As they say, the only constant in life is change. And when your financial goals or circumstances change, that’s a great time to revisit your financial plan.
Maybe you received a significant pay increase or began a long-awaited retirement. Or perhaps the market’s recent ups and downs have left you wondering how your portfolio is holding up and if you’re still tracking toward your short- and long-term goals.
To help you adjust to life’s twists and turns, here’s a five-step checklist for fine tuning your financial plan:
1. Review Your Portfolio
Periodically reviewing and rebalancing your portfolio is important in any market environment. For example, market fluctuations can cause your portfolio to drift away from your goal, potentially making it riskier or more conservative than intended. A professional, like a Financial Advisor, can help you make the adjustments needed to bring your investments back into alignment with your risk tolerance, overall investing strategy and financial goals.
2. Check in on Your Retirement Plan
Checking in on your retirement plan can help ensure you’re tracking toward your goal of a financially secure retirement. If you are off-track, it’s important to determine why.
For instance, if you’re still saving regularly but falling short because your investments aren’t performing, you may wish to adjust your asset allocation strategy or even specific investments you’ve chosen. This may entail shifting portfolio risk, to the extent you’re comfortable. A Financial Advisor can help determine an appropriate path forward for you. You may also consider increasing your savings levels, stretching out the time horizon until you retire or even reducing the ambitiousness of your retirement spending plans. For some investors, the most palatable option is a little of each of these approaches.
Alternatively, if you are doing better than anticipated, maybe now is a good time to reassess your risk exposure to lock in that progress and help protect against future market volatility.
3. Revisit Your Insurance Needs
Changes in personal relationships, lifestyle needs and market performance are often good reminders to check in on your insurance coverage. Make sure your policies are titled correctly, benefit levels meet your needs and planned premium payments of flexible permanent policies remain as scheduled. Review your life, disability and long-term care policies to help ensure your coverage sufficiently protects your wealth, livelihood and loved ones. For folks who have increased their net worth or who own multiple high-value assets, it may also be time to think about property and casualty insurance or increasing coverage if you already have a policy.
4. Refresh Your Estate Plan
Estate plans typically reflect a person’s wishes at a moment in time. As you move through life, important events such as births, deaths and marriages, as well as evolving personal relationships, could affect both whom you entrust with sensitive medical and financial decisions that may one day need to be made on your behalf at the end of your life, as well as how you ultimately want your wealth and assets distributed after you pass. That’s why it’s imperative to periodically review estate planning documents closely, especially if you’re in retirement. While often challenging, this type of planning is essential if you hope to ease a difficult process for the people you love and to help ensure that your wishes are respected.
5. Identify New Tax-Saving Strategies
While people tend to focus on taxes in the lead-up to Tax Day, smart tax strategies can be beneficial year-round. One place to start is looking over your latest Form 1040 federal tax return alongside your professional tax advisor or Financial Advisor, to identify strategies that may help reduce your income tax bill in the future. These may include ideas such as donating to charity, “harvesting” investment losses and/or saving for future education costs in a tax-advantaged account.
If you’re retired, you may also want to review your current sources of income and identify potential opportunities to maximize the tax-efficiency of your portfolio distributions through techniques such as income smoothing and tax-efficient withdrawals.
The Bottom Line
Periodically checking in on your financial plan can help you figure out if you’re on track for your financial goals, so you can make adjustments as needed. And if you’d like support on the specifics, a Financial Advisor can help tailor your plan to your financial situation so you can navigate the road ahead with confidence.