Financial Focus: Get Ready For Your Year-End Review

The last few months of a year often prompt people to think about goals they want to pursue in the coming year. If your goals include financial issues, an annual review is an excellent opportunity to focus on what you need to do to pursue them. Every person’s goals are unique, but you may want to think about the following areas when preparing for your review.

Building Retirement Assets

Your advisor can help you calculate how much you need to save for your later years. If you are coming up short, funding an IRA may help you close the gap.1 For the 2014 tax year, you may contribute a maximum of $5,500 to a traditional or to a Roth IRA—plus a $1,000 catch-up contribution if you are age 50 or older. If you haven’t yet made your 2014 contribution, you may do so up until April 15, 2015. These contribution limits will remain unchanged for the 2015 tax year.

If you are approaching retirement (particularly if you are planning to retire at the end of the year), you should work with a skilled retirement income advisor to create a written cash flow plan.  This plan should specifically address strategies for sustaining a sufficient amount of income for you to live at or near your current standard of living during your retirement years.**  It should also address the risk of running out of money in your old age.

Preparing for Education

College costs continue to increase faster than the rate of inflation, which presents a challenge for academically minded families. In addition to saving as much as you can afford and pursuing financial aid, you may want to consider a Coverdell Education Savings Account (ESA)—but you’ll want to do so before the end of this year.

Coverdell accounts currently permit you to save $2,000 annually per beneficiary. Withdrawals are tax-free as long as they are used for qualified expenses associated with elementary, secondary or higher education.

What actions should you consider now? If you currently have a Coverdell ESA, be sure to make your current-year contribution by December 31, 2014. Similarly, if you need to withdraw funds from a Coverdell account to cover qualified education expenses for the current school year, do so by December 31, 2014.

Evaluating Your Estate

When crafting your financial plan, be sure to consider whether your investments complement the provisions of your will. As part of this exercise, your financial advisor can help you review the potential estate-planning benefits of stretch IRAs, Roth IRAs and other accounts. Don’t forget to review beneficiary designations to make sure they are up-to-date.

Assessing Your Asset Allocation

Last but certainly not least, your financial advisor can make sure your portfolio’s mix of assets—stocks, bonds and cash investments—is on target given your risk tolerance and time horizon. A more aggressive mix may be appropriate for longer-term goals that are 10 or more years away, while being more conservative may be desirable for shorter-term objectives.

There may be other areas you want to pursue, but these few may provide initial food for thought. By capitalizing on the goal-setting opportunities of your annual review, you’ll improve your chances of making the coming year a building year for your financial future.

Bonds are subject to market and interest rate risk if sold prior to maturity. Selling bonds prior to maturity may make the actual yield differ from their advertised yield and may involve a loss or gain. Bond values will decline as interest rates rise and are subject to availability and change in price.

General risks inherent to investments in stock include the fluctuation of market prices and dividend, loss of principal, market price at sell may be more or less than initial cost and potential illiquidity of the investment in a falling market.

An investment in cash alternatives securities is not insured or guaranteed by the FDIC, NCUA or any other government agency. Although the goal exists to preserve the value of your investment at a constant dollar rate, it is possible to lose money by investing in these securities.

Asset allocation cannot eliminate risk of fluctuating prices and uncertain returns, nor can this strategy ensure profit or guarantee against loss.

** No strategy can assure success.

1Withdrawals of earnings or other taxable amounts are subject to income tax, and if made prior to age 59½, may be subject to an additional 10% federal tax penalty.

This article was prepared by GenWealth Financial Advisors with information sourced from  Standard & Poor’s Financial Communications and is not intended to provide specific investment advice or recommendations for any individual.

John Shrewsbury and Janet Walker are founders of GenWealth Financial Advisors and hosts of the “Get Ready for the Future Show” now in it’s seventh year of broadcast on 103.7 The Buzz and is also heard on KARN-fm. GenWealth is an Arkansas Registered Investment Advisor based in Bryant with securities offered through LPL Financial, member FINRA/SIPC.  GenWealth is a separate entity from LPL Financial.