Summer vacation is the time to relax with family, reconnect with friends and make new memories for both the young and the old.
For Baby Boomers near or in retirement, this halfway point to the end of the year is also a great time to re-evaluate your financial portfolio to assure you are meeting your goals (and make tweaks if you are not).
“Hitting the halfway point of the year is a great time to give your finances a check-up,” says Christine G. Russell, senior manager of retirement and annuities for TD Ameritrade. “Investors who get into the habit of reevaluating their investments mid-year have the opportunity to make necessary adjustments and be better prepared heading into the second half of the year.”
Russell discussed with FOX Business what you need to know about conducting a mid-year financial check-up.
Boomer: What should I be doing to maximize the potential interest on my savings account?
Russell: Interest rates are still at historic lows in the aftermath of the financial crisis. While some borrowers have benefited from low interest rates on mortgages and auto loans, savers have been grappling with rates well below one percent. If you already have a sufficient emergency fund and are saving for something further down the road, it may make sense to consider a diversified portfolio of investments that suits your time horizon and risk tolerance.
Boomer: Should I update my W-4?
Russell: Those who have had a major event occur in their lives since the beginning of the year, such as a marriage, divorce, or newborn child, should update their W-4 form. Similarly, it may be beneficial to update a W-4 if an individual decides to take on a second job to earn some extra cash. Events like these will impact an individual’s taxes when they file their 2017 returns next year. While some people grow accustomed to receiving a refund each spring, experiencing a life change can cause and individual to owe money come April. However, those who have qualified for additional deductions can see the size of their refund increase, leaving them with a fatter check. It is important to be proactive about your tax filings to avoid the surprise of owing Uncle Sam money or being forced to wait for a large refund when you could have been seeing that money in your paycheck.
Boomer: Is it important to review my credit report mid-year?
Russell: Yes. Checking your credit report provides important benefits for individuals. Monitoring your credit report regularly will allow you to check your financial progress, spot possible discrepancies and even find instances of identity theft. It is important for individuals to stay informed of changes to their credit report and monitor their credit history so they can work to improve their score during the remainder of the year or contact the credit bureau if there are potential issues before they become major problems. Mistakes and fraud both happen. Stay alert.
Boomer: If I am not meeting my New Year’s financial expectations what changes should I make?
Russell: Now is the time to revamp your 2017 financial strategy if it is not going the way you had hoped. With half of the year remaining, there is still time to catch-up to meet your end-of-year goals. Revisiting expectations and tracking your financial progress can motivate you to put in the extra effort over the next few months. It is also valuable to check-in on investments and reassess risk tolerance from the beginning of the year. By doing this, an individual will have a better understanding of their finances and have the opportunity to turn their year around.
Here are some specific considerations:
First do you really have a plan based on your household needs? If you have a realistic plan, then why are you not meeting your goals? There may be a good reason you did not meet expectations, and no changes are necessary. Or you may need to update your plan with more realistic expectations. A good financial plan can provide a framework for making changes when they are needed, rather than when emotions may be driving arbitrary changes. If you have no plan, not meeting your expectations can be a key indicator that you need to work on a more detailed household financial plan.
Second, in reviewing your plan have you captured your risk tolerance correctly? Is your portfolio diversified enough, when you consider your risk tolerance, time horizon, and goals? Remember to consider all assets, not just 401(k) or IRA accounts.
Third, consider your goals thoroughly; not just performance goals, but risk protection and estate planning goals. You may be willing to give up some investment performance today for a sustainable income in retirement. And let’s face it, supporting your quality of life in retirement is usually the goal for long term savings, isn’t it?
To sum it up, remember to look at the big picture when evaluating your financial expectations.