The flipping of the calendar onto a new year can serve as a reminder to assess your financial state so you can move confidently toward tax season and beyond.
Peter Hoglund, Alex Vaccarella and Bret Kaye, senior financial advisors at Wealth Enhancement Group in Warren, work with clients to review their finances and uncover areas that they might not have considered to make their accounts more stable and profitable. Here, Hoglund shares their advice on what you should be considering in January:
Check the Amount You’re Withholding for Taxes
A lot of things can change throughout the year. Did you get a salary increase or bonus? Did you take on a second job? Now is a good time to look at how much you’re withholding for taxes in each paycheck or moving into your retirement or profit-sharing plan to make sure the percentage correct. Is it enough?
Rebalance Your Investment Portfolio
If you’re managing your own investments, make sure the allocations are appropriate for this—and the next—stage of your life. During the year, the markets may have shifted your allocation into a risky position. It pays to review this periodically. Maybe now is the time to hire a professional and turn over the reins?
Assess the Past Year’s Spending
Credit cards produce great year-end spending statements. These concise reports are helpful to determine where you are spending your money over the year or month-to-month. This bird’s-eye view can help you find ways to cut spending—and save more—in the coming year.
Act Now if You Want to Change Your Accountant
Do you want to hire a new CPA to file your taxes and help manage your finances? Now is the time to act. Most accountants take on clients in November and December. Move quickly as openings close up by the middle of January. If you are looking to switch, get a new accountant nailed down at the end of the year or early January to be safe.
Review Wills, Power of Attorney Documents and Health Care Directives
Wills, power of attorney documents and health care directives might not need to be changed annually, but it’s good to review them every year and make necessary adjustments.
Tell Loved Ones Where Important Accounts and Documents Are Kept
Loved ones should know where you have your financial holdings and where important documents like wills, power of attorney and health care directives are kept. Many of my clients give my information to their loved ones so if something happens to them, they know to call me for institutional knowledge. As people age, the sad fact is that peers pass away. An advisor can be a steady source for this information. If you do not have one central advisor, leave clear and concise directions on where accounts are held, account numbers and institution contact information.
If You’re 73 or Older, Understand Minimum Distributions on Your IRA
When you turn 73, you are required to take a minimum distribution if you have a traditional IRA, which a lot of people have from rolling over their employer’s 401(k) plans or pensions into a tax-deferred account. Since the IRS bases the minimum amount you have to take out each year on factors like your age and the current life expectancy table, the figure changes every year.
This can make people a bit anxious because not only are they taking money out but they are paying income tax on the distribution, both of which fluctuate. However, you have the entire calendar year to plan how to disburse the funds and pay the taxes. January is a good time to plan how it will be distributed. Some retirees prefer to take slivers out every month like a paycheck. If you opt for this, realize that the amount will change and you will have to adjust the disbursement to make it equal payments throughout the next 12 months.
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