Here we are, once again, in the midst of people’s favorite holidays. Between Christmas and New Year’s, it’s time for good food, visiting friends and relatives, gifts, and of course, popping champagne.
It’s also time for New Year’s resolutions (which most people forget about by February anyway). It’s the perfect time to assess your financial fitness, and whether or not you are on track for your retirement.
“Around the holidays everybody gets pretty busy,” says Dawn-Marie Joseph, president of Estate Planning & Preservation, Inc. in Williamston, Michigan. “In January, we all panic.
“You’re busy thinking about wrapping presents and who will visit,” she says. “Set aside one hour for yourself and your finances. It could make a big deference in your life.
“A lot of people wait till end of year for charitable contributions,” she says. “I suggest do it now. Get it out the way, you know you will do it anyway. Whether it’s to yourself or your church, it makes it easier for you but easier for them too.”
But Joseph generally recommends that people not wait until the end of the year.
“Do it every single month, so when we come down to end of year, you aren’t worried about the holidays and taking care of your financial business,” she says. “I do it every month. The sooner the better. We are in a society where everyone wants to procrastinate. With holidays, it muddies up the water.”
Joseph says you should review your budget, 401(k), IRA and all of your finances monthly to see where you are.
“It puts you more in the driver’s seat,” she says, “whether you get together with a qualified financial planner, or if it you and your significant other.
“When you start thinking about the end of the year and going into a new year, it’s a good time to think proactively,” says Brian Singer, of Singer Financial Group in Brownsburg, Ind. “One of most important things people can do for retirement readiness is make sure they’ve got a plan. And they should have a written retirement income plan, not just a book of pie charts.
“You need to define where income will come from, how it will grow, how long it will last and how much guaranteed income,” he says. “What most people want to do is define the amount of guaranteed income that matches income they need for their desired lifestyle. Someone getting close to retirement should put procrastination aside, be proactive and get together with a financial professional who can help them determine what their income strategy should look like and potentially suggest any insurance products that may be a good fit for them.”
Some of the tips we’ve compiled from various financial professionals.
- “One of the big ones would be for year-end planning is always making sure if you are in company-sponsored plan that you have, at the very least, maxed out your company match,” says Jeremy Keating at Capital Income Advisors in San Diego. “Max as much as you can put in, whether it’s 401(k), 403(b) or IRA. Technically you have until April. But there is no time like present.”
- Consider hiring a financial advisor, says Singer. “Some people out there are do-it-yourselfers, but I think at the risk of sounding self-serving, it’s a great time to start interviewing some professionals and get engaged with someone who has experience in helping people plan for retirement. There is a difference between the saving and distribution phase and you should work with a professional who has experience in helping pre-retirees and retirees shift from one phase to the other.”
“If you don’t’ have a financial professional with whom you work, start looking,” says Joseph. “A lot of people use a financial professional because it was a recommendation from someone else. Someone from church. Ask around. Whatever your comfort level, get out there and get it take care of.”
- Joseph says if you haven’t gotten into the habit of reviewing your finances monthly, do it now. “ You owe it to yourself,” she says. “Look at all your accounts. If you have a 401(k), the chances of you being able to do it online are huge. Figure out what you have to do online if you haven’t. it’s not going to ruin your holidays.”
- Do your research, Joseph says. “Consider giving a 529 (college savings plan) as a Christmas gift. Educate yourself about the laws. Look at the IRS.gov website. It’s a wealth of information. Get in touch with your CPA. Look up rules. Get it done by the end of the year. It’s the same thing when you think about adding something to you IRA. Get online and do it. The information is great from IRS.gov if you don’t have a financial professional or someone who can answer those general questions for you.”
- Take care of your required minimum distributions (RMD), says Keating. “Every December we call all our clients who have not met their minimum distribution,” he says. “If you don’t take them, there is a 50% penalty. “
- From a subjective role is year-end is not just for reviewing your goals for this year, but year coming up,” says Keating. “I work with a fair amount of my clients’ kids. We try to save $100 a month. How we get there? We also on an annual basis do cash flow projections for clients. How much do you have and how much you are spending. We do that all year. But, since there are people who don’t want to do it all year, they should do it now.”
Still, Joseph says it is best to do it monthly, and not wait until the end of the year.
“Make it part of your routine,” she says. “Give yourself an hour. Write it down on a calendar When you write something down it’ probably going to happen. Now you feel obligation that you have to get it done. That’s what I suggest.”
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