Labor Day traditionally marks the end of summer and the beginning of the school year. For those of us who still go to work every day it also means it’s time to shake off the lazy days of summer, roll up our sleeves and get back to work.
September is also a great time to get back on track with your financial goals. Below are 5 things you should do right now to get back on track and end 2016 with a strong finish.
Review your goals. I am great at setting goals at the beginning of the year, but not always so great at revisiting them throughout the year. If I fail to meet a goal, it’s often because I forgot about the goal at some point during the year.
Financial goals can be the same way. If this was the year you were going to max out your Roth IRA contribution in addition to contributing to your 401(k), it may be hard to do that if you wait until the end of the year. Technically you have until your tax filing date, usually April 15, but if you have already spent the $6,500 you were going to add to your Roth or traditional IRA, it can be hard to make up for lost time at the end of the year. If funds are available, make your IRA contribution now and check it off your list.
Update your financial plan. Most of the financial plans I do for clients are updated electronically on a daily basis. The exception would be for assets – like your 401k balance – that are held at other institutions. Updating your financial plan with current information helps you to measure and see progress towards your goals. Updating your plan also refocuses you on your goals and sometimes provides that extra push you need to get things done.
Complete outstanding action items. I have a laundry list of action items on my to do list. I try to scratch things off my list as quickly as possible, yet some items still linger.
If you haven’t taken your 2016 IRA Required Minimum Distribution, do it now. This is an item you don’t want to miss. Waiting until the very end of the year provides little benefit and if you miss your RMD the penalty is steep – 50% of the RMD amount.
Have a rollover to complete? Get it done. Keeping assets in an old retirement plan prevents your retirement assets from being managed in a way that is consistent with your other investments, spreads your financial assets over multiple institutions making them harder to track, and can make it more difficult to manage risk.
If the rollover was a good idea in the first place, why wait?
Assess your risk tolerance. Every one is an aggressive investor — until the market takes a dive.
A $1 million dollar portfolio loses at least $100,000 when the market corrects 10% or more. If we get into a bear market, the drop will be even more significant. From the fall of 2007 to the spring of 2009, the market lost over 55% of its value. A $1 million IRA became a $450,000 IRA in less than 18 months.
I can’t say when the next market correction or full-on bear market will occur, but I can say with confidence that one is coming – some day.
Take a moment and complete your Free Portfolio Risk Analysis. You will find a link in the upper right hand corner of this website. This tool can help you determine how much market risk you can tolerate handle when markets go down, and help you estimate your upside when markets go up.
If you are a client of mine, we can do this for you at our next meeting or over the phone. With markets at or near all-time highs September might be a good time to assess your true risk tolerance and reposition assets accordingly.
Meet with your financial advisor. I see most of my clients once or twice a year. Typically those meetings are prescheduled 6-12 months in advance. If you haven’t scheduled an appointment with your advisor for a year or more I recommend doing so today (you know who you are).
Regular contact with your advisor is the only way they can get into the details of your financial situation, get up to speed on your goals and help you implement the steps you need to take to reach your goals. Even if you don’t have time for a meeting, a phone call or teleconference can be all that is needed to get you back on track.
If you are not working with a financial advisor, that’s fine too. Just be sure you set aside time with yourself, your spouse and significant others in your life to review your goals and get refocused before the year ends.
Summer is over, but there are still four more months to get back on track and reach your goals for 2016.