Ring In The New Year By Revisiting Your Financial Plan


In order to keep pace with changes in your life, your financial plan should function as a “living” document. As your life goals and aspirations evolve, your financial plan needs to be adapted to support those modifications.

The new year is an ideal time to evaluate, and if necessary, update your plan. Taking the first steps to determine if your life goals and financial plan align early in the year also allows you to renew savings, tax planning and charitable giving goals for the new year.

Consider these five tips to keep your financial plan on track and in the direction your life is heading in the upcoming year:

1. Align Your Plan With Your Life

In today’s sometimes unpredictable world, change is a given. At year’s end, it’s time to anticipate, as best you can, any upcoming changes in income; major life events (such as marriage or the birth of a child); or shifts in your retirement timeline. If you anticipate any of these life changes, you may need to revisit your investment risk profile and portfolio allocation to accommodate what the future will bring.

2. Re-Examine Retirement Contributions

Make sure that you are taking full advantage of all retirement funding opportunities. If maximum contributions are not in the budget, confirm that you are, at a minimum, optimizing your employer contributions in your 401(k) or other employer sponsored plans. If you have a plan at work, don’t assume that it will be static in the upcoming year. Employers can change their options from year to year, so be sure your contributions are keeping pace. If you do not have an employer sponsored retirement plan, evaluate other options available to save while deferring taxes via IRA accounts or other accounts that might be available depending on your earnings and work situation.

3. Do Good, Save On Taxes

Charitable giving not only benefits causes that matter to you, but they can also offer tax advantages. If you’re considering charitable donations, here are a few options:

• An increasingly popular approach to giving involves donating stock that has appreciated in value, for a tax deduction equal to the whole donation and not just the stock’s gains.

• Creating a donor-advised fund (DAF) allows you to direct donations to preferred charities – even if those donations aren’t made in the same tax year as the DAF’s creation.

• Taxpayers age 70½ and older can make qualified charitable donations (QCD) from their IRAs, effectively lowering adjusted gross income and meeting required minimum distribution.

4. Manage Your Tax Rate

Tax time is just around the corner and some will find themselves straddling two tax brackets or risk paying a higher alternative minimum tax. You may want to consider several options to help minimize your tax exposure in the New Year including: deferring income, increasing charitable contributions or education savings. Also keep in mind that tax rules change and this is on the new administration’s agenda. If/when these changes occur, your advisor will evaluate and interpret what they mean for you and discuss any opportunities that may emerge.

5. Make Sure Your Estate Plan Also Reflects Life Changes

Remember that your estate planning should be fluid, just like your financial plan. A carefully crafted estate plan assures that loved ones reap the benefits of your hard work and, in case of sudden death or debilitation, aren’t burdened with uncertainty and confusion. Be sure to keep your beneficiaries, powers of attorney and health care designations up to date.

These tips are a good starting point for New Year considerations. When making any changes, keep in mind that underlying laws and regulations are complex, with significant benefits and consequences to each. At River Wealth Advisors, we can assist you in conducting this review, discuss the options unique to your circumstances and help you make the adjustments that will keep your financial plan on track with your life.