The end of the year is fast approaching and I can’t wait to spend some quality time with loved ones. The last thing I want to do is deal with year end finances during that time. That’s why we’ve put together a list of things you should consider doing now before the end of the year. Financial goals, investment allocations, retirement and estate planning, and yes, taxes, are all included in the checklist. Take the time to review it now and enjoy the holidays knowing that you’re ready for 2011.
We all know tax planning is incredibly important and something many of us should have done yesterday. Doing so can help reduce the tax burden to you and your heirs. It can be a bit overwhelming so we’ve focused on a few key topics that you should discuss with your financial advisor now.
Setting Your Financial Goals for 2011
Setting goals is a practice most successful people use to make sure the things they need to happen actually happen. Having a target, or several targets, helps you focus your energies and activities on achieving them. It may sound simple, but you might be amazed at how effective it can be, and even more surprised by how many people don’t set goals.
1. Review your long term financial goals
It’s important to re-evaluate your long term financial goals to make sure they are still in line with what you and your family wants. A lot can happen in a year and your goals should adapt. Perhaps you’re welcoming a newborn into the family and want to establish a 529 plan, or have an opportunity to sell your business.
2. Write down your top financial goals for 2011
These are more short term goals, but can still impact your long term goals. Try writing down your top 3 financial goals in order of importance. Do you have a major expenditure planned like buying a house or paying for college? Will you sell your business or expect to get a promotion that will increase your investable assets?
Review Your Investment Strategy
Here at WrapManager, we strive to speak with clients on a quarterly basis to make sure their goals and investment strategies are aligned. We do this using our Envision process which takes a snapshot of where you are now, plans for your goals, and calculates the probability of achieving them given a certain investment allocation. Learn more about our Envision process and how it helps investors plan for the future by clicking here.
3. Does your investment strategy and allocation match your goals?
Reviewing your strategy and allocation is critical to gaining an understanding of your financial picture and often leads to the comfort of knowing where you stand. If your goals have changed, don’t put off adjusting your financial strategy. Start making those changes now. If your long term goals haven’t changed and there haven’t been any major life events, then you may be comfortable with your current allocation. We still recommend reviewing your strategy and allocation at least annually, but ideally quarterly.
4. Understand and know your risk tolerance
You’ve listed your goals, adjusted your investment allocation and strategy to fit with your short and long term goals, and you’re done! Not quite. It’s important to understand the downside risk of your investments. How much can you stand to lose and still achieve your goals? How much downside risk are you comfortable with? Our Envision process helps investors like you determine their risk comfort levels and understand how their investment strategy affects their level of risk in their portfolio.
Retirement and Estate Housekeeping
5. Make sure your estate plans are current and accurate
It’s a good idea to review your will, trust, and other estate planning documents on a yearly basis, especially with the number of estate planning law changes this year. If you don’t have estate documents set up currently, now may be an excellent time to do so. You may spend money up front, but it may prove to be well worth it. Doing so will help ensure that your assets are distributed as you wish upon your passing and make the handling of your estate easier on your heirs. This includes your beneficiaries listed on your IRA and other retirement accounts. Your loved ones could spend a lot of time and incur additional costs distributing your assets if there is not a clear plan in place.
6. Make retirement plan contributions
It’s probably a good idea to make sure you’ve made contributions to your retirement accounts such as your IRA and 401(k). If you are age 50 or older, you are allowed to make catch up contributions including an additional $5,500 to your 401(k) plan and $1,000 to your IRA or Roth IRA in 2010. Even if your level of income disqualifies you for the contribution deduction, the amounts will still grow tax deferred and may therefore be a good retirement planning option.
Charitable Contributions, Gifting, and Taxes
7, 8, 9…Our October 2010 newsletter “Tax Planning Checklist for 2010 and Beyond” explains in detail charitable contributions, gifting, and other tax considerations concerning your investments. It’s important to review this and go over it with your tax advisor. Determining what, if any, actions need to take place with your investments in 2010 could potentially lower your ultimate tax liability. Click here to read and print the article.
On December 6th, President Obama indicated that he would push for a two year extension of the bush tax cuts, a 2% reduction in payroll taxes during 2011, a top estate tax rate of 35% after a $5 million tax-free allowance per individual, and a few other tax credits. Of course this still has to be approved by Congress.
Give Us A Call Today
We help investors like you make sure they know where they are financially. Perhaps more importantly, we help investors develop their investment strategies and match them to their goals and risk tolerance, all using what we believe are some of the best money managers around. The Envision process is free, insightful and comes with no obligation. Get started today by answering a few questions about your financial situation. Or give one of our Wealth Strategists a call today at (800) 541-7774 (or email ) to have us take a look at your financial situation and investments, discuss these tax strategies, or research money managers.
Sources: Deloitte, First Clearing LLC
The attached report and information have been prepared or produced by WrapManager, Inc. from sources and data believed to be reliable. Information provided in this report is for educational and illustrative purposes only and should not be construed as individualized investment advice, as an offer to sell, or the solicitation of an offer to buy any security in any states where such an offer or solicitation would be prohibited by regulations. WrapManager, Inc. is not a tax advisory firm. We recommend you contact your tax attorney or CPA prior to utilizing any of the tax-related strategies mentioned or discussed. Returns and experiences will vary for each client. Each client’s risk tolerance and investment objectives are unique to them. Past performance may not be indicative of future results. No assumption that future performance of any specific investment or product made reference to directly by WrapManager, Inc., on its Web site and in marketing materials, will be profitable or equal the corresponding indicated performance level(s). If performance numbers are generated gross of fees, a client’s return will be reduced by investment advisory fees and any other expenses. Opinions expressed are those of WrapManager, Inc. and are subject to change without notice and are not necessarily those of Prospera Financial Services, Inc., its directors, parent company or its affiliates. Securities offered through Prospera Financial Services and cleared through First Clearing, LLC. Prospera Financial Services - Member FINRA/SIPC.