Why Do Most People Forget About Their Financial Health When It Comes To Resolutions
Why Do Most People Forget About Their Financial Health When It Comes To Resolutions?
We're already heading into March. How is everyone doing with your goals or resolutions so far? Instead of focusing on the usual 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? I’m talking about your financial plan – your fiscal health, if you will. Spring is a great time to review your plan and make whatever revisions might be indicated. With that in mind, here are 5 things you can do to get started on your financial health journey
1. Review titling of your accounts
It's not something that people think about and this is why it's worth mentioning. Account titling often occurs haphazardly – an individual opens a bank or brokerage account, meets Mr. or Miss Right, they live together or get married and … down the line there’s a problem. If one partner dies and that bank or brokerage account is still titled only in the original holder’s name, those assets can’t be accessed readily by the survivor. The solution may be as straightforward as changing to joint accounts, but it’s not always that simple. In fact, titling has implications across a wide range of estate planning issues, as well as other situations such as Medicaid eligibility, special needs qualifications and borrowing power, to mention just a few. Account titling is more than just using the right form – it can also be a tool for estate planning.
Review your account titling and determine if that’s still the arrangement you want.
2. Designate and update your beneficiaries
If you don’t correctly document and update your beneficiary designations, who gets what may be determined not according to your wishes, but by federal or state law, or by the default plan document used in your retirement accounts. When did you last update your beneficiary designations? Has something changed in your life (divorce, remarriage, births, deaths) that necessitates changing your beneficiaries? You should update your beneficiaries on anything that affects your heirs (wills, life insurance, annuities, IRAs, 401(k)s or qualified plans…the list goes on). If you’ve designated a trust as a
beneficiary, has anything changed in the tax laws regarding trusts that could affect your heirs? Have you provided for the possibility that your primary beneficiary may die before you? Have you provided for the simultaneous death of you and your spouse? You need a good estate planner to walk you through the various scenarios.
3. Check to see if your retirement plan is on track
Losses incurred during the most recent recession may have derailed and/or delayed the retirement plans of many investors. The important thing is to respond and determine – promptly and realistically – what changes might be needed. In evaluating the current state of your plan, don’t fixate solely on a number – “We’ll be fine when our retirement portfolio is worth $X” – that just isn’t the way retirement works anymore, if it ever did. You need to drill down into what types of assets you have, what your cash flow situation is and what it will be, what your contingency plans are, what rate of return you’re assuming, what inflation rate you’re assuming, how long you’re planning for, and all the other important details that go into achieving a successful retirement. The truth is retirement has a lot of moving parts that must be monitored and managed on an ongoing basis.
4. Make the indicated changes
Do you need to adjust your contributions to your IRA or other retirement plans? Do you need to adjust your tax withholding? If you’re due for a raise, how about channeling the extra money into a retirement account? Are you taking full advantage of your employer’s retirement plan options, particularly any contribution match program? Regardless of whether you’re years away from retirement or fairly close, the effects of compounding can be very significant – if you take advantage of them. Go after any problem areas – or opportunities – systematically and promptly.
5. Set up a regular review schedule with your advisor
Your financial advisor can help you with specialized tools, with impartiality, and with the experience earned by dealing with many market cycles and many different client situations. It’s vital that you communicate fully with your advisor, telling him or her not only what’s happening in your life today but what’s likely to happen or might happen in the future. Are you going to move, change jobs, have kids coming up on college age, face the possibility of significant medical expenses? Advisors can’t help you manage what they don’t know, so err on the side of over‐communicating. Establish a regular schedule for getting together and reviewing your portfolio, your financial and retirement plans, and what’s happening in your life.
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Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.
