've already realized short-term gains in 2012, you might want to realize short-term losses to offset those gains. But don't use short-term losses to offset long-term gains, if you can help it, because long-term gains are taxed at a maximum rate of only 15% in 2012.

Other considerations may come into play. The best approach is to do what's best for your situation. Contact us for assistance in reviewing your options.

Know the facts about IPOs

Do you know anybody who's tripled his money investing in the IPO (initial public offering) of a hotshot new company? It can happen. And many investors thought the recent Facebook IPO was a way to quick riches.

Yet the truth is, most investors don't make money playing IPOs. It's just that no one brags when they lose money. Nonetheless, investors of all kinds are lined up for a shot at the next IPO. So it pays to know the facts before diving in.

First bit of advice: Don't bet the farm. The problem is that generally IPOs are issued by companies with no track record, inexperienced management, and few assets. And, unfortunately, the underwriters for these IPOs are motivated to complete the transaction, collect their fees, and move on. Their compensation is linked not to the quality of the firms they take public, but rather to the number of deals they sell to the public.

To protect yourself, you must do your homework, as you would for any investment. A company planning an IPO writes a prospectus that describes the business and details management's plans for what they intend to do with the money, how fast they intend the company to grow, and what profits they expect. The prospectus also discusses the competition and markets, and, most importantly, describes the risks of investing in the IPO.

Do the necessary research, and be sure you understand the risks before you make an investment in an IPO.

How to fix tax return errors

Suppose you discover a mistake or omission of an item

on the 2011 federal tax return you recently filed.

Should you ignore the error? Although it can depend on

the nature and significance of the item, the answer is

generally "no." But the matter may be resolved by filing

an amended 2011 return.

Clearly, you should file an amended return right away

if you've paid less tax than the amount you actually

owe for 2011. If the IRS eventually detects the mistake,

it can require you to pay the difference in tax liability

plus substantial interest and penalties. As a general

rule, the IRS has three years in which to audit a return,

but the statute of limitations is extended to six years

if you underreport income by more than 25%. And there's

no time limit if fraud is involved.

When a change works in your favor, consider all the

ramifications. If you stand to receive only a few extra

dollars back, it's probably not worth the effort. This

also gives the IRS another chance to scrutinize your

return. On the other hand, if you expect a sizable refund

in return, it usually makes sense to pursue this action.

One of the common reasons for amending a return is to

change your tax filing status or dependency exemptions.

For instance, there could be some confusion over

claiming exemptions for children following a divorce.

Similarly, you may have overlooked special deductions

or credits available on 2011 returns.

If you discover an error or missing information on a

return you already filed, give us a call. We can review

the situation with you and help you file an amended

return if necessary.