Financial resolutions for the New Year

Now that the last chorus of Auld Lang Syne has been sung and the champagne and noise-makers have all been put away, many of us turn our attention to making New Year’s resolutions.

What a great opportunity to get our financial houses in order! Towards that end, here are some suggested financial resolutions to start your New Year off right. 
1.   Create a financial plan. 

Consult with an experienced financial advisor to create a customized financial plan.  This is a personal financial roadmap designed to gauge whether you are on the right track towards securing a comfortable retirement. 

2.   Create/review estate plan. 

It is estimated that as many as 120 million adult Americans do not have a current estate plan.  A comprehensive set of estate planning documents should include a Last Will and Testament, a Revocable Trust, Financial Powers of Attorney and Advance Health Care Directives.  The costs of not having a current estate plan could far outweigh the nominal expense of consulting with a qualified estate planning attorney to create or update your documents. 

3.   Review beneficiary designations on retirement accounts. 

Reviewing beneficiary designations of qualified retirement accounts (IRAs, 401ks, 403bs, etc.) is important for two reasons.  First, to ensure that these assets will pass upon your death to the people you care about.  Left to chance, these accounts could pass to an ex-spouse, or you could exclude after-born children or grandchildren. Second, to ensure that the benefits of tax-deferred growth continue for your heirs.  Some employer plans provide that your estate is the default beneficiary of your account, which could accelerate the taxation of the account.    

4.   Review/rebalance asset allocation.  

If you’ve been invested in equities since the economic downturn of 2008-09, you’ve benefited from one of the longest bull markets in recent memory, but you may now be over-weighted in equities as a result.  This could be a good time to take some profits and rebalance and diversify your investment portfolio.   

5.   Dollar cost average into the market. 

The New Year provides a great opportunity to implement a long-term investment strategy of periodically investing a set amount into the market.  Allocate the amount you can afford to invest monthly across a group of 3-5 mutual funds to diversify risk. You’ll be buying a diversified basket of securities as market prices fluctuate over time.     

6.   Life insurance.

If you have not already done so, consult with an insurance agent or financial advisor about some low-cost term insurance to provide for loved ones in case something were to happen to you prematurely. Knowing that your family is protected if something unforeseen happens will give you piece of mind.  If you are beyond your earning years and still in good health, universal life insurance may be a way to enhance the legacy you’ll leave behind for children and grandchildren.            

7.   Long-term care insurance.

If you are among the millions of Americans who worry about rising health care costs, consider long-term care insurance as a way to protect your family against the risk of an extended stay in a skilled nursing care facility. Nursing homes cost as much as $100,000 annually today, and are expected to continue rising in cost in the coming years.          

8.   Start a 529 Plan for children or grandchildren.

If you have young children or grandchildren, it may be a good time to start a college savings program.  529 Plans are flexible, tax-efficient savings accounts that anyone can start for college-bound beneficiaries.  Earnings that are used for higher education escape income taxes. Donors may get a state income tax deduction for their contributions to these accounts. Federal gifting rules allow donors to make tax-free gifts of as much as $14,000 annually.                

9.   Review SS earnings statements.

In case you haven’t noticed, the Social Security Administration stopped mailing annual earnings statements to save on postage costs. You can and should periodically review your earnings statements on-line at If there are any discrepancies in your earnings history, it will be far easier clearing matters up now than if you wait years or decades to locate old W-2 statements or copies of tax returns.                                                      
10.   Create a personal information guide.

Finally, gather all your personal financial information in a personal information guide.  Include bank and investment account information, contact information for your attorney, accountant, financial advisor and insurance agent, and your legal documents such as estate planning documents and real property records. If you were to become ill or die, having these records in a safe place will help your loved ones manage your affairs in a time of grief.  
This is not an exhaustive list, but these are some of the steps you can take to strengthen your personal financial life.  It’s never too early or too late to organize and plan for the financial security of you and your loved ones.

Richard Behrendt, a former Internal Revenue Service attorney, is director of estate planning at Annex Wealth Management, headquartered in Elm Grove.

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