By Kim Mueller, Senior Advisor
Spring means warmer weather, longer days and blooming flowers – and also a time for a thorough house cleaning after a cold winter. But it may also be the perfect time for people to review their financial goals and objectives.
Meeting with a financial advisor to review any major changes or new ideas is a good way to help ensure your financial plan is intact. Here are five key reasons to review your plan this spring:
Major Life Events. For most of us, life-changing events such as marriage, divorce, a new baby, or a new job will likely have an impact on how we save, invest, and manage our money.
For example, for couples with a new baby, it’s wise to consider opening a 529 Education Savings Plan. These education savings plans are meant to help families set aside funds for future college costs, though the money can also be used to pay for up to $10,000 per year in tuition for K-12 schools. The plans provide tax-deferred growth and qualified withdrawals are tax-free. Many states offer a full or partial tax deduction or credit for 529 plan contributions. There is also a new benefit provided by the Secure 2.0 Act which may allow for rolling over funds from a 529 plan to a Roth IRA for the beneficiary, subject to certain limits.
Couples should also consider updating their life insurance policy or getting a new one that covers both spouses for any situation. If one spouse unexpectedly passes away, the remaining spouse would possibly need to cover childcare and many other expenses on their own for several years.
Update Your Financial Goals. Our goals aren’t static and depending on the progress you’ve made during the past several years, it’s possible your financial goals have changed.
For example, when people in their 30s and 40s set their financial goals, retirement may seem like an abstract goal. However, by their late 50s and early 60s, their retirement plans – and the money they need to pay for it – may have changed in many ways.
Others who had originally planned to retire at a certain age may decide they want to keep working. For example, a 55-year-old client has decided he’d like to move from full- to part-time work and continue working through his 60s, yet not pull any money from his investment portfolio until age 70. Our team is working with him to project how he can scale back sooner and still meet all of his financial needs and goals.
Review your Tax Situation. With the 2022 tax season nearly behind us, review any potential changes in 2023 that will raise or lower taxes when filing tax returns in April 2024.
For example, anyone planning to retire this year may likely have less income going forward and qualify for a lower tax bracket.
If that’s the case, new retirees may want to consider converting money from their Traditional Individual Retirement Account (IRA) into a Roth IRA. While taxes will be due on the money that is converted to a Roth IRA, the tax rate may likely be lower since your income may likely drop once retired. The money converted in a Roth IRA will grow tax-free for the rest of your life.
For executives who receive a significant amount of compensation in stock awards, it may be time to consider starting or enhancing a charitable giving plan. Some plans, such as a Donor Advised Fund, can reduce taxable income while supporting charities and nonprofit organizations of your choice.
Discuss your Risk Tolerance. After several years of strong equity returns, most investors experienced a drop in the value of equities in their portfolio in 2022. And the future is still quite uncertain.
While losing money is never fun, it can be a window into how much risk you are willing to take on. “Staying the course” with your financial plan if often the best strategy, even during tough times. But if the market’s performance is causing stress and sleepless nights, it may be a good idea to discuss the benefits or drawbacks of re-positioning your portfolio to lessen the risk.
Revisit Your Estate Plan. It’s not uncommon for people to put a plan in place, then put it away and forget about it. It may be time to review important items in your estate planning documents, including the people named as the beneficiaries, trustees, and power of attorney. Additionally, if a new child has recently come into the family, you will want to update your documents to reflect this change. Time may be of the essence as law which set the lifetime exemption amount is due to sunset at the end of 2025 replacing the current lifetime exemption amount of $12.92 million per person with an amount that is roughly half of the current levels beginning with 1/1/2026.
Estate plans should be reviewed every three to five years with your attorney. Meeting with a financial advisor periodically helps ensure the plan continues to meet your needs.
No matter the issue, a financial advisor from the Diederich Simmons Perez team is available to help. If you need to speak with a financial advisor to develop a financial plan or review your current plan, contact our team at Moneta – DSP Team. We offer a free consultation and are happy to discuss how we work to help people achieve their lifetime financial objectives in support of the things they most cherish.
© 2023 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified.
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