It’s that special time of year: Time to make sure your financial goals are on track and that your investment strategy will get you there.
Of course, this is something that we can help you with all year long, but year-end is a particularly good time to check in on both short-term and long-term goals. Give your financial plans a once-over with this checklist.
#1 Review your goals
It can be helpful to remind yourself what you’re aiming for in the first place: a comfortable retirement? Being able to purchase that vacation home? Paying for all your children’s college educations?
Once you understand where you’re headed and how well you’re doing at getting there, you can make necessary adjustments for the year ahead.
#2 Check in on your progress
Are your retirement accounts where they need to be, and how are they looking considering inflation? How about your taxable investment accounts? Did you meet any short-term investment objectives you set for the year? Would it make sense to open separate accounts to pursue other goals?
Do a thorough review of all your savings and investment accounts to confirm their standing and how they’re helping you achieve your goals.
#3 Rethink your risk tolerance
Your risk tolerance — your ability to lose some or all of an investment in exchange for the potential of greater returns — necessarily changes over time. Look at your time horizon (how close to retirement you are, for example), and consider whether you can be more aggressive with investments in 2022 or if you should adjust your strategy away from equities and shift toward more conservative holdings.
Risk tolerance can be a tricky thing to determine on your own, particularly because emotion plays such a big role in how many people approach financial decisions. A risk assessment is something that your wealth manager can assist you with as part of your financial planning.
#4 Rebalance your portfolio
The process of rebalancing ensures that your portfolio’s asset allocation is in line with your financial plan. Market events throw portfolios out of whack, which is a normal and natural part of investing.
Rebalancing is something that you should do on a routine basis (often once a year, and sometimes in response to the market). Restoring your portfolio to its optimal proportions often involves looking at areas of investment growth, and taking some gains to reinvest in other areas of the markets.
#5 Consider maxing out investments
If you haven’t maxed out your investments, you can still make contributions to your employer-sponsored retirement plan through December 31, 2021. This is both a tax-smart and savings-smart thing to do. If you’re a business owner or self-employed, you can lower your taxable income by contributing to your SEP-IRA, SIMPLE IRA or individual 401(k) (just stay under the phase-out limitations for the 20% deduction on pass-through income).
Keep in mind that you can also contribute to your individual retirement account (IRA) until you file your taxes (April 15, 2022, for most people).
#6 Review your legacy plan
This isn’t an investment, but it does determine what happens to your investments after you die. Make sure you’ve updated your estate or legacy plan to include any newly acquired investments, including real estate. Review your will and beneficiaries to ensure that everything aligns with your wishes, and double check that everything is set up in the most tax-efficient way possible.
Don’t go it alone: Let Ironwood Wealth Management help you meet your goals with comprehensive financial planning. Get in touch to learn more about our approach today.