As your financial partner, we care about your future. A yearly review of your financial and retirement plans is the key to helping you stay on the right path to reach your goals.
An annual review of your financials and retirement plans can take place any time during the year and can help you better grasp your overall financial planning efforts. Your annual review gives you a chance to sit down with your financial advisor and think about your family’s financial goals, such as saving for retirement, a house, or a child’s education. Some things you may want to consider include reducing taxes on your investments, protecting your income, or building a financial safety net. Once you feel as though you're on the right track, you can start to work on ensuring that you are investing in accordance to your goals. And while you are looking at your accounts and holdings, be sure you're checking things like beneficiaries and completing a health care proxy, which can have serious consequences if neglected.
Here are some important questions to ask your financial adviser when you do an annual review…
1. Is my investment strategy on track?
No matter how many accounts you have, your annual review should revisit each of your priorities and your strategy for reaching them, making any adjustments as necessary. At least once a year, check your target asset mix to ensure that it continues to meet your time frame, risk tolerance, needs, and preferences, and to perform any modifications that might be necessary in light of the past year’s market performance.
Your advisor can help you look at specific investments and decide whether they still have a role in your investment portfolio. It’s crucial to make sure your investments match your time frames or specific goals. Some investment goals may be short-term such as saving for a new car, a vacation home, or travel, while others may be long-term such as saving for a child’s education or your retirement.
2. Am I saving tax efficiently?
Are you taking the time to explore strategies to help defer, reduce, or more efficiently manage taxes on your investments?
While you don't have control over market returns or tax law, you do have control over how you use your investment accounts that can offer certain tax advantages. This approach is sometimes called Active Asset Location. The Active Asset Location strategy allows you to choose which assets to leave in your taxable accounts and which to keep in your tax-advantaged accounts. A helpful tidbit to remember when considering the tax efficiency of your accounts is the more tax inefficient an investment is, likely the more tax you pay on it.
3. Am I protecting my income?
In order to protect your hard earned income, it’s wise to review your family’s insurance needs annually to make sure you have the right amount and type of insurance to keep you and your family covered. Unexpected circumstances can derail your financial plan.
Life insurance is a good place to start. If your planning of having children, you might want to increase the amount of your life insurance to protect your loved ones. However, many people find as their children reach adulthood, it's better to decrease life insurance. If you do reduce your life insurance, be thrifty and apply the savings toward your health insurance, which becomes more critical as you age and costs continue to add up.
One more thing: Don't forget to check to make sure your insurance beneficiary designations are up to date!
4. Am I preserving my assets?
Your annual review is the perfect time to make sure you have an estate plan, and that it still reflects your family and financial situation. It is very important to make sure key individuals know where to find relevant documents and information.
If you do have a plan, there are four big events to consider that affect estate plans: marriage, divorce, birth, and death. Changing careers, moving, having children or grandchildren, or losing a loved one can also have a big impact on your plan overall.
5. How does my plan affect my family?
Taking time for annual reviews can greatly help you prioritize financial decisions necessary to support your family’s goals across the generations. It can help you bring your family together to sort through important matters sometimes neglected, such as college savings, care-giving responsibilities, health care decisions, estate planning, and the tax implications of an inheritance.
*Asset allocation and diversification do not guarantee a profit or protect against a loss. Tax, legal, or Social Security claiming advice is not offered through, nor supervised by Lincoln Investment or Legend Advisory.
It is understandable that all this might be a bit overwhelming, but an annual review is well worth the effort when you take into account all the hard work you have invested into building and protecting your wealth. Don't forget, we're here to help you through every step of the way. Contact us with any questions you may have.