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Kickstart Your Year With a Financial Wellness Check

by Philip Tull | January 27, 2022 | Aging Well, Financial Planning, Retirement Planning

Do you ever get inspired by someone you meet who has a distinct goal or discipline? Someone who makes you think, “I can get behind that!” Recently I was speaking with a couple and they mentioned they kickstart each new year by not only doing a dietary detox but a financial detox as well. During the month of January, they do some form of food detox: usually bread, sugar, and often alcohol. Then for their financial detox, they put a pause on everything except necessities — cutting out things like eating out, entertainment, and even TV subscriptions.

What a reset! They then add them all back, right? Not necessarily. At the end of the month, they do an assessment to see what they felt they missed the most and what they maybe didn’t even miss at all. Then they begin adding things back in with freedom from the things they never knew they wouldn’t miss.

A financial detox may not be for everyone, but maybe a wellness checkup on your finances to kickstart your year is. Let’s start by doing a checkup on what’s often the largest asset you have: that retirement plan. Here are five check points to ensure your retirement plan is strong and healthy!

Allocation Rebalance

Market growth and corrections can cause your investment allocation to drift over time. If you use a target date or risk allocated fund then your rebalance is done by the fund manager. If you select your own fund allocation, it is good practice to review your allocation and consider if a rebalance back to your target allocation of equity to fixed income (e.g., 80/20, 60/40) is in order.

Investment Selection

Risk tolerance, financial planning goals, lifestyle needs, and market outlooks can change. If you are nearing retirement, you may want to consider reallocating to a less aggressive allocation with fewer growth funds. If you are just starting off and realizing you have a higher risk tolerance than you originally thought, maybe consider adjusting to be more aggressive and hold more growth funds.

Payroll Deferrals

A lot can change in a year: earned income, spouse’s income, lifestyle costs, inheritance, tax bracket, retirement plan match, IRS contributions limits — just to name a few. Do you now have room to increase your deferral into your 401(k)? Do you need to adjust your deferral up due to the recent IRS increase to the maximum amount you can contribute? Did you recently turn 50 and are now eligible for catch-up contributions? Do you need to adjust for a recent change in your employer match?

Beneficiaries and Personal Information

Life changes fast. Review your beneficiaries to ensure that in the event of an untimely death, your loved ones would receive any needed care. Did you have children in the past year? Did your marital status change? Take time to review and reassess any asset with a beneficiary now.

Pre-Tax or Post-Tax

Taxes can make a big difference. Be sure to evaluate if your current tax bracket or your projected tax bracket in retirement has changed. If you are in a lower tax bracket this year, it may be worth considering contributing to your post-tax Roth 401(k). If you got a promotion, maybe it’s time to switch to pre-tax contributions.

Take a moment today and give your retirement plan the wellness check it needs and that you deserve! When it comes to finances, timeliness is everything. Whether it’s an unplanned loss of life, market correction the month before retirement, or one of numerous other life events, choose peace of mind by knowing your retirement plan and finances are healthy and thriving! For more information, contact us at 757.436.1122.