It’s not unusual for people to start a new year plotting out all they want to achieve in the coming months, whether that involves a new exercise regimen, a career switch or checking a few more items off their bucket lists. But the beginning of the year also can be a great time to work on your investment portfolio and financial plan.
After such a bullish market year in 2017, it might not seem necessary to make any changes. But the moves you make now could affect the success of your plan for the rest of 2018 — and possibly for years to come.
If you haven’t done so yet, consider making an appointment with your financial and tax professionals to assess where you stand. Here are some timely items to address now and add to your annual financial checklist:
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Look to rebalance your portfolio.
Thanks to another record-setting year in the market in 2017, many investors’ accounts are up. That’s a great thing, but it also means your asset allocation could be skewed. For example, a lot of people are likely overweight in the large-cap technology sector (Amazon, Facebook, Apple, etc.). If you own stock in these types of companies, you easily could have drifted from your target allocation without even realizing it. You could have started 2017 at a 65% stock to 35% bond allocation, but your mix today could be closer to 75%/25%. I understand it’s tough to rebalance when things are going so well, but it’s important to stick to your plan because it was originally designed to protect your money as well as grow it. (Need more incentive? Don’t forget the dot-com bubble of 2000.)
Look to maximize your savings.
A new year represents a new start, so this is a good time to focus on your savings in general and what you’re stashing away for retirement in particular. Many people focus their savings in one (or more) of these three directions: an IRA, a 401(k) or an HSA. You’ll want to review whether you are making the most of these savings opportunities. For example, if your employer offers a 401(k) and you aren’t contributing to it, you need to get started. Preferably, you’ll want to contribute up to the company’s matching amount, if they offer one. There also may be the likelihood you will receive a pay raise this year. If that happens, consider allocating a portion of it — or maybe even all of it — to your savings. Finally, I always like to tell people that if they are looking to save more, they should start off with an amount they feel is manageable. You can always increase the amount later. That’s better than overextending yourself by setting aside too much and then realizing you can’t pay your bills.
Look to refresh your financial plan.
The run-up in the stock market has most likely had a positive effect on your overall financial plan; therefore, you may have more retirement options available now than you thought. It’s smart to stick to your plan, but it is important to understand how it reacts in both good and bad markets. Setting at least an annual meeting with your adviser to go over your goals, reassess where you stand and consider new strategies makes good sense. Planning always needs to be done, whether the sun is shining or it’s raining buckets.
I often tell my clients that financial planning is a process, not a one-time event. The start of a new year is a great opportunity to look around, figure out where you are and where you want to be, and then implement the recommendations that will propel you toward your retirement goals.
Kim Franke-Folstad contributed to this article.
-
Is Your Social Security Earnings Record Wrong? Here's How to Fix ItYour Social Security benefits are based on your Social Security earnings record. It's important to review your records to avoid having your benefits reduced.
-
Stock Market Today: Markets Discount Another U.S. DowngradeAfter Friday's closing bell, Moody's followed Standard & Poor's and Fitch and cut its rating on U.S. government debt.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
In Your 50s? We Need to Talk About Long-Term CareMany people don't like thinking about long-term care, but most people will need it. This financial professional recommends planning for these costs as early as possible to avoid stress later.
-
Social Security Pop Quiz: Are You Among the 89% of Americans Who'd Fail?Shockingly few people have any clue what their Social Security benefits could be. This financial adviser notes it's essential to understand that info and when it might be best to access your benefits.
-
Such Attractive Yields in High-Grade Munis Are Rare and May Not Last LongAccording to this munis expert, the last time munis were this cheap was a brief period in 2023. If you kicked yourself for missing out then, you have a second chance now.
-
Financial Analyst Sees a Bright Present for Municipal Bond InvestorsHigh-tax-bracket investors have an excellent opportunity to secure low-volatility, high-quality returns at yield levels rarely seen in over a decade.
-
I'm an Insurance Pro: How Not to Get Dumped by Your Insurance AgentYour insurance agent or broker might show you the door if you do any of these five things. Being a good customer is about more than paying your bill on time.
-
Two Estate Planning Issues You Should Never OverlookThis estate planning attorney explains why proper asset titling and beneficiary designations make a big difference when it's time to transfer your wealth.
