Midyear $ checkup: Five things to review now

Review goals, investments, and tax breaks, protect what you have, and do some financial housekeeping.

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Key takeaways

✔  Review your financial goals—and the investments that go along with them—to see if anything has changed.

✔  Get a tax break and save for retirement at the same time. If you aren’t contributing the max to retirement savings accounts, see if you can bump up contributions.

✔  Protect yourself and loved ones with insurance and important paperwork like wills, health care proxies, and more.

These days you’re probably thinking about the beach, the mountains, or a road trip with the family. But summer, when life may be a little slower and your mind a little less cluttered, is actually a good time to do a quick midyear financial reality check.

A midyear checkup can accomplish several things. You can stop and 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 are investing appropriately for those goals. And while you are looking at your accounts, take care of “housekeeping” items, too, like checking beneficiaries, which isn’t complicated but can have serious consequences if neglected.

Here are five things to do in a midyear review.

1. Review your financial goals.

You probably have several savings goals and accounts. Your annual financial review should revisit each of your priorities. If your situation has changed, make adjustments as necessary.

For instance, 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 and college tuition costs.

Also check your retirement savings accounts to see whether you’re saving enough to get or stay on track to live the lifestyle you want in retirement.

While you are looking at your accounts, check who you named as your beneficiaries, no matter what age you are. Your retirement account assets pass directly to the beneficiaries you designate with your account custodian, trustee, or plan administrator. Plus, your beneficiary designations supersede any accommodation you have made in your will for your retirement account. So who you name is important.

You can also name beneficiaries on a regular bank or brokerage account.

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 due to the past year’s market performance. Start by assessing your mix of stocks, bonds, and cash to see whether it still matches your target investment mix. In general, if any of your allocation is more than 10% away from your target, you may want to rebalance it back to your desired investment mix. And if you don’t have a target investment mix, create one in our Planning & Guidance Center.

Then, look at specific investments and evaluate whether they continue to have a role in your portfolio. If you own mutual funds, see whether they are performing as you expected and whether 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 keeping it.

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 a tax-advantaged retirement account. A taxpayer with a marginal tax rate of 25%, for example, could potentially realize a tax savings of $250 for every $1,000 in pretax dollars contributed to a traditional 401(k), 403(b), or IRA.

Have you contributed as much as you can? For 2017, you can contribute $18,000 of pretax dollars to your 401(k) or 403(b). Also, those aged 50 and older may make a catch-up contribution of as much as $6,000, meaning they can contribute $24,000 in total.

Eligible taxpayers can contribute up to $5,500 (or up to the level of earned income, if lower) to a traditional or Roth IRA, or $6,500 if they have reached age 50, for 2017. Self-employed individuals with a simplified employee pension (SEP) plan can contribute 25% of their compensation, to a maximum of $53,000.

If you received a big tax refund, wrote a sizeable check for tax due with your 2016 return, or experienced any life changes, you should evaluate whether you’re having too much or too little in taxes withheld from your pay. The IRS withholding calculator can help you determine how much—if any—of an adjustment to make.

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. On the other hand, most people find that as they get older—and their net worth climbs and their children reach adulthood—they need less life insurance.

If you choose to reduce your life insurance, you could apply the savings toward your health insurance, which becomes more critical as you age and typically continues to increase in cost. You might also benefit from looking into long term care insurance, which may offer a variety of features and options.

Check your insurance beneficiary designations. It’s easy to do, but it could have a huge negative impact if it’s neglected.

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. If you have them, review not only your paperwork but any life events that have occurred. Marriage, divorce, birth, and death are the four big events that affect estate plans, but you may also want to consider other factors that could affect your planning.

Make sure key individuals know where to find relevant documents and information too. Consider using secure virtual safes, such as FidSafe®1, to store copies of important documents and other information, such as passwords, financial statements, and wills.

It’s worth it

While this might sound like a lot of ground to cover, a midyear check is well worth the effort when you consider the hard work you have invested in building and protecting your savings.

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