Setting goals is the key to creating new positive behaviors, maintaining focus, and it increases your preparedness for the future. Writing those goals down is even more important. According to a study done by the Dominican University of California, people who wrote down their goals and shared them with friends were 33% more successful in accomplishing their goals.1 Therefore, it goes without saying that writing your financial goals down will help you to achieve them. A year-end financial checklist allows you to reflect upon your financial situation at this moment, determine what has been completed and what still needs to be addressed.
As we near the end of 2021, these are items that we recommend you evaluate. Our advisors at Fragasso Financial Advisors work collaboratively with our clients to review their goals/action items and to plan accordingly.
1. Review your investment portfolio for any rebalancing needed to remain within your risk tolerance as well as to generate any tax losses that can offset capital gains.
2. Revisit your tax withholdings to ensure you have paid enough in taxes in the current year.
No one wants an unforeseen tax bill or a tax penalty.
3. Maximize your 401k, IRA, or other retirement account contributions. It is important to take advantage of the available tax deductions as well as any employer match. As a reminder, the SECURE Act eliminated the maximum age for IRA contributions. If you have earned income, you are eligible to contribute.
4. Remember to take your entire Required Minimum Distribution. The SECURE Act also pushed the required distribution age back to 72. You want to ensure you are taking the correct distribution amount, or a hefty penalty can be assessed.
5. Evaluate your emergency savings account as well as your income needs. The rule of thumb is to have at least 3-6 months of emergency spending set aside.
6. Review your insurance needs including life, long-term care, disability, health, auto and homeowner’s policies.
7. Update beneficiary designations. Whether your marital status has changed, you have had a child, or someone has passed away, it is so important to make sure your beneficiaries are up to date.
8. Explore opportunities to make charitable gifts. The benefits include decreasing your taxable income as well as feeling good about giving to a cause you care about.
9. Review your estate plan documents always taking into consideration changes to tax or estate law.
10. Consider a Roth IRA conversion if you feel your tax bracket is lower now than when you retire or start your required minimum distributions. This helps to diversify your retirement income as Roth IRA withdrawals are tax free.
Taking time to complete your goals analysis provides peace of mind knowing that you are on track when entering a new year. You will also be able to fully enjoy your holiday season with family and friends!
All of us here at Fragasso Financial Advisors are here to help guide you, not only at year end, but throughout the entire year. Reach out to your financial advisor if you need help completing your year-end financial checklist today.
1 https://www.dominican.edu/academics/lae/undergraduate-programs/psych/faculty/assets-gail-matthews/researchsummary2.pdfDr. Matthews, a professor in the Department of Psychology at the Dominican University of California in the School of Arts, Humanities and Social Sciences, recruited 267 survey participants for a study on how goal achievement in the workplace is influenced by writing goals, committing to goal-directed actions, and accountability for those actions. 149 participants completed the study. The final participants ranged in age from 23 to 72, with 37 males and 112 females. Participants came from the United States, Belgium, England, India, Australia and Japan and included a variety of entrepreneurs, educators, healthcare professionals, artists, attorneys, bankers, marketers, human services providers, managers, vice presidents, directors of non-profits, etc.