Mid-Year Retirement Planning Checklist
At the beginning of every year, it’s popular to make New Year’s resolutions. We create goals and hang vision boards. We might even concentrate on them for the first few weeks or even months, but then things happen and before you know it, summer is here and our goals start collecting dust. It is time to brush off those resolutions and goals, and re-commit to your financial dreams. It is never too late in the year to refocus. And remember, no judgment. Don’t get down on yourself because you aren’t as far as you had hoped to be by now. Just know: You did the best you could from moment to moment and now you are ready to get yourself back on track!
If retirement goals were on your list of resolutions, here are a few areas to review:
Check your deferrals. Depending on your compensation plan, your annual deferrals to your 401(k) or other retirement plan could be more or less than you anticipated. If you are planning to max out your contributions this year, determine how much you have contributed to date and then estimate the remaining contributions for the year. Compare this to the maximum allowable amount for 2023 and make the necessary adjustments. Or, maybe you aren’t planning to contribute the maximum amount this year. Do you think you could still make an adjustment? I would challenge you to increase your contribution amount by 1%. It might not appear to make a difference, but over the long run it can add up and make a positive impact on your retirement goals. You should review your IRA accounts as well. Do you plan to contribute to a Traditional or Roth IRA this year? If you haven’t made a contribution and feel it would be appropriate for you, make a plan to do so. You could either contribute in lump sums or set up an automatic contribution right from your bank account. Either method can work, so do what’s best for your overall financial situation and your personality.
Check your tax withholdings. Nobody likes to get a surprise tax bill at the end of the year, so take a moment now to recalculate your 2023 income tax liability. Check to see how much you’ve withheld year-to-date and make any adjustments. The IRS has a tax withholding calculator on its website, or you can ask your tax return preparer to run a quick estimate. This review is especially important if you have multiple employers or if you owed a large tax payment at the end of last year.
Check on your investments. Your investments can play a critical role in the pursuit of your financial goals and you should review them periodically, especially when you experience a significant life event, or large changes in the market. Even if the stock market and economy have been stable, make sure you continue to be in quality investments and that the balance continues to complement your risk tolerance. Mid-year is a great time to review your holdings and make any necessary changes, or schedule some time to meet with your wealth advisor.
Check on tax strategies. When it comes to saving for your retirement, taxes can play a huge role in the amount of money you will have to spend now and in the future. Your plan should include a strategy to help you mitigate the effect of taxes. One such strategy involves Roth conversions. Based on your spending needs and anticipated tax bracket, you might want to consider converting a portion of your tax deferred assets to a Roth IRA. The amount you convert would be considered ordinary income in the year you convert, but by focusing on this mid-year, it allows you to plan for the additional taxes, so you aren’t surprised at the end of the year. Another tax strategy might involve looking for any tax-loss harvesting opportunities in your taxable accounts. In a year where there has been some volatility in the stock market, it might provide an opportunity to sell some investments and recognize a loss. This loss can then offset investment gains on other investments or year-end gains recognized by any mutual funds you hold.
Check your risk management plan. When was the last time you reviewed any of your insurance policies? This is one area you can easily overlook in a retirement plan. On an annual basis, you should review your Property & Casualty coverage with your agent to make sure you understand your coverage if you were in a car accident or had a fire in your home. With the significant increase in home prices over the last couple of years, you should also check your home value on your policy. You might be underinsured. It’s also a good time to review your life and disability insurance if you’ve had a significant life change. Has your income changed? Did you add a new member to your family? Was there a death? The value life insurance brings to your retirement plan can change over time. You may have purchased it to cover your home or support your children, potential college expenses, possible long-term care expenses, or to help beneficiaries cover anticipated taxes on inheritances. Because your life and needs change, your policy should change as well and the policy you have today might not be what you need 10 years from now. A mid-year check with your advisors could help you uncover any possible underinsured risks.
Check your non-retirement accounts. Take a moment to check your savings, emergency, or brokerage account. Your household cash flow might ebb and flow so your accounts might do the same. Mid-year is a great time to check your emergency fund to make sure you have an appropriate amount set aside, and if it is a little low, create a plan to get back on track. With the recent interest rate increases, this mid-year check could also include making sure the interest rate you have on your savings account is keeping up with the market. Lastly, a taxable account can be an important part of your retirement plan, especially if you would like to retire early. It allows you to pull from the account without incurring the types of penalties you might incur if you pulled from a retirement account before turning 59½. Are you adding to a taxable account on a monthly basis and are the investments in this account appropriate based on your risk tolerance and anticipated spending needs? If not, consider working with your wealth advisor to develop a plan.
These are just a few suggestions when it comes to reviewing your retirement plan. The important part is to take a moment and review the key components of your financial life. Make sure you understand how you are invested, how much you contribute monthly to your plan, and whether you should increase those contributions. It’s also important to review the tax impact of the various accounts and investments you hold and any anticipated risks to your plan. Finally, be sure to share all this information with someone who would handle your affairs if anything happened to you. The short amount of time you invest in a mid-year financial review today could have a significant impact on your future financial goals.