Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some continued
education for some credentials I maintain and it occurred to me that we all
could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
Midyear $ checkup: 5 things to review now
Review goals, investments, taxes, and insurance—plus some
planning.
FIDELITY VIEWPOINTS 06/16/2021 7 MIN READ
Key
takeaways
- Review your financial goals—and the investments
that go along with them—to see if anything needs to change.
- Get a tax break by saving in tax-advantaged
accounts.
- Protect yourself and loved ones with insurance
and important legal documents such as wills, health care proxies, and
more.
Summer is a good time to catch up on your to-do list. One way to
do that is by taking stock of your finances with a midyear checkup.
That could accomplish several things. You can think about your
financial goals, such as saving for retirement, a house, a child's education,
or a financial cushion, and then make sure that you're investing appropriately
for those goals. And while you're looking at your financial accounts, you can
take care of "housekeeping" items such as checking beneficiaries, which
isn't complicated and can have serious consequences if neglected.
Here are 5 things to do in a midyear review.
1.
Review your financial goals
|
0:00 |
|
/ |
|
21:47 |
|
Menu |
When to Question Your Financial Instincts
© 2021 These presentations are provided for informational
purposes only.
You probably have several savings goals and accounts. Your midyear
financial review should revisit each of your priorities. Since your ability to
save may be affected by your spending, it can make sense to review your
spending and see how it lines up with your plan. If expenses have gotten out of
hand, look for ways to pare back.
Read Viewpoints on
Fidelity.com: 50/15/5: a
spending and saving rule of thumb
Next look at how much you’re saving for each of your goals. If
your life situation has changed, make adjustments as necessary. It can be
important to go through this exercise even if nothing has changed to help
ensure that your plans stay on track.
For example, if you've been saving for a new home or your
children's college education, you might want to adjust those goals based on the
current real estate market or college tuition costs. You may need to save more
or less money to reach your goals.
It’s important to make retirement savings a priority as well—even
thought it may be decades away. Review the amount you’re able to save and
evaluate if it will be enough to let you maintain your lifestyle in retirement.
Not sure how much money you may need in retirement? Read Viewpoints on
Fidelity.com: How much do
I need to retire?
At the same time, check the beneficiaries you've listed on your
accounts, no matter what age you are. Your beneficiary designations supersede
any directions in your will for accounts that have them—so consistency in who
you name as a beneficiary is important.
You can also name beneficiaries on a regular bank or brokerage
account—even if it wasn’t part of the account opening process. Make sure your
accounts are also titled appropriately for your needs as well.
Tip: Find out
how to update your beneficiaries
To learn more about estate planning, read Managing
estate planning
2.
Check your investments
This is also the time to see what you own, ensure that your
investment mix continues to meet your needs, and make any changes that might be
necessary. Start by assessing your mix of stocks, bonds, and cash to see if it
still matches your risk tolerance, time frame for investing, and financial
situation. Don’t forget to include your company stock plans—if you have one, it
should be included in your midyear review.
It’s a good idea to review your investment mix and compare it to
the target you’re aiming for. For example, if you wanted to have 60% of your
portfolio devoted to stocks and it’s now 70%, you could consider rebalancing.
Then, look at specific investments and evaluate their role in your
portfolio. If you own mutual funds, see whether they are performing as you
expected and if there have been any changes to the fund's investment approach.
If you own stock in individual companies, evaluate each company’s current
status and prospects, and decide whether they justify being kept in your
portfolio.
Read Viewpoints on
Fidelity.com: Give your
portfolio a checkup and The guide
to diversification
3.
Get a tax break
A simple way to reduce your taxes is to take advantage of
opportunities to lower your taxable income by contributing to tax-advantaged
retirement accounts like a 401(k) or IRA.
If you have a high deductible health plan (HDHP) and are eligible
for a health savings account (HSA), contributing to the HSA can also give you a
tax break. A taxpayer with a marginal tax rate of 24%, for example, could
potentially realize a federal tax savings of $240 for every $1,000 in pre-tax
dollars contributed to an HSA, traditional 401(k), 403(b), or IRA.
If you have an HDHP, it can be a good idea to contribute at least
enough to your HSA to cover your anticipated health care expenses. If you’re
not sure how much your health care expenses may be, it’s a good idea to put in
at least enough to cover your deductible. You can always change the
contribution amount later if you find you need to. HSA contributions are
pre-tax and tax-deductible. When you use money saved in an HSA on qualified
medical expenses now or in retirement, the withdrawals—of contributions and any
investment returns—are tax-free.
Read Viewpoints on
Fidelity.com: 3 healthy
habits for health savings accounts
If you have a retirement plan at work, make sure you’re
contributing at least enough to get the entire match from your employer. If you
can save more, one option is to contribute the maximum to your HSA. You can
change your HSA contribution at any time. If your HSA is funded for the year
and you’ve gotten your match, see if you can save more in your in your
workplace retirement account.
Annual
contribution limits
In 2021, you can contribute up to $19,500 pre-tax to your 401(k).
If you're at least age 50, you can add a catch-up contribution of $6,500
pre-tax.
The annual contribution limit for IRAs, including Roth and
traditional IRAs, is $6,000. If you're age 50 or older, you can contribute an
additional $1,000 annually.
The 2021 IRS contribution limits for health savings accounts
(HSAs) are $3,600 for individual coverage and $7,200 for family coverage.
If you're 55 or older during the tax year, you may be able to make
a catch-up contribution, up to $1,000 per year. Your spouse, if age 55 or
older, could also make a catch-up contribution, but will need to open their own
HSA.
For contribution limits on small business retirement plans,
read: Small-business retirement plans
4.
Protect what's yours
It's wise to evaluate your insurance needs annually to make sure
you have the right amount and type of insurance to cover unforeseen
circumstances that can derail your finances.
Life insurance may be a good place to start. If your family is
growing, you might want to increase the amount of your life insurance to
protect your loved ones. Life insurance is mainly designed to replace lost
income. As you get older, there are fewer years of income in the future, so the
amount of income to replace decreases.
Read Viewpoints on
Fidelity.com: What you
should know about life insurance
You might also benefit from looking into long-term care insurance,
which may offer a variety of features and options.
Don't forget disability insurance as well. You may be covered at
work. But it’s a good idea to make sure you're adequately covered just in case
anything prevents you from working and earning a paycheck for an extended
period of time. Consider if you would be able to pay for essentials or if your
disability benefits may leave a shortfall.
Be sure to check your insurance beneficiary designations, too.
5.
Review important paperwork
Thinking about a will, health care proxy, and power of attorney
can be an uncomfortable topic, but consider the alternative: Do you want
someone else making important financial and health decisions on your behalf
without any input from you? If you don't have any of these key documents, take
the time to set them up.
All of these documents are part of an estate plan—which is
something everyone can use. Read Viewpoints on
Fidelity.com: 5 steps to create an estate plan
If you have these documents in place, review your paperwork and
think about any life events you’ve been through. Marriage, divorce, birth, and
death are 4 big events that can affect estate plans, but there are other
factors that could affect your planning.
Make sure the people you care about know where to find relevant
documents and information too. Consider using a secure virtual safe such
as FidSafe® to store copies of
important documents and other information, like passwords, financial
statements, and wills.
It's
worth it
While this might sound like a lot of ground to cover, a midyear
checkup is well worth the effort when you consider the hard work you've
invested in building and protecting your savings.
(As with any of these informative articles,
anyone who needs someone to talk to about
this
very subject contact me and I can direct you to a knowledgeable advisor).
No comments:
Post a Comment