Enjoy Your Summer… After You Review This Mid-Year Checklist

July 1, 2019
Checklist on a desk

We’ve officially hit the mid-year mark! As you begin making your 4th of July barbeque plans or vacation preparations, we encourage you to put aside a little time to examine your current financial picture so you can avoid surprises at the end of the year.

Since our Prepare for a Happy New Year by Reviewing This Year-End Checklist article was so well received, we are offering a brief – but by no means exhaustive – checklist for your mid-year review.

Below are five issues you should evaluate to ensure your retirement and charitable contributions, distributions, and deductions are on course to meet your 2019 financial plans and goals.

1. Assess your overall asset allocation to confirm your portfolio has not drifted significantly.

The six-month check-in gives you an opportunity to ensure your portfolio has stayed in line with your desired levels of asset allocation and that if it has not, you understand any changes that may have occurred since January 1, allowing you to stay on course with your 2019 and beyond goals.

For instance, unless you do a periodic check-in, whether on your own or with your financial advisor, you may not realize your portfolio’s initial investment allocation of 50% stock and 50% bonds has shifted to 75%/25% and, as a result, your level of risk has increased by 50%. The semi-annual review allows you to see these shifts and reallocate your assets and refocus your future investments to help you reach your original, intended portfolio objectives.

As you do your review, keep in mind that the recent market fluctuations that may have caused you some heartburn may impact your assessment. Try to remember that market volatility is common, and a well-planned portfolio is designed to weather these short-term storms. (Read Tune Out the Noise: Don’t Let Short-Term Volatility Dictate Your Long-Term Investment Decisions for more on this topic.)

2. If you’re an accumulator, check your retirement savings deferrals to confirm you are maximizing your options, including matching contributions.

If you are still in the workforce, you should check your 401(k) contributions. Perhaps you’ve had to stop or reduce the amount being deferred into your 401(k) so there is more money in your paycheck to pay for unexpected expenses or life events.

If you are able to, consider this your reminder to change your deferrals back to January 1 levels. If you are unable to revert back to January 1-level deductions, talk to your financial advisor; together you can review and readjust your asset allocation to help you stay on track to meet your long-term financial goals.

In addition, you may also want to consider making after-tax IRA contributions and converting them to a Roth IRA. Speak to your advisor to learn if you are eligible.

3. For retirees, review your withdrawals to confirm your spending is in line with your plan.

If your investments have enjoyed a strong period of return, perhaps you can give yourself a raise. If your portfolio took a hit in the market or you’ve had to deal with unexpected expenses, the longevity of your portfolio may be affected, and it would be wise to reduce your income and take lower withdrawals.

4. Review your tax withholding to prevent any surprises at year end.

Many have already felt the impact of the new tax laws; but the changes can still yield end-of-year surprises if you‘re not paying attention.

If you’ve earned any “unique income” during the first half of the year – a larger than expected bonus, capital gains from the sale of a security, or from converting an IRA to a Roth IRA – you’ve likely increased your tax liability and should consider adjusting your withholding potential.

On the flip side of the coin, maybe you suspended your 401(k) contributions for a few pay periods to help with unexpected expenses. While the money may have gone to pay down some debt, you now have higher taxable income, which could also result in a potentially higher tax liability.

Ask your advisor if there are opportunities to move funds or appreciated securities into tax-advantaged accounts, or to make charitable contributions to help lower your taxable income.

5. Review your insurance, wills, power of attorney documents, and beneficiary designations – especially if your personal situation has changed.

Within the first six months of 2019, you may have welcomed a new child or grandchild, gone through a divorce, begun saving for a wedding or your around-the-world vacation, or taken on more debt by purchasing a second home or cosigning a college education loan.

Whatever life-changing event(s) occurred already this year – or may occur in the second half of 2019 – they likely require changes in order to transfer your wealth, replace lost income, or cover new debts. We encourage you to speak with the appropriate professionals, including financial advisors, accountants, and lawyers, to review and make any and all adjustments to protect you and our loved ones – your future and theirs.

If you experience any unforeseen expenses or life events or have been stung by changes in the tax laws, or if you just want reassurance that your investments are on pace with your needs and objectives, talk with your advisors. Ask your financial advisor to re-run the projections of your financial plan and make the necessary adjustments to keep you headed in the right direction.

And then be sure to enjoy your summer!