"We're doing a lot of hand holding," said Lynn Ballou, Certified Financial Planner and managing partner at Ballou Plum Wealth Advisors. "Clients were really hopeful that Congress would set aside its differences and come to a decision, so most people don't actually know what it's going to mean to them if they go over the fiscal cliff. They're concerned but they're also just mad."
Here are a few questions advisers have been fielding from their clients.
1. What's going to happen to my money if we go over the fiscal cliff?
If the fiscal cliff isn't avoided, tax rates on income, estates, gifts, capital gains and dividends will increase, and a number of tax breaks will expire.
Income tax rates would revert to higher levels if the Bush tax cuts expire. Gift and estate tax rates are slated to soar to 55% for anything worth $1 million or more next year -- up from the current 35% tax and exemption of $5.12 million.
Ballou said it's a smart idea for certain clients to convert retirement accounts to a Roth IRA. And for clients who were planning to give big gifts next year, it could be beneficial to do it this year to avoid a big tax hit.
In addition to the rate increases, key tax breaks for families -- like the American Opportunity Credit and the Earned Income Tax Credit -- are set to revert to lower levels at the beginning of the year. The payroll tax cut is also slated to expire, which would leave 160 million workers with smaller paychecks.
Lagarde: Quick fiscal fix is not enough
2. Should I get out of the stock market?
Ross Levin, president of Accredited Investors in Minneapolis, said that many of his clients are especially concerned that going over the fiscal cliff could spark a stock market sell-off.
For those particularly worried about investment losses, Levin has been shifting their stock and bond holdings. While a typical portfolio has 70% stocks and 30% bonds, he said in some cases he will scale back the stock investment to as little as 55%.
But he says it's a bad idea to do any drastic repositioning. "As an investor, you need to be comfortable with uncertainty -- it is that uncertainty that allows you to have returns," he said.
For clients who were already planning on selling a stock next year, however, Levin said he may advise them to do it this year instead, in order to take advantage of the lower capital gains tax rate.
Otherwise, planners are telling clients not to panic.
"Some people want to take drastic actions like go to all cash," said Paul Jarvis, a CFP and portfolio manager at Bell State Bank & Trust in Fargo, North Dakota. "Investors are worried that if the fiscal cliff negotiations fail, they'll have a significant loss."
Along with making modest portfolio adjustments, Jarvis advises people to put aside enough money to last one to three years. And stash this money in an FDIC-insured savings account -- not under a mattress, Levin recommends.
Ballou said she doesn't have any clients who want to get out of the stock market completely, but she said that many have thought about selling their dividend-paying stocks because they're worried about dividend taxes increasing.
"We have to tell clients, 'Your portfolio is designed to get you where you need to go in life irrespective of tax law, so there's no rush to go out and start selling things because you think you're paying lower tax rates now."
3. Am I on track to survive a fiscal cliff?
Making it through the fiscal cliff unscathed will likely involve readjusting your spending and saving habits, advisers say.
"Many clients are saying their biggest concern is whether they're going to run out of money," said Jarvis. He recommends setting up an emergency fund, making sure investments are diversified and maximizing tax-deferred accounts like 401(k)s and IRAs.
Ballou, who has received more calls than usual in recent weeks, said many clients are particularly worried about affording income tax hikes. To help them budget accordingly, she sits down with them and looks over last year's tax returns to show them just how much taxes would increase if Congress doesn't act.
"We're looking at people's budgets to make sure they have room for an extra tax bite," she said.
Even if Congress reaches a deal and their taxes don't end up rising, this is still a good way for people to make sure they're living within their means and their finances can sustain an emergency or future tax code changes.
"It's a good reminder of what we should be doing anyway," she said.