Midyear checkup: Five things to review now

Review investments, see whether you can reduce taxes, protect what you have, and do some housekeeping.

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It’s summer. You’re thinking beach, 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 those accounts and holdings, 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 your goal based on the current real estate market and college tuition costs.

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.

2. Check your investments.

This is also the time to see what you own, to ensure that your investment mix continues to meet your needs, and to 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 asset allocation. 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 asset mix.

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.

And you can contribute more this year. For 2016, you can contribute $18,000 of pretax dollars to your 401(k) or 403(b). Also, those age 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 2016. 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 2015 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 these 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.

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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Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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