You know that feeling when you realize you missed a deadline by just a few days? Being just a little bit off can throw your entire plan out of whack, like when you intend to start a new exercise routine on Monday — then Monday comes around, you get busy and can’t make it to the gym, and end up feeling like you missed your shot at a fresh start.
Don’t let that happen to you this New Year, especially when it comes to your money. We may be looking at the last two weeks of the year, but there’s still plenty of opportunity to make money moves now that will help set you up for success when you turn the page to a new calendar.
Here’s what you may want to consider doing with your investment portfolio before 2018.
Rebalance Your Portfolio
Market volatility can really shake up your asset allocation. Thanks to the strong bull market we’ve been enjoying, that means you’re likely over-invested in equities right now — and you may not want to be!
Start 2018 with a portfolio that accurately reflects your tolerance for risk, your time horizon, and your goals by rebalancing before the end of the year.
Think carefully before selling assets with gains, as it could trigger some unpleasant, last-minute tax consequences for you. If you’re not sure how to appropriately rebalance, don’t tinker around in your portfolio on your own.
Touch base with your financial planner, who can help guide you to set up a strong portfolio for 2018.
Get Last-Minute Tax Breaks
Speaking of tax consequences, make sure you stack the deck in your favor! One easy way to do this within your investments is to make some last-minute contributions to tax-deferred accounts.
If you haven’t maxed out your 401(k), contribute money there first, especially if it provides you with an employer match. Then, start looking at your traditional IRA, SEP IRA, or SIMPLE IRA if you have access to any of these.
Or, fund your health savings account (HSA). These offer a triple-tax advantage:
- Money going into the HSA is tax-deferred.
- Earnings that grow within the account are not taxed.
- Withdrawals are tax-free as long as you spend them on qualified medical expenses.
…and Harvest Those Tax Losses
Don’t forget to strategically sell off your assets that lost value over the last year. “Strategically” is the key word here, since doing so willy-nilly can offset any potential advantage you gain from tax-loss harvesting.
Identify New Opportunities for 2018
Because of a strong bull market, stocks are pretty pricey right now. Buying into the most popular stocks right now might lead you to buying high — which is not want you want to do for investment success.
When the market dips, it provides a good opportunity to buy carefully-selected stocks that match up with your needs, goals, and overall investment strategy.
But you shouldn’t wait to buy just because you want to enjoy a nice sale on assets. (That’s timing the market, and it’s tricky!) You can, however, be strategic about where you place your money while the cost of US equities is so high.
Consider international stocks and bonds, which are much cheaper to buy than stocks here at home. Some investors shy away from this, but remember: the US only represents about half the total global market. Avoiding international assets leaves you with a portfolio that’s not truly diversified, and could expose you to greater risks than you need to take.
Automate What You Can
If you haven’t yet set up automated contributions to your investment accounts, now is the time to do so. Automating benefits you in several ways:
- It eliminates the room for human error in the form of excuses. No more, “Oh, I forgot!” It’s already done.
- It creates consistency. Even if something unexpected comes up during the month and leaves you in a place where you can’t invest as much as you wanted, you know you at least saved a little bit through your automatic contribution.
- It makes things simpler, because it’s one less thing for you to worry about.
That doesn’t mean you won’t make manual contributions to your assets throughout the year. But this provides a solid baseline to ensure you’re consistently taking action every month to grow your wealth.
Use Funds Before You Lose Them
If you have a flexible spending account, you only have a few more days to use the money within the FSA before you lose it.
Unlike HSAs, FSA funds don’t roll over from year to year. Whatever is left in the account goes back to your employer.
Your FSA might have a grace period, so be sure to determine if that’s the case for you and if so, what the date on that period is (for many FSAs, it’s March 15th).
Even with a grace period, act now to book important doctor appointments throughout January and February so you don’t miss out come March.
Don’t Forget About Your Beneficiaries
This is a good time to pause and reflect on the ending year before you gear up to the new one. As you think about everything that happened in 2017, don’t forget to check your beneficiaries on your accounts.
Changes in lifestyle, relationships, families, and more can mean the beneficiaries who were listed on your investment accounts are no longer the appropriate people. Do a quick check and make tweaks to your account as necessary.
Keep Paying Attention to Taxes
Sensing a theme here yet? Some of the most important year-end moves you can make with your investments revolve around taxes and tax deadlines — and what the actual tax laws are.
As of December 15, Congress still hasn’t passed what promises to be one of the biggest overalls to the tax system in decades — but they’ll decide on whether to do so or not before the end of the year.
Keep an ear out for updates, but don’t just react.
Ask your CPA and your financial planner to help you plan ahead through these changes so you can proactively make decisions about what’s best for your complete financial situation.
Request for a Raise in Your Retirement Account Contributions
Talk to HR or your manager about the forms you need to fill out to request an increase in the amount you contribute to your retirement accounts in 2018.
Even if you just bump up those contributions by 1 or 2 percent, it makes a difference — and helps you avoid succumbing to lifestyle inflation.
Taking this action now will set you up for a higher savings rate in the new year, which helps keep you on the path to financial success.
You have until the clock strikes midnight on December 31. Ready? Get started!
Eric C. Jansen, ChFC is the founder, president and chief investment officer of Westborough Massachusetts-based Finivi, which provides fee-based retirement income planning and investment management services for successful individuals and families nationwide. Do you need help planning for retirement? You can click here to request a complimentary consultation with a financial planner.
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