Is Now the Time to Revisit Your Financial Plan?

When the market is at an all-time high, you may not be worried about running out of money in retirement. Your house may be paid off, the kids are grown up and are financially independent, and there’s always Social Security to fall back on. But what about when your retirement expectations aren’t met? While the stock market has had significant gains over the past few decades, we could be in for a period of stagnation or even stagflation. In these uncertain times, a financial plan is more important than ever. Consider whether now is the time to revisit your financial plan.

Consider Your Investment Strategy

A strategy becomes even more important when you near and enter retirement, as you may plan on generating retirement income from your portfolio, and your risk tolerance may decrease. Consider your past investment decisions and the thought process behind them: Were they based on emotions like fear? Were they made quickly? Were they made with taxes in mind? A professional can help you answer these questions and review your asset allocation, your income needs, and risk tolerance.

Don’t Forget About Taxes

We’ve seen proposals for raising taxes and creating new taxes, and we could see new legislation in the next few years. The Tax Cuts and Jobs Act expires in 2025. There are several reasons why your tax burden could actually increase in retirement, including RMDs, property sales, losing the mortgage interest deduction if you pay off your house, and taxes on Social Security benefits and pension payments. There are many long-term tax minimization strategies an advisor can help you consider, such as a Roth IRA conversion.

Don’t Put Off Estate Planning

Have you created a will or named beneficiaries to your retirement accounts and insurance policies? If so, it’s important to review them periodically. Your will does not control who inherits all assets, such as retirement accounts, life insurance policies, and annuities – you must name a beneficiary for each. If you don’t, these assets can be paid to your probate estate, possibly triggering income tax. It’s important to factor in taxes as well. For example, if you pass on an IRA to most non-spouse beneficiaries, it has to be drained within ten years.

Many of us ignore our finances until the market looks bad. As we get closer to and enter retirement, it’s important not to wait for events like these to review our finances. Now is the time to take stock of your overall finances, including your long-term tax minimization strategy, your investment strategy, and your estate plan. All of these things work together, which is why going to one professional for all of your financial planning needs can have benefits.

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