4 financial spring cleaning tipsWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
Every year I, Nolan, take everything out of my garage and do a good spring cleaning. It is amazing how much junk builds up in the garage every winter. I donate unwanted items and generally anything I haven’t used in the last two years. I move the winter items back to the storage room in the basement and bring up the spring and summer items. I put together a list of items I’m running low or out of and run over to the local hardware store so I’m prepared for the year ahead. Getting started always seems like a daunting task, but when the job is done, what a rewarding feeling it is to look at my improvements. Financial spring cleaning should also be done once a year. Use these four tips to get started this year.
Rebalance investments annually.
Some investors constantly make changes to their accounts, while other investors seem to never make a move. Changing too often can lead an investor into chasing results and paying more in added fees and expenses. At the same time, taking a “set it and forget it” approach, can cause an investor to end up with an account that gets unbalanced that could increase risks and decrease long-term performance. A good rule of thumb is to, once a year, review all of the investments and look at the asset allocation and rebalance the accounts. This can help reinforce the long-term strategy of buying low and selling high and help maintain diversification. Ask a financial professional for a review or use online tools from sites like www.morningstar.com for an investment analysis.
Check into new or expiring law changes.
As it stands now, the Bush Era tax cuts are set to expire at the end of this year. It is our opinion that tax rates will go up in the future. Thus, for many of the people we talk with right now, we are discussing Roth IRA strategies. One strategy involves making contributions into Roth IRAs. Income limitation could come back into effect next year, making this a great year for high-income earners to look at this option. Other times, a Roth conversion strategy can make sense for current retirement accounts. The main advantage for an investor is they can pay taxes now versus later, which could be at a higher rate on what could be a higher balance. This strategy gets even more attractive for investors who can pay the taxes from a source other than the retirement account. For the investor who feels their family’s tax rates will be higher in the future than they are going to be this year, these ideas should be discussed with a financial professional and an accountant.
Dust off old policies.
Old life insurance policies can be another great area to review. More competition and longer life expectancies have driven down the cost of insurance at most insurance companies. Doing an insurance policy review can be an eye opening experience on how offers vary from one company to the other. Last week, for example, when we compared the offer for a client from two different insurance companies for the same cost, one company offered 50 percent more death benefit. Sometimes, older policies can be exchanged for a new “paid up” policy, eliminating future premium payments for a policy owner. Other times, newer policies can offer additional benefits. One common theme we have been seeing lately is insurance companies offering “chronic illness” as a new rider. This can be a way for someone to get a form of long-term care insurance without paying for traditional long-term care insurance. Usually an insurance comparison can be done for little to no cost to a policy owner.
New grandchildren, a loss of a loved one, a marriage, you name it, life changes occur all of the time. As life changes occur, not only is it important to make sure your legal documents, like wills and trusts, are up to date, it is important as well to make sure beneficiary designations get updated. Many families assume that their will or trust will cover all their assets; this is not always the case. Accounts such as retirement plans, life insurance policies and annuities should contain named beneficiaries. If these accounts do not get updated as life changes occur, an account owner’s assets may not be paid out the way the owner thought. Ask the company who holds your accounts to send you a copy in writing of who the current named beneficiary is. Update any changes that need to be made and make sure the changes have been acknowledged in writing.
For more information about The Retirement Guys, tune in at 1 p.m. Saturday on 1370 WSPD or visit www.retirementguysradio.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., member FINRA/SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550
Diversification does not eliminate the risk of market losses.