Financial & Estate Planning

Ideas That May Improve Your Finances in 2015

Ideas That May Improve Your Finances in 2015

Here is a list of planning ideas for 2015.  Not all of them will apply, but possibly one or two will strike a chord.  We hope you find the list helpful and of interest.  Please give us your feedback, and don’t hesitate to contact your Wealth Advisor if you have any questions.

Are you getting closer to retirement?

If retirement is approaching, now is the time to think about what you will do with your pension, deferred compensation, stock options, health insurance, and so on.  When it comes to transitioning to retirement, we can help you evaluate key decisions.  Here are just a few examples:

  1. What should I do with my employer sponsored retirement accounts?
  2. Will I benefit more from taking a monthly pension or receiving a lump sum payment?
  3. How should I withdraw funds from my portfolio to cover living expenses now that I’m not receiving a pay check?
  4. What is the right strategy for exercising my remaining stock options?

Did you change jobs recently?

We have a mobile workforce these days.  Starting a new job or leaving an old one brings about important financial decisions.  This often includes making the right benefit elections and selecting payout options for certain retirement plans and severance packages.

Is it time to rebalance your 401(k) or 403(b)?

There were some wide variations in returns for different types of investments last year.  With that in mind, now is a good time to take a look at how your employer sponsored retirement accounts are invested.

We often encounter 401(k) and 403(b) accounts that have not been reviewed in quite some time.  Investment options in these accounts change; as do markets, fund managers and risks.  So it’s always good to take a fresh look at your strategy.

As the chart below shows, asset classes, come into and out of favor over different market cycles.  Making sure your accounts are properly diversified with the right mix of investments, will help you achieve your goals, and should make for a less bumpy ride along the way.

Asset Class Returns


Is this a milestone year?

Is this the year you need to file for Medicare, Social Security, or do you need to begin taking required minimum distributions (RMDs)?

Required Minimum Distributions (RMDs) – Generally, an individual must take their first RMD by April 1st of the year following the year in which they turn age 70 ½.  Clear as mud, right?  There are several key decisions to make when taking your RMD, among them:

  1. How much do I need to withdrawal to avoid penalties?
  2. When do I make the withdrawal?
  3. How much should I withhold, if any, for income taxes?

Social Security – Deciding when to begin Social Security benefits is highly dependent on your cash flow needs, expected longevity, and whether you have a spouse eligible for benefits on their own independent earnings record.  Running the numbers can help quantify different claiming options.  We have developed best practices and tools to help you make an informed decision about when to begin Social Security benefits.

Are you the beneficiary of a trust?

The top tax rate (39.6%) for trusts and individuals is the same, but with a trust, income is taxed at the top rates much sooner.  Also, the net investment income tax (i.e., Medicare Surtax of 3.8%) and higher dividend and capital gains rates, kick in much earlier for trusts.

With trust distribution planning, you may be able to reduce the overall income tax liability by shifting income from the trust’s income tax return to your own return.  (Keep in mind there are often other reasons to not make distributions from a trust, such as asset protection.)  We can help you think through the decision making process, and coordinate a plan with you and your CPA.

Should you refinance?

Despite all of the talk and expectation for higher interest rates, the opposite has proven to be true in the past year.  Rates have generally fallen and now may be a good time to refinance a loan, or reevaluate the overall structure of any debt that you may have.

Do you have a current financial statement?

Do you have an up-to-date personal financial statement that lists your assets (what you own) and liabilities (what you owe)?  From just a quick review of a personal financial statement, it is not at all unusual to find opportunities that can simplify your finances or save you money.  We can help you build a personal financial statement if that’s of interest.

Do you have a complete list of your digital life? 

This is a hot topic in the estate planning world now that so much of our lives are online.  And, the question not only deals with access to financial accounts, but also what might happen with things like your LinkedIn or Facebook accounts should something happen to you.

Most of the questions and comments we receive are about keeping track of and remembering passwords, identify theft, and fraud.  There are a number of good resources out there that can help you keep track and protect yourself.  Planning for our digital lives is now a key component of a good financial plan.

Do you know what your estate plan says? 

Are your executor and trustee appointments still appropriate?  Are you still comfortable with distribution provisions for kids and grandkids?  Has your family grown with the addition of new children or grandchildren?  Has your financial situation changed materially?  Are your beneficiary designations for retirement accounts and life insurance up to date?  What about account titles?

Note that with the big jump in estate tax exemptions ($5.43 million per individual); much of the focus of estate planning, has switched from estate tax reduction to income tax reduction.  To benefit, you may need to tweak your plan.

Also, where are your key documents located, and will your executor or power of attorney know how and where to find these if something happens to you?

How does your P&C insurance compare?

When is the last time you really sat down and tried to understand your homeowners, automobile, and liability coverage?  It’s certainly not exciting, but it is very important to do.

Through a review of current statements, we typically find savings opportunities or ways to improve coverage.  To help coordinate a review,  we simply need current declaration pages for your existing coverage.

Is now a good time to travel?

Okay, so we rarely tell clients to spend more money, but Europe is on sale (good note for the portfolio discussion as well).  The Euro has fallen significantly against the US Dollar.  If you’ve been putting off that trip, and you’ve budgeted for it, now may be a good time to go (all else being equal of course).