Are you ready for the end of the year where your finances are concerned? Most of us really do not think about our finances on an annual basis but we need to for many different reasons. Many worry about their finances at the beginning of the year but I would venture to guess the majority do not get around to their finances until the end of the year or the beginning of the following when you do your taxes. And if we were to be honest with ourselves would we have to admit we are really also not prepared for retirement. In general we are just not saving enough plain and simple.
Most people will rely heavily on Social Security and are not doing things now that will make their retirement easier when it does happen. Your retirement account is your funding for possibly decades of retirement and you need to manage it to the best of your ability or find someone who for a manageable fee will assist you in the management of your retirement accounts. A corporate 401(k) and individual retirement accounts are the most common forms of retirement accounts people need to worry about but management is only a portion of the equation. The remaining part is at what level are you saving?
While almost who works can have an IRA most companies also have 401(k) plans that all employees can participate in. These are two great vehicles for retirement that allow for tax savings in some cases and allow your money to grow tax deferred for many years. The fourth quarter is a good point at which to examine your accounts, level of contributions, asset allocation and beneficiaries.
On an annual basis you need to check your beneficiaries on any account that has one to make sure they are current and up to date. You do not want spouse #1 to receive what you thought you were leaving your current spouse. Any time you have a life event you need to make sure you have the correct beneficiaries listed.
In your 401(k) you are allowed to contribute up to $17,500 and an additional $5,500 if you are over the age of 50. Okay those figures may not be all that realistic to the majority of people but in many companies there is a company match on a portion of what you elect to contribute. Always contribute the full amount that the company matches otherwise you are leaving free money on the table so to speak.
You may or may not think of this and in many circles advisors do not advocate rebalancing your portfolio’s assets. Some do not think it is wise to sell assets that are making money and purchasing assets that are maybe not having as good a return. But by rebalancing your assets you will sell some of your leaders to use that money to buy the ones who are lagging. By doing this you keep a balance you wished to achieve at the start of your investing. A simple way to look at this is if time cost averaging is seen as a good way to invest allowing you to buy assets at different price levels this works much the same way. You will sell fewer higher returning assets which will allow you to buy lower returning ones. And since investing is cyclical this will vary from year to year and work much the same way as cost averaging.
If you change jobs do not leave your old 401(k) with your previous employer but do not cash it in either. If you can I would recommend rolling it over into your new companies 401(k) if they allow that and have good investment options. If they do not allow that to happen or are lacking in good investment options roll it over into an IRA where you have control over what it will be invested in and do not leave it to chance or in some cases to be forgotten as you continue to move and change jobs. Never ask for the money in your name as that will trigger possible taxes and other with holdings that are easily avoided if you have them pay the funds directly to a new qualified plan.
These are just some easy to follow suggestions that everyone needs to be aware of at least once a year or when you have a major life event. It is better to keep up with these issues as they arise rather than wait for the end of the year or in a worst case scenario forget completely.
