✔ Review your retirement savings plans

Saving for retirement in an individual retirement account (IRA), 401(k), or another retirement plan is a nice way to enjoy some tax relief. As you put together your annual financial plan, you should consider the following vehicles:

☐ Decide whether a Roth or Traditional IRA is best for you now.
☐ Convert a traditional IRA to a Roth IRA.
☐ Do the same for your 401(k), which can also be Roth or regular.
☐ Rollover any old 401(k) accounts from a previous employer into your IRA.
☐ Increase or decrease your annual contribution amounts to retirement accounts.

✔ Review your investments

It’s important for investors to take stock of where their investments are during the annual financial planning process. This is especially true when the economy undergoes a shift, like right now. This is where the services of a fiduciary financial advisor may help tremendously:

☐ Check your asset allocation.
☐ Then figure out which investments will do the best job of meeting your asset allocation goals.

✔ Rebalance your portfolio

Periodically rebalancing your portfolio ensures that you’re not carrying too much risk or wasting your investment dollars on securities that aren’t generating a decent rate of return. It also makes sure that your current portfolio reflects your investment strategy (changes in the market often cause a shift that needs to be corrected to maintain your planned diversification).

☐ Look at which asset classes you have in your portfolio and if there are any gaps. If necessary, rebalance your investments to meet your current strategy.

✔ Tackle end-of-year tax planning for investments

While you’re looking over your portfolio and rebalancing, don’t forget to factor in how selling off assets may affect your tax liability. If you’re selling investments at a profit, you’ll be responsible for paying short- or long-term capital gains tax, depending on how long you held the assets. Consider these strategies:

☐ Harvest tax losses by replacing losing investments with different ones to offset a potentially higher tax bill.
☐ Look into whether you should offset capital gains and losses.
☐ Investigate whether it makes sense to use appreciated securities to make charitable donations or support lower-income family members.

✔ Update your financial emergency plan

A sizable emergency fund is helpful if you run into a financial rainy day; be sure you have socked away adequate resources. While you’re at it, look at your broader emergency plan as a whole.

☐ If you don’t have three to six months’ worth of expenses tucked away, building your emergency savings should be a top priority.
☐ Invest in insurance: For example, are you covered for a temporary disability?
☐ Make sure you have a financial and medical power of attorney in place.

These are things you should be thinking about as you finalize your annual financial plan.

✔ Look ahead to next year’s savings

As you move into a new year, think about where else you could be saving money to fully fund your emergency savings and put aside additional dollars for the future. Consider whether you should:

☐ Refinance your mortgage.
☐ Rethink your car insurance.
☐ Lower your food bill.
☐ Utilize Flex Spending or Health Savings Accounts.
☐ Cut the cable TV cord.
☐ Curb your energy bill.
☐ Divert your paycheck to savings, by contributing more to retirement accounts or funneling money directly from your paycheck to an emergency savings account.

✔ Work on building alternative income streams for retirement

A 401(k), pension plan, or Social Security benefits may all be potential sources of income in retirement, but they’re not your only options. Figure out what else you could add:

☐ Investing in a rental property and becoming a landlord can provide regular income.
☐ A part-time job/small business may be the right solution to adding to your income.
☐ If funds are tight and you own your home, investigate whether a reverse mortgage is a good solution for you.
☐ Think about purchasing dividend stocks, starting a side hustle, creating a website that you can monetize, or making investments in peer-to-peer lending. These options require varying degrees of time and money to get started, but they all provide potential avenues for boosting income in retirement.

The Bottom Line

An annual financial plan is an exceptionally valuable tool for your life (and peace of mind) today and for your future. Best-case scenario: You’ve checked off all the items on this punch list by now. If not, don’t hesitate to pencil in time on your calendar to get the year started on the right foot. We at Gainplan would be happy to help you think through your issues and give you an objective review of your plan.

This website commentary reflects the personal opinions and analyses of Gainplan LLC employees. It does not describe Gainplan LLC’s advisory services or client investment performance. Views in the commentary may change anytime without notice. Nothing here constitutes investment advice, performance data, or recommendations for specific securities, transactions, or strategies. Mentioning a security or its performance is not a buy or sell recommendation. Gainplan LLC uses various investment strategies, not all discussed here. Investing in securities carries risks, including loss. Past performance does not guarantee future results.

Gainplan LLC provides links to third-party websites for convenience. Clicking these links leaves our website. Gainplan LLC is not responsible for errors, omissions, or content on third-party sites and does not necessarily endorse their information. Users accessing these sites must follow their terms and assume all risks.