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12 FINANCIAL
RESOLUTIONS
Review and revamp your financial plan all year long.
Instead of hauling out those familiar New Year’s
resolutions about eating less and exercising more, how
about focusing on something that’s also very good for
you in the long run – and even sooner? We’re talking
about your financial plan – your fiscal health, if you will.
The approach of a new year – or any time, for that matter –
is a great time to review your plan and make whatever
revisions might be indicated. With that in mind, here are
12 suggested resolutions that, if followed, could help you
go a long way toward attaining your financial goals.
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2
3
You can’t realistically expect to
How close did you come to what
Account titling often occurs hap-
reach a goal without knowing
you had planned to spend last
hazardly – an individual opens
where you’re starting from.
year? Where did you go off-track
a bank or brokerage account,
Using December 31 as the effec-
and what can you do about that?
meets Mr. or Miss Right, they
tive date, update your personal
Has something fundamental
live together or get married
balance sheet (assets versus
changed in your life that affected
and … down the line there’s a
liabilities, broadly speaking).
your expenses, and is that a one-
problem. If one partner dies and
You should already have – or
time item or an ongoing cost?
that bank or brokerage account
develop if you don’t – an idea
Where can you trim expenses?
is still titled only in the original
of what you’re going to need to
Although some budget items
holder’s name, those assets
reach important financial goals.
are fixed, a sharp pencil can
can’t be accessed readily by the
If you’re already retired, you also
produce significant savings on
survivor. The solution may be
need to know if the income you
other costs.
as straightforward as changing
Get your balance
sheet in order
Review your budget
and spending habits
Review the titling
of your accounts
receive from Social Security,
Some businesses engage in
to joint accounts, but it’s not
pensions, retirement plan assets
a process called zero-based
always that simple. In fact, titling
or other sources is still going to
budgeting in which ever y
has implications across a wide
support your current lifestyle.
anticipated expense must be
range of estate planning issues,
Either way, you’ve got to have a
justified again every year (at the
as well as other situations such
scorecard. Everything else really
personal level, this approach
as Medicaid eligibility, special
proceeds from this, so take the
is sometimes called zero-sum
needs qualifications and bor-
time to bring all these numbers
budgeting). In other words, the
rowing power, to mention just
up to date.
$2,500 you spent last year on
a few. Account titling is more
travel would have nothing to do
than just using the right form –
with what you budget for travel
it can also be a tool for estate
this year. Instead, you start with
planning. Review your account
what you realistically expect to
titling and determine if that’s still
have as income, then assign
the arrangement you want.
q
those dollars to your various
expense categories, while
also maintaining flexibility to
account for cost areas such as
healthcare that can’t be pinned
down precisely.
2
q
4
5
6
If you don’t correctly document
Everyone should have a certain
The ups and downs of the mar-
and update your beneficiary des-
amount of assets – six or more
kets affect your asset allocation.
ignations, who gets what may be
months of living expenses is
Appreciation among large caps
determined not according to your
a common rule of thumb – set
may tilt your portfolio into more
wishes, but by federal or state
aside in cash accounts that can
conservative territory than you’d
law, or by the default plan docu-
be accessed quickly and easily.
like or market volatility may create
ment used in your retirement
Think about where your cash
imbalance in another sector. The
accounts. When did you last
reserves are located, bearing in
question is, are you comfortable
update your beneficiary designa-
mind that only member banks of
with the current level of risk in
tions? Has something changed
the Federal Deposit Insurance
your portfolio? Risk tolerance
in your life (divorce, remarriage,
Corp. can offer FDIC insurance,
isn’t static – it changes based
births, deaths) that necessitates
and only up to a maximum of
on your net worth, age, income
changing your beneficiaries? You
$250,000 per account. The FDIC
needs, financial goals and var-
should update your beneficia-
insurance coverage limit applies
ious other considerations. The
ries on anything that affects your
per depositor, per insured
most recent recession has made
heirs (wills, life insurance, annui-
institution for each account
many investors more risk-averse.
ties, IRAs, 401(k)s or qualified
ownership category. This means
That’s certainly understandable,
plans ... the list goes on). If you’ve
that a bank customer who has
but it may be that you need to –
designated a trust as a benefi-
multiple accounts may qualify
very carefully – take on slightly
ciary, has anything changed in
for more than $250,000 in insur-
more risk to keep pace with
the tax laws regarding trusts that
ance coverage if the customer’s
your goals. You want to make
could affect your heirs? Have you
funds are deposited in different
informed decisions here. Review
provided for the possibility that
ownership categories and the
your holdings and your overall
your primary beneficiary may die
requirements for each ownership
asset allocation with your finan-
before you? Have you provided
category are met. Ownership
cial advisor and make whatever
for the simultaneous death of
categories include single, joint,
adjustments are indicated.
you and your spouse? You need
certain retirement accounts,
a good estate planner to walk you
revocable and irrevocable trust
through the various scenarios.
accounts, employee benefit plan
Designate and update
your beneficiaries
q
Evaluate your
cash holdings
accounts, and certain corporate
and government accounts.
3
Revisit your portfolio’s
asset allocation
EVERYONE SHOULD HAVE
A CERTAIN AMOUNT
OF THEIR ASSETS
SET ASIDE IN CASH
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9
Evaluate your sources
of retirement income
Review your Social
Security statement
Review the tax efficiency
of your charitable giving
Most retirees have several
If you’re not yet retired, you need
Think strategically about your
sources of income such as Social
to go online and establish an
contributions – donate low-cost-
Security, pensions, retirement
account with the Social Security
basis stocks rather than cash, for
portfolios, rental properties,
Administration – the SSA no
example. Consider establishing
notes receivable, inheritances,
longer sends individual state-
a donor-advised fund, which
etc. Every individual picture
ments of accrued benefits in the
enables you to take an upfront
is different. Think about how
mail. Review your statement, and
deduction next year for contribu-
secure each source is. Can you
be sure all your earnings over the
tions made over the next several
really count on that inheritance
years have been recorded. Use
years – and provides other ben-
Are there likely to be vacancies in
the SSA’s online calculator to
efits. Give, but do so with an eye
your properties that would inter-
compute your benefits at various
toward reducing your tax liability.
rupt the cash flow? Are the notes
retirement ages (it’s generally
receivable backed up by collat-
best to wait as long as possible
eral? The point is to know which
to begin collecting). Revise your
income sources are reliable and
spousal plan if warranted – this
which are less certain, and how
won’t apply to everyone.
q
much of your total income each
category represents. If too much
of your retirement income is from
sources you consider less than
solid, it may be time to reposition
your assets.
q
USE THE SSA’S
ONLINE CALCULATOR
TO COMPUTE YOUR
BENEFITS AT VARIOUS
RETIREMENT AGES
There is no assurance that any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss.
Asset allocation and diversification do not ensure a profit or protect against a loss. Past performance is not indicative of future results.
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Check to see if your
retirement plan is on track
Make the
indicated changes
Set up a regular review
schedule with your advisor
Losses incurred during the
By now you should have a good
Your financial advisor can help
most recent recession may
idea of where you stand overall,
you with specialized tools, with
have derailed and/or delayed
what your cash flow situation is
impartiality, and with the experi-
the retirement plans of many
(including whether you’re saving
ence earned by dealing with many
investors. The important thing
enough), what your retirement
market cycles and many different
is to respond and determine –
income picture looks like, and
client situations. It’s vital that
promptly and realistically – what
where the shortfalls or other
you communicate fully with your
changes might be needed. In
challenges are. Do you need to
advisor, telling him or her not
evaluating the current state of
adjust your contributions to your
only what’s happening in your life
your plan, don’t fixate solely on
IRA or other retirement plans?
today but what’s likely to happen
a number – “We’ll be fine when
Do you need to adjust your tax
or might happen in the future.
our retirement portfolio is worth
withholding? If you’re due for
Are you going to move, change
$X” – that just isn’t the way retire-
a raise, how about channeling
jobs, have kids coming up on col-
ment works anymore, if it ever
the extra money into a retire-
lege age, face the possibility of
did. You need to drill down into
ment account? Are you taking
significant medical expenses?
what types of assets you have,
full advantage of your employer’s
Advisors can’t help you manage
what your cash flow situation
retirement plan options, partic-
what they don’t know, so err on
is and what it will be, what your
ularly any contribution match
the side of over-communicating.
contingency plans are, what rate
program? Regardless of whether
Establish a regular schedule for
of return you’re assuming, what
you’re years away from retire-
getting together and reviewing
inflation rate you’re assuming,
ment or fairly close, the effects
your portfolio, your financial
how long you’re planning for, and
of compounding can be very sig-
and retirement plans, and what’s
all the other important details
nificant – if you take advantage
happening in your life.
that go into achieving a suc-
of them. Go after any problem
cessful retirement. The truth is
areas – or opportunities – sys-
retirement has a lot of moving
tematically and promptly.
parts that must be monitored and
managed on an ongoing basis.
S
ince we all know that resolutions tend not to survive very long, add one more to make
this a baker’s dozen. Resolve to really follow through on these – and give yourself permission
to spend a day lazing around watching movies and eating ice cream when you’re done! Just
one day, though.
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LIFE WELL PLANNED.
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