Objective information about financial planning, investments, and retirement plans

8 Year-End Financial Planning Tips for 2014

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When I thought about this post I looked back at a post written about a year ago cleverly titled 7 Year-End 2013 Financial Planning Tips.  The year-end 2014 version isn’t radically different but it’s also not the same either.

Here are 8 year-end financial planning tips for 2014 that you might consider:

Consider appreciated investments for charitable giving 

This was a good idea last year and in fact always has been.  Many organizations have the capability to accept shares of individual stocks, ETFs, mutual funds, closed-end funds and other investment vehicles.  The advantage to you as the donor is that you receive a charitable deduction equal to the fair market value of the security on the date of the completed transfer to the charity.  Additionally you will not owe any tax on the gains in the investment unlike if you were to sell it.

This does not work with investments showing a loss since purchase and of course is not applicable for investments held in tax-deferred accounts such as an IRA.  I suggest consulting with a financial or tax advisor here.

Match gains and losses in your portfolio 

With the stock market having another solid year, though not nearly as good as 2013 was, year-end represents a good time to go through the taxable portion of your investment portfolio to review your gains and losses.  This is a sub-set of the rebalancing process discussed below.

Note to the extent that recognized capital losses exceed your recognized gains you can deduct an extra $3,000.  Additional losses can be carried over.  This is another case where you will want to consult a tax or financial advisor as this can get a bit complex.

Rebalance your portfolio 

With several stock market indexes at or near record highs again you could find yourself with a higher allocation to stocks across your portfolio than your financial plan calls for.  This is exposing your portfolio to more risk than anticipated.  While many of the pundits are calling for continued stock market gains through 2015, they just could be wrong.

When rebalancing take a look at all investment accounts including your 401(k), any IRAs, taxable accounts, etc.  Look at all of your investments as a consolidated portfolio.  While you are at it this is a good time to check on any changes to the lineup in your company retirement plan.  Many companies use the fall open enrollment event to also roll out changes to the 401(k) plan.

Start a self-employed retirement plan 

There are a number of retirement plan options for the self-employed.  Some such as a Solo 401(k) and pension plan require that you have the plan established prior to the end of the year if you want to make a contribution for 2014.  You work too hard not fund a retirement for yourself.

Take your required minimum distributions

If you are one of the many people who need to take a required minimum distribution from a retirement plan account prior to the end of the year you really need to get on this now.  The penalties for failing to take the distribution are steep and you will still owe the applicable income taxes on the amount of the distribution.

Use caution when buying mutual funds in taxable accounts 

This is always good advice around this time of year, but is especially important this year with many funds making large distributions.  Many mutual funds declare distributions near year-end.  You want to be careful to wait until after the date of record to buy into a fund in your taxable account in order to avoid receiving a taxable distribution based on a few days of fund ownership.  The better path, if possible, is to wait to buy the fund after the distribution has been made.  This is not an issue in a tax-deferred account such as an IRA.

Have a family financial meeting 

With many families getting together for the holidays this is a great time to hold a family financial meeting.  It is especially important for adult children and their parents to be on the same page regarding issues such as the location of the parent’s important documents like their wills and what would happen in the event of a long-term care situationWhile life events will happen, preparation and communication among family members before such an event can make dealing with any situation a bit easier. 

Get a financial plan in place 

What better time of year to get your arms around your financial situation?  If you have a financial plan in place review it and perhaps meet with your advisor to make any needed revisions.  If you don’t have one then find a qualified fee-only financial advisor to help you.  Just like any journey, achieving your financial goals requires a roadmap.  Why start the journey without one?

If you are more of a do-it-yourselfer, check out an online service like Personal Capitalor purchase the latest version of Quicken.

These are just a few year-end financial planning tips.  Everyone’s situation is different and this could dictate other year-end financial priorities for you.

The end of the year is a busy time with the holidays, parties, family get-togethers, and the like.  Make sure that your finances are in shape for the end of the year and beyond.  

What I’m Reading-Packers Reign Supreme Edition

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It’s Cyber Monday (can you say contrived promotional event) and I have already been to O’Hare to drop my daughter off.  Amazing how crowded it was even at 5 AM.

Great football games over the holiday weekend, but none better than the Packers beating the Patriots yesterday in what was deemed a Super Bowl preview.  Feels good now but the next week is another game.

Here are a few financial articles I suggest for some good Post-Thanksgiving financial reading:

Jim Blankenship offers some Year-End Charitable Giving Tips at Getting Your Financial Ducks in a Row.

Mike Piper answers a reader question Which Accounts Should I Spend From Each Year In Retirement? at Oblivious Investor.

Christine Benz provides an example of A Conservative Retirement Saver Portfolio for ETF Investors at Morningstar.com.

Larry Light shared a piece from financial advisor and blogger Jeff Rose Make Your Money Last In Retirement (Pt. 2) at Forbes.

Ben Steverman writes Hedge Funds Lose Money for Everyone, Not Just the Rich at Bloomberg.

John Wasik shares Five Ways to Protect Yourself on Cyber Monday at Forbes.

For now the Packers reign supreme but the Falcons visit Lambeau for next week’s Monday Night game and they will pose a tough challenge.  Enjoy Cyber Monday and the rest of the week.

Are You Ready For Retirement?

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To my readers:

The infographic that was originally included in this post was taken down as was the link to the firm that supplied it due to a malware warning on their site.  Please check out the many other posts on this site in the retirement category and other categories that may interest you.  I apologize for any inconvenience but your online safety in viewing my site is of the utmost importance to me.

Original post without reference to the infographic

Happy Thanksgiving to all of you and to your families.  We are thankful for having all five of us home together and the time we get to spend as family. For anyone with adult kids you know that doesn’t happen as often as we might like sometimes.

As I write this we are sitting out Black Friday as we always do and looking forward to a weekend filled with family, great leftovers, and football. Especially on Sunday when I am hoping for a Packer victory over the Partriots at Lambeau Field.

Retirement is a journey.  I can’t think of a better time to get started or to gauge your progress than now no matter what your age.  Why not take some time over the last month of year to ensure that you hit the ground running in 2015?

Five Things to do During a Stock Market Correction

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As you may or may not know the stock market has been going through some tough days recently.  For example the S&P 500 Index is down about 8% from its all-time high reached in September of this year.  While we are not officially in correction mode (this is usually defined as a 10% or greater drop in an index) there has been a lot of volatility lately.  Here are five things you should do during a stock market correction.

Do nothing

Assuming that you have a financial plan with an investment strategy in place there is really nothing to do at this point.  Ideally you’ve been rebalancing your portfolio along the way and your asset allocation is largely in line with your plan and your risk tolerance.  Making moves in reaction to a stock market correction (official or otherwise) is rarely a good idea.  At the very least wait until the dust settles.  As Aaron Rodgers told the fans in Green Bay after the Packers 1-2 start, relax.  They have since won three straight.  Sound advice for fans of the greatest team on the planet and investors as well.

Review your mutual fund holdings

I always look at rough market periods as a good time to take a look at the various mutual funds and ETFs in a portfolio.  What I’m looking for is how did they hold up compared to their peers during the market downturn.  For example during the 2008-2009 market debacle I looked at funds to see how they did in both the down market of 2008 and the up market of 2009.  If a fund did worse than the majority of its peers in 2008 I would expect to see better than average performance in the up market of 2009.  If there was under performance during both periods to me this was a huge red flag.

Don’t get caught up in the media hype

If you watch CNBC long enough you will find some expert to support just about any opinion about the stock market during any type of market situation.  This can be especially dangerous for investors who might already feel a sense of fear when the markets are tanking.  I’m not discounting the great information the media provides, but you need to take much of this with a grain of salt.  This is a good time to lean on your financial plan and your investment strategy and use these tools as a guide.

Focus on risk

Use stock market corrections and downturns to assess your portfolio’s risk and more importantly your risk tolerance.  Assess whether your portfolio has held up in line with your expectations.  If not perhaps you are taking more risk than you had planned.  Also assess your feelings about your portfolio’s performance.  If you find yourself feeling unduly fearful about what is going on perhaps it is time to revisit your allocation and your financial plan once things settle down.

Look for bargains

If you had your eye on a particular stock, ETF, or mutual fund before the market dropped perhaps this is the time to make an investment.  I don’t advocate market timing but buying a good long-term investment is even more attractive when it’s on sale so to speak.

Markets will always correct at some point.  Smart investors factor this into their plans and don’t overreact.  Be a smart investor.

Your 401(k) – A To Do List for the Rest of 2014

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In a recent post Eight Financial To Do Items for the Rest of 2014, I outlined several items for your financial to do list for the rest of 2014.  One of those items was to review your 401(k) plan.  Here are a few more steps to take with your 401(k) plan yet this year.

Review your salary deferral amount

The maximum dollar amount that you can defer from your salary is $17,500 or $23,000 if you are 50 or over at any point during 2014.  If you are not on track to max out your contributions now is a good time to see if you can increase your salary deferral percentage even by 1%.  In the long run this will put you that much farther ahead in your question to build a retirement nest egg.

Review and if needed rebalance your account

Both the S&P 500 and the Dow Jones Industrial Average have hit a number of new record highs during 2014 on the heels of a very solid 2013.  In fact the S&P 500 Index is up almost threefold since the market lows of March, 2009.  If you haven’t recently rebalanced the asset allocation of your account back to your target allocation this is an excellent time to do so.  Better still if your plan offers auto rebalancing this is a great time to sign up if you haven’t already.

Be aware of any changes to the plan

Fall is open enrollment time for employee benefits for many companies.  While changes to the level of your salary deferral contributions as well as to the investment choices you make can be done throughout the year, many companies choose this time frame to announce changes to their plan for the upcoming year.  This might include the level of the employer match, the addition of a Roth 401(k) feature, or changes to the menu of investment choices available to you.  You need to be aware of any and all changes to the plan and be ready to make any applicable adjustments based upon your situation.

Be cautious when it comes to company stock 

Perhaps as a sub-set of the rebalancing section mentioned earlier if your account includes an investment in your company’s stock this is a good time to review how much you have allocated there and if needed pare that amount down.  There are no hard and fast rules but many financial advisors suggest keeping your allocation to company stock to 10% or less.  The rational here is that you already depend upon your employer for your livelihood; if the company runs into problems you might find yourself unemployed and holding a lot of devalued company stock in your retirement plan.

Get a handle on any old 401(k) accounts 

It’s not uncommon for folks to have several old 401(k) accounts from former employers.  It’s also not uncommon for these accounts to be neglected and unwatched.  If this describes you make this the year to get your arms around these accounts and make some decisions.  Roll them over to an IRA or if eligible to your current 401(k) plan.  If leaving one or more of them with that former employer is a good decision make sure you monitor the account, rebalance when needed, etc.  The point is even if these accounts are relatively small they can add up and help as you save for retirement.  Take charge and take affirmative action here.

Understand your options should you leave your current employer 

Let’s face it the last part of the year is often when companies do layoffs.  If you suspect that you will be impacted in this way you should at least start thinking about what you will do with your 401(k) account.  The same holds true if you are looking for a new job or considering going out on your own.

As we head into football season, the kid’s activities at school, and the holidays please make some time to tend to these and perhaps other items in connection with your 401(k) plan.  For many of us our 401(k) is our primary retirement savings vehicle, make sure that it is working hard for you.

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. 

The Plutus Awards – Finance Blogs to Read and Discover

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The finalists for the 2014 Plutus Awards which celebrates the best in personal finance blogging were recently announced.  Check out the official announcement here.  I was very honored and flattered to have this blog named as a finalist in the Best Financial Planner Blog category.

What is most gratifying is that the finalists were chosen by other finance bloggers.  I am humbled by and grateful for being selected as a finalist among all of these outstanding finance blogs.  I read many of them and plan to check out the ones that I am not familiar with.

If you are looking for a list of finance blogs to read and learn from here is list of the finalists by category:

Best New Personal Finance Blog

FITnancials
Listen, Money Matters!
Rock Star Finance
Stapler Confessions
ValerieRind.com

Best-Kept Secret Personal Finance Blog

Debt Discipline
Free From Broke
L Bee and the Money Tree
The Frugal Exerciser
Wealthy Single Mommy

Best Designed Personal Finance Blog

Be Wealthy & Smart
Budget Blonde
Christian PF
Financially Blonde
Good Financial Cents

Most Humorous Personal Finance Blog

The Empowered Dollar
Financial Uproar
Frugalwoods
Len Penzo dot Com
Punch Debt in the Face

Best Microblog

@JimYih
@MMarquit
@MoneyCrashers
@rockstarfinance
@wisebread

Best Personal Finance Podcast

Cash Car Convert
Dough Roller
Listen Money Matters
Money Plan SOS
Stacking Benjamins

Best Retirement Blog

Escaping Dodge
Financial Mentor
Mr. Money Mustache
Retire by 40
Retire Happy

Best Entrepreneurship Blog

Beat the 9 to 5
Careful Cents
Create Hype
Microblogger
My Wife Quit Her Job

Best Blog for Teens/College Students/Young Adults

Broke Millennial
Making Sense of Cents
TeensGotCents
The Broke and Beautiful Life
Young Adult Money

Best International Personal Finance Blog

Monster Piggy Bank
Reach Financial Independence
The Skint Dad Blog
The Money Principle
Miss Thrifty

Best Canadian Personal Finance Blog

Blonde on a Budget
Boomer & Echo
Canadian Budget Binder
Canadian Finance Blog
Money after Graduation

Best Religious Personal Finance Blog

Bible Money Matters
Christian PF
Indebted and in Debt
Luke1428
Out of Your Rut

Best Tax Blog

The Blunt Bean Counter
Tax Girl
JoeTaxpayer
TaxProfBlog
The Wandering Tax Pro

Best Deals and Bargains Blog

$5 Dinners
Bargain Babe
Bargain Briana
CouponMom
Hip2Save

Best Frugality Blog

Club Thrifty
Frugal Rules
I Am That Lady
Pretty Frugal Living
Stapler Confessions

Best Debt Blog

Dear Debt
Debt Roundup
Enemy of Debt
Money Plan SOS
The Frugal Farmer

Best Investing Blog

Dividend Mantra
Financial Mentor
Investor Junkie
Personal Dividends
The College Investor

Best Contributor/Freelancer for Personal Finance

Cat Alford
Jason Steele
Michelle Schroeder
Miranda Marquit
Stefanie O’Connell

Best Green/Sustainability Blog

DIY Natural
Prairie Eco-Thrifter
Sustainable Life Blog
Sustainable Personal Finance
The Frugal Farmer

Best Financial Planner Blog

Financially Blonde
Good Financial Cents
Nerd’s Eye View
Mom and Dad Money
The Chicago Financial Planner

Lifetime Achievement

FMF (Free Money Finance )
FrugalTrader (Million Dollar Journey)
Jim Wang (Bargaineering)
Lazy Man (Lazy Man And Money)
Ramit Sethi (I Will Teach You To Be Rich)

BLOG OF THE YEAR

Afford Anything
Broke Millennial
Canadian Finance Blog
The Empowered Dollar
Making Sense of Cents
Mr. Money Mustache
PT Money
Stacking Benjamins
Wealthy Single Mommy
Wise Bread

Congratulations to all of the finalists.  Note I did leave off a couple of categories that were mostly internal blogging resources.

There is plenty of excellent personal finance information contained in the list above, time to get reading.

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. 

Money Conversations – Caring for Aging Parents

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Thanks to Cheryl J. Sherrard, CFP®, NAPFA Registered Advisor and Director of Planning for Clearview Wealth Management in Charlotte, NC for contributing this post.  

This post is a follow-up to my recent post Family Financial Conversations and to the post previously contributed by Cheryl’s colleague Megan Rindskopf Meaningful Family Conversations for the Holidays.

We all know that when we get married, we marry the entire family.  What we may not realize is that each of us comes into a marriage with expectations about how we will interact with and assist our families.  Most couples talk about and come to consensus on topics such as when to visit which set of parents and can usually resolve that by rotating holidays with their respective families.

However, the discussions you may not have had revolve around each of your expectations surrounding caring for aging parents and in-laws.  You may be fortunate if the prior generation has already dealt with planning for any needs that will arise in their later lives, but you and your spouse should consider what you know about their current situation, their preparedness for unexpected issues and your ability and willingness to help and supplement their care if needed. While we can’t control the specific course of events nor the time frame of how our parents age, married couples can and should proactively discuss what their expectations are and how they want to approach caring for aging parents should a need arise.

Stuck in the middle

Consider the following;   a married couple are in their fifties and are busy saving and preparing for their eventual retirement.  They both work outside the home in fulfilling careers and can finally see the end in sight for college tuition payments for their children.  Because they fully paid for their children’s educations, they believe that if they save aggressively over the next ten years, they can reach their retirement goals.   Suddenly, the husband’s mother experiences a stroke and needs extensive rehabilitation, which the husband automatically assumes they will assist with.  He doesn’t want his mom rehabbing in a facility; he wants to move her into their house and care for her there.  

However, because of the demands of his career, care and coordination for his mom would likely fall to his wife and would require her to work part-time or not at all.  The wife never considered moving parents into their home in the event of a need and although she loves her mother-in-law, she isn’t sure it would be good for their marriage or her relationship with her MIL to bring her into their home.  She is happy to coordinate care and assist on occasion, but she isn’t sure how their family can aggressively save for their own retirement if she has to scale back on work in order to provide care to her MIL.

Caring for aging parents takes planning

The example above illustrates a case where an in-depth discussion between husband and wife well in advance of any parental issues may have eliminated some misunderstandings and potential disagreements down the road.  Caring for aging parents can be stressful enough simply because it is difficult to see them struggling.  Combine that with the stressors of parents vs. in-laws, the demands of careers, teen or young adult children, saving for retirement and you have a recipe for stress and strain in a marriage.

What should you be talking about with your significant other, prior to the onset of any parental aging issues?

  • What are the expectations each of you have for how you want to care for your parents if they need your help?
  • Are the relationships (spouse, children, parents, in-laws) strong enough to withstand one of the parents being assisted by you?
  • What are your parent’s expectations for how they would want to handle a long-term care need if it occurred?
  • Do your parents have adequate resources, either assets or appropriate insurance, to cover the cost of paid caregivers?
  • Does your home have adequate space to accommodate the additional person, as well as provide some level of privacy for them and you?
  • Will daily care of a parent further inhibit your ability to adequately save for your own retirement?
  • If you decided to assist, which of you would be the likely caregiver and why? 

These are just a few of the questions that spouses/partners need to discuss, well in advance of any need on the part of a parent.  It is important to know that there is no right answer, as it will vary by the circumstances of each family and extent of the parent’s care needs.  Recognize that even if you do plan, things may change and you will have to be flexible to deal with whatever the situation presents.  However, having the discussion in advance will help to eliminate some of the stress on your relationship by bringing expectations out into the open and working to find common ground for the two of you.

Cheryl J. Sherrard, CFP®, NAPFA Registered Advisor is Director of Planning for Clearview Wealth Management in Charlotte, NC.  Cheryl can be reached at csherrard@cvwmgmt.com and via Twitter.  

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. 

Family Financial Conversations

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Family financial conversations dealing with retirement, estate planning, elder care issues and other important financial matters between parents and adult children can be difficult at best.  A recent article by Fidelity highlighted some of the key issues involved.

According to Fidelity:

“In life and money, timing is often everything. And that’s particularly true when it comes to sensitive family discussions about retirement security, eldercare, and estate planning.

According to Fidelity’s latest Intra-Family Generational Finance study,1 three-fourths of parents and their adult children agree it’s important to have frank conversations on such topics, but almost two-thirds (64%) can’t agree on when. While parents would prefer to wait until after retirement, their children want the conversations to take place well before their parents retire or experience health issues.” 

“These discussions aren’t always easy, but there can be real emotional and financial consequences when they don’t happen or lack sufficient depth,” says John Sweeney, executive vice president of retirement and investing strategies at Fidelity. “It’s absolutely critical that families come together to sort through important matters related to such things as retirement preparedness, caregiving responsibilities, estate planning, and the tax implications of an inheritance.”

Suggestions for successful family financial conversations

 

How to have key family discussions

While these steps suggested in the Fidelity piece are no guarantee of a successful dialog, I think you will agree these steps offer a solid framework for these often difficult conversations.

PREP for family financial conversations

 The Fidelity piece offered this outline (their PREP plan) to break the ice and get these family meetings going: 

Make family meetings on retirement issues easier

While every family and every family’s situation is different, this is a good framework from which to start.

What’s at stake?

These conversations can be difficult because there is a lot at stake.

  • How will your parents provide for their retirement?
  • Where will the money come from in the event of a Long-Term Care situation?
  • Who will take over your parent’s financial affairs in the event they become unable to do so?
  • What are your parent’s wishes in terms of a myriad of issues including disposition of their assets upon their death, burial, staying in their home, etc.? 

Besides these issues a lack of communication and planning can be costly to the family in terms of taxes and other issues in terms of transferring your parent’s wealth to the next generation.  While this might sound like it only pertains to the very wealthy this is not the case.

At the end of the day what is really at stake is the opportunity for parents to communicate their financial wishes to their adult children and for the children to help their parents make these desires come true.

There is nothing easy about discussing these issues and having these family financial conversations.  But any difficulties that might exist will be dwarfed by the potential guilt and regret felt by both parents and children later on if this dialog does not occur.

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. 

Time for a Mid-Year Financial Review

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It’s hard to believe that the first half of the year has come and gone already.  We enjoyed having all three of our adult children home over the holiday weekend.

Financial Review

Mid-year is always a good time for a financial review and 2014 is no exception.  So far in 2014:

  • Various stock market indexes are at or near record high levels. The Bull Market in stocks celebrated its fifth anniversary earlier this year and through June 30 the S&P 500 Index is up 190% since the March 2009 lows.
  • Bond funds and ETFs have surprised us by posting some pretty decent returns.  This is contrary to what many expected, especially in the wake of weak performance in 2013.
  • After largely not participating in the in the strong equity markets of 2013 REITS have been a top performing asset class YTD through the second quarter.
  • Emerging markets equity lost money as an asset class in 2013 and has also staged a nice recovery YTD through the first half of 2014.
  • Small cap stocks have underperformed so far in 2014 after a very outstanding 2013. 

In just about any year at the midpoint there will be asset classes that outperformed and some that have underperformed expectations.  That’s completely normal.  As far as your mid-year financial review here are a few things to consider.  These apply whether you do this yourself or if you are working with a financial advisor.

Review your financial plan 

Whether you do this now or at some other point in the year you should review your financial plan at least annually.  Given the robust stock market gains of the past five years this is a particularity opportune time for this review.

  • How are you tracking towards your financial goals?
  • Have your investment gains put you further ahead than anticipated?
  • Is it time to rethink the level of investment risk in your portfolio? 

Adjust your 401(k) deferral

If you aren’t on track to defer the maximum amount of your salary allowed ($17,500 or $23,000 if you are 50 or over at any point in 2014) try to up the percentage of your salary being deferred to the extent that you can.  Every little bit helps when saving for retirement.

Rebalance your portfolio 

This should be a standard in your financial playbook.  Different types of investments will perform differently at different times which can cause your overall portfolio to be out of balance with your target.  Too much money allocated to stocks can, for example, cause you to assume more risk than you had anticipated.

While it is a good idea to review your asset allocation at regular intervals, you don’t want to overdo rebalancing either.  I generally suggest that 401(k) participants whose plan offers auto rebalancing set the frequency to every six months.  More frequent rebalancing might be appropriate if market conditions have caused your portfolio to be severely misallocated.

Note some investment strategies call for a more tactical approach which is fine.  If you are using such a tactical approach (perhaps via an ETF strategist) you will still want to monitor what this manager is doing and that their strategy fits your plan and tolerance for risk.

Review your individual investments 

Certainly you will not want to make decisions about any investment holdings based upon short-term results but here are a few things to take into account during your mid-year financial review:

  • If you hold individual stocks where are they in relation to your target sell price?
  • Have there been key personnel changes in the management of your actively managed mutual funds?
  • Are any of your mutual funds suffering from asset bloat due to solid performance or perhaps just the greed of the mutual fund company?
  • Are the expense ratios of your index mutual funds and ETFs among the lowest available to you?
  • Has your company retirement plan added or removed any investment options?
  • Is the Target Date Fund option in your 401(k) plan really the best place for your retirement contributions? 

Review your company benefits 

I know its July but your annual Open Enrollment for employee benefits at most employers is coming up in the fall.  This is the time where you can adjust your various benefits such as health insurance, dental, etc.  Take a look at your benefits usage and your family situation as part of your financial review to see if you might need to consider adjustments in the fall.

Review your career status 

How are things going in your current job?  Are you on a solid career path?  Is it time for a change either internally or with a new employer?

A key question to ask yourself is whether you feel in danger of losing your job.  Often companies will time their layoffs for the second half of the year.  Ask yourself if approached with a buyout offer to leave would you take it.

For most of us our job is our major source of income and the vehicle that allows us to save and invest to meet financial goals such as retirement and sending our kids to college.

Start a self-employed retirement plan 

If you are self-employed you need to think about starting a retirement plan for yourself.  The SEP-IRA and the Solo 401(k) are two of the most common self-employed retirement plans, but there are other alternatives as well.

You work too hard not to save for your retirement.  If you don’t have plan in place for yourself it is time to take action.

Mid-year is a great time for a financial review.  Take some time and take stock of your situation.  Failing to plan your financial future is a plan to fail financially.

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. 

Photo credit:  Flickr