With all that has been going on with the pandemic and the volatile markets, you’ll be forgiven if you haven’t paid much mind to your retirement goals... By us, at least. We forgive you.
The IRS is not so forgiving.
If you haven’t been paying much attention to your portfolio and your retirement situation, now would be a good time to take stock. A lot has changed in the last two months, and that has implications for your financial goals, your potential tax burden and your fiscal sanity. So here are three things you can do to get back on track:
#1 Get your documents in order
The tax deadline has been postponed, but it will be here before you know it. If you procrastinated, use this time to get ahead of the game. Collect your W-2s, receipts, bank statements etc. so they are ready to go come July 15th.
Beyond filing for taxes, there are some reasons why it is particularly valuable to get your ducks in a row now. The CARES Act stimulus check is dependent on your 2018 or 2019 tax returns, and it might make sense to contribute more to your IRA for 2019 to avoid meeting the phase out threshold. A Roth conversion might still make sense if you are looking to lower your tax burden.
You can’t make solid decisions about any of that if your paperwork is sitting in a pile in the basement. If you don’t know where to start, simple things like rifling through your unopened mail and shredding old documents can help organize your financial life.
#2 Revisit your budget
While you’re looking through your documents, take a look at your expenditures and assets. Maybe some recurring payments need to be brought down or eliminated. Let’s face it, if you aren’t using that streaming service now, you’re probably not going to.
Take stock of your financial situation. Have you seen your hours diminished? Did you refinance your house? Are you eating out less? All of that impacts your personal balance sheet.
If possible, now would be a good time to bolster your emergency fund. Aim to have nine months of expenses tucked away if possible, given the unpredictability of world events.
#3 Rebalance your portfolio
With the ups and downs of the market, you might find you are overinvested in one type of asset. This has implications for your risk level and your potential tax bill down the road. If certain investments have done well, it might make sense to sell high and buy other assets on the cheap.
This is also a good time to revisit your 401k strategy. Do you need to step up your contribution? This may be good timing while the market is down, and you might find you need more to meet your financial goals down the road.
Work with your advisor to strive for tax and asset diversification and make sure you aren’t missing out on any opportunities amidst the market turmoil.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
This article was originally published in the Pioneer Press. You may view the article here.
Series 7 & 63 Securities Registrations,1 Series 66 Advisory Registration, † Insurance License Bruce has been in the financial services industry since 1983 and is one of the founders of Wealth Enhancement Group. Since 1997, he has hosted the “Your Money” radio show, a weekly program that focuses on delivering financial advice in a straightforward, jargon-free manner. Bruce also hosts with the "Mid-Morning" crew on WCCO-TV each Tuesday morning to...Read More