I hope that everyone is enjoying a wonderful holiday weekend. We’ve been watching a lot of college football (Fight-On USC Trojans!) and traveling back and forth between two colleges with our kids. Holiday weekends are a great time to catch up with family and friends. It’s also a great time to review your financial situation.
Two-thirds of 2012 is already in the books. The markets have done pretty well through the end of August. Here are some representative returns YTD:
| S&P 500 | +13.51% |
| S&P 400 Mid Cap ETF (ticker MDY) | +11.45% * |
| Russell 2000 Small Cap ETF (IWM) | +10.65% * |
| MSCI EAFE Index (foreign stocks) | +6.92% |
| Vanguard REIT ETF (VNQ) | +16.97% * |
| Barclays Aggregated US Bond Index | +3.85% |
*Net asset value return of the ETF.
Here are some areas that merit your attention:
Your 401(k) plan. By now all plan participants have received the required disclosure from their plan about the fees associated with the investment options offered. While many participants may be inclined to toss this notification, I’d suggest that you take a look at it. How costly are your options? How do the returns stack up against the benchmarks listed? The information provided on the notification is simply a starting point. Take the initiative, do some additional research on your investment options on Morningstar or other financial websites. The websites of many plan providers offer Morningstar data on the investments offered, so that might be a good starting point for you.
Your asset allocation. With the nice returns on equities so far this year, your portfolio might be over weight in equities compared to your planned asset allocation. If you haven’t done so in awhile this would be a good time to take a look at your allocations to make sure they are in line. When doing so be sure to take a total portfolio view. Look at your retirement accounts (IRAs, 401(k)s, etc.) as well as your taxable accounts. Consider directing new contributions/additions to your accounts to those areas that are underweight. When buying or selling within accounts consider doing so within tax deferred accounts, or taking losses in taxable accounts if possible.
Fund or start a retirement plan if you are self-employed. You work hard for the money you earn. Unlike rank and file employees of a company, you are responsible for your own retirement savings. As soon as you can I suggest that you start saving for your retirement. In some cases an IRA might be the right vehicle. As your business grows you can look at options that allow for greater levels of retirement contributions such as a SEP IRA, a Solo 401(k), or even a Cash Balance Pension Plan. If you are thinking of starting a plan yet this year, consult with your CPA or a qualified financial advisor as the deadlines and requirements for each type of plan differ. If you already have a retirement plan in place be sure to fund it to the greatest extent that you can.
Get a financial plan in place. Whether you do this yourself or hire a professional to guide you through the process, there is no better time than the present to see where you stand and how you are tracking towards your financial goals. While this process will benefit you regardless of your age, it is especially critical for folks within 15 years or less of retirement. If you already have a plan in place, review it to see if you are still on track. Remember financial planning is an ongoing process, not a one-time event. Your life changes, you may have gotten married, divorced, had a child, changed jobs or lost a job, or become a widow or widower. Or perhaps your financial aspirations have simply changed. These are all good reasons to develop a financial plan or revisit an existing one.
Enjoy your Labor Day barbeque, but take some time in the near future to make sure you are on top of your financial situation.
Please feel free to contact me with your financial planning questions.
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