Ring in the New Year with a Fresh Look at Your Financial Portfolio

January 2, 2023

Erica Bouchard, CFP^®

January is not only a perfect time to implement your personal and professional resolutions – it’s also a great reminder to review your financial goals, plans and strategies. Decades of data have proven that successful financial outcomes are more likely to happen because of purposeful and thoughtful planning. As we start 2023, we recommend our clients reflect on their personal situation over the past year and consider how changes may impact their current plans.

We’ve compiled a checklist to get your year off to a fiscally fit start:

1. Get Organized

At the start of the year, it is helpful to have a full picture of what your anticipated overall income streams and cash requirements are going to be for the year. Plan for larger expenditures, especially if you will be withdrawing from your pool of investments to pay for them. You don’t want any needed funds at risk in the stock market; with advanced notice, you may reduce any associated tax liabilities as well. Make sure you have a good account of all current assets and liabilities; it’s essential to know what dollars you have available to you.

2. Identify Changes in Your Goals

Each year can be filled with surprises in your personal situation that may change your long-term goals and current objectives. Without a clear end goal in mind, you won’t know whether you’re saving too much or too little to meet short- and longer-term objectives such as funding education, buying a home or retiring. It’s important to reevaluate your goals annually as with life events such as marriage, the birth of a child, divorce, a new business venture or death of a loved one.

3. Adjust Your Plan Accordingly

When we work with clients, our foremost concern is ensuring they aren’t at risk of running out of money during their lifetime. To do this, we build a plan based on the context of their current needs, wants and wishes. By starting with your goals in mind, you can revise a savings plan, update a portfolio allocation strategy, calculate a realistic retirement date and more.

While planning is vital for a healthy financial life, it’s equally important to make sure you aren’t suppressing your lifestyle too much along the way to retirement. Life is meant to be enjoyed! While we focus a lot on non-working years, you want to have fun during your working years as well. With proper preparation, you can strike that balance between planning for the future and living in the now. Or as we like to call it, giving yourself “permission to spend.”

4. Develop and Maintain a Budget

Regardless of your economic position, it’s essential to know where your dollars are going. This is often the single most difficult form of homework for clients. Your budget and your plan are only as good as the assumptions being used. If you are looking for a starting point, there are some great online options such as Mint and You Need a Budget. If technology isn’t your thing, you can also utilize a basic budget template. Please reach out to us if you’d like a copy of that template.

Once you know what your goals, spending needs and available monthly dollars are, it’s time to determine if you are falling short or have an overage. To account for all of your money, we suggest assigning every dollar to a spend, save or give bucket.

5. Maximize Your Savings

To ensure you are maximizing your money, work with your advisor to review popular savings opportunities, such as:

Company Retirement Plans – Don’t miss out on free money. Take note of whether your company offers a matching contribution, and if so, what is needed to earn your match. You can save up to $22,500 per year in these plans with a $7,500 catch-up contribution option for those 50 and older. It will also be helpful to explore if your plan includes traditional pre-tax or Roth post-tax deferral options. Your advisor can help you decide which path will be most beneficial to you from a tax standpoint.
Health Savings Account (HSA) – This may be beneficial for those on a high deductible health plan. Built like an IRA but for health care, a 2023 HSA allows an individual to annually contribute a maximum of $3,850; a family may fund the account up to $7,750. For those 55 and older, you are eligible to contribute another $1,000.
Individual Roth IRA – You may invest $6,500 annually, plus a $1,000 catch-up contribution option for those 50 and older.
Individual Traditional IRA – Like an Individual Roth IRA, you may invest $6,500, plus a $1,000 catch-up contribution for those 50 and older.
College 529s – Every person can give up to $17,000 to any individual without having to do a special tax filing as part of an annual exclusion for estate taxes.
Custodial Accounts – With this strategy, you must be mindful of 529 contribution amounts to ensure you stay within annual exclusion totals as noted above. There are retirement and non-retirement account options.
Donor Advised Fund (DAF) – Think of this as a Roth IRA for charity and a means for enhancing your gifting power. The idea is to give dollars today using appreciated stock to your DAF with the flexibility to donate to charity over time. Meanwhile you enjoy an upfront tax deduction and the ability to invest and grow tax-free dollars over time.

6. Protect Your Wealth

Have any changes over the last year impacted how your dollars are protected? With proper planning you can safeguard your wealth from creditors, fraudsters or an unforeseen life event. Keep these items in mind as you consider the plan you have in place.

Review and update your account titling and beneficiary designations on all accounts including checking and savings accounts.
Assess who is overseeing your health care decisions, finances and guardianship of minor children when you are no longer able to do so. Consider creating and/or updating your power of attorney for health and financial matters, estate documents including a revocable trust and appoint an executor of your will. Once you have a current estate plan, it’s critical you work with your attorney and advisor to implement it properly.
Utilize strategies to protect your assets and your identity. This includes freezing your credit, regularly monitoring your bank account and credit card transactions, reviewing your credit report annually, assigning a pin number to your tax return and signing up for theft prevention services such as LifeLock or Identity Guard.
To minimize gaps and ensure your insurance coverages are cost effective, evaluate your life, disability and long-term care needs. It’s also recommended you review property and casualty insurance coverages.

Rarely does one’s plan withstand the test of time. Life inevitably changes, almost as quickly as tax and estate laws. Plans should be created, implemented and monitored for changes; a good financial advisor can help hold you accountable, provide proactive advice and be your best advocate.

About the author: Erica Bouchard, CFP^®
As a respected, resourceful problem solver and an enthusiastic collaborator, Erica delivers comprehensive long-term plans to her clients, all while accounting for complex dynamics and their ever-changing needs. She invests her time and energy in rigorous continuing education and is committed to bringing skill, insight and confidence to Buckingham client relationships.

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