The road to retirement is a long process, but the beginning of a new year presents investors with an opportunity to reassess their goals as well as their strategic plan for achieving them. Whether or not your targeted retirement date is approaching in 2018, or 2058, January serves as an opportune time to meet with your financial advisor to plan how to get the most out of the upcoming fiscal year.
Here are a few considerations every investor seeking a secure financial future should revisit with their financial advisor this January.
Prioritize goals and objectives. Review your goals and objectives that you established for 2017 and update them for 2018. When developing new goals and objectives, you should first define one or two broad objectives, like retiring by a certain age or paying college expenses for a child or grandchild. From there, determine no more than five specific goals for each objective. Remember, these goals need to be specific, attainable and measurable.
[See: 7 of the Best Stocks to Buy for 2018.]
For instance, given that retirement is the No. 1 objective for many, a goal to meet this objective could be to maximize the contribution that you can make to your 401(k) or 403(b) plan. For 2018, the maximum amount is increasing by $500 to $18,500. For those over the age of 50, an additional contribution of $5,500 is also allowed. First, confirm the amount that you are contributing to these accounts. Many investors fail to raise their annual contribution amount after their initial enrollment date. If you are not saving at the maximum level, consider increasing the amount that you save. Challenge yourself to save more than you think is feasible each paycheck.
Remember that it is easier to save in smaller increments throughout the year than a large amount at year’s end. Additionally, you will benefit from dollar cost averaging, a technique of buying a fixed dollar amount of an investment on a regular schedule, which then purchases more when prices are low and less when prices are high. Generally, you are able to make changes throughout the year to the amount that you contribute, but check with the rules of your plan first. Typically, most adjust their spending to their net paycheck. By increasing your contribution and “paying yourself first,” you will have a better chance of meeting your retirement objective.
Get an early start on tax planning. Much will be written over the next several weeks on the new tax plan and how to navigate it. However, one item that you can get an early start on is developing a process to keep your financial records organized. Preparing for taxes may seem daunting, but if you keep your supporting documents organized throughout the year, completing your return is a much easier and faster process. Many lose valuable deductions because they either forget or misplace supporting records.
The best plan is one that you will stick to. A simple plan may involve creating folders that align with two broad categories — income and deductions. From there, create subfolders for bank statements and canceled checks, investment statements, and Social Security benefits for the broad income category, and charitable contributions, medical expenses, and child care expenses for the broad deductions category.
[See: How to Max Out Your 401(k) in 2018.]
For a more complex plan, you can use online tools like Mint.com, Quicken, or even a simple spreadsheet. Remember that if you use a digital system, you will still need to retain supporting documents such as acknowledgement from charities, medical expenses, etc., in the case that your tax return is audited.
Create or revisit your strategic giving plan. Many wait until the end of the year to make their charitable donations. For 2018, consider giving early. By giving early, you not only help the charity time its cash flow, but you can be more thoughtful in terms of how you give.
Consider creating a donor advised fund to transfer appreciated stock. You will receive a charitable deduction at the time of the transfer. You can either retain the transfer in the fund or you can make a grant to your favorite charity from the fund. By establishing the fund early in the year, you will have the flexibility to make gifts to the fund throughout the year as you rebalance your portfolio or sell stocks with long-term capital gains.
Ensure your estate plan is still in order. Now is a good time to review any beneficiary elections that you have made for individual retirement accounts, employer retirement accounts and life insurance policies. Remember that these accounts pass to those named a beneficiary and not through your will.
Review your mistakes from 2017. Take this time to review any goals that you established for 2017. It is important that you celebrate any financial milestones that you reached, as well as determine the reasons why you did not meet your 2017 goals.
[See: What Everyone Should Know About IRAs.]
Every new year represents a new opportunity to reassess your financial goals. Whether your 2017 goals were met or not, 2018 presents another chance to get back on track, or continue exceeding expectations.
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