Your Financial Plan Review In The New Year

Your Financial Plan Review In The New Year

February 01, 2021

We all make New Year’s resolutions—either consciously or subconsciously. We all want to do better, and a new year is a great time to assess where we are, where we’ve been, and where we hope to be in the coming year. Reevaluating your financial plan is a good start to a new year, and here are a few items to keep in mind when reviewing your plan. 

Risk Tolerance and Investment Review 

How long has it been since you checked your investment risk tolerance?  Many investment firms offer risk profile questionnaires for investors to use to help determine the right mix of assets given their willingness to take on risk.  It’s important to keep in mind that a suggested target investment allocation for you may change over time as you get closer to the distribution phase of your plan.  In addition, if you haven’t rebalanced your investment portfolio in a while, you might be surprised how far your investments have drifted away from your target allocation.  

Another important aspect of your financial plan is to review performance and overall expenses you are paying.  Morningstar offers tools online to help you with this kind of analysis and it’s important to make sure your investment’s performance and underlying expenses are in line with averages.  Sometimes poor performing investments or investments with high internal expenses can fly below the radar and can negatively impact your returns over the long haul.      

Tax Strategy Planning

In the wake of a major election and a change in administration, questions naturally arise about how tax laws could change and how that will affect your wallet. The Tax Cuts and Jobs Act (TCJA), one of the prior administration’s significant accomplishments, cut taxes in multiple ways. The corporate tax rate was brought down to 21% from 35% and this was a highlight of this signature tax reform.  However, it also cut income taxes for many individuals as well. The top tax rate was brought down to 37% from 39.6% (It kicks in for income above $524,000 this year). The TCJA also increased the standard deduction and gives some business owners a 20% tax deduction. Many of these tax cuts for individuals were temporary, however, and are set to sunset in 2025.  

Although not certain, the new administration may look to roll back some of these tax cuts enacted by the prior administration.  It still remains to be seen but recent commentary from the newly elected Treasury Secretary, Janet Yellen, may give an indication.  She said recently in a Senate testimony, “Our tax system cannot be tilted toward corporate interests and the wealthy, while those that are sustained predominately by wages bear an unequal burden.”

If you're faced with a situation of rising taxes, you may want to shift some or more of your savings to tax-deferred vehicles such as a 401(k) or a traditional IRA. Because of how often new tax legislation is introduced, tax planning is not a one-and-done deal. Be sure to work closely with your tax professional to ensure any changes you make will benefit your own specific situation.  

Estate Planning

Regularly reviewing your estate plan with an estate planning professional is a crucial component of your financial strategy. Life moves quickly, and it is all too easy to forget how much can happen in a short period of time. Arrivals of new children or grandchildren, health conditions, asset purchases or liquidations, marriage/divorce, retirement, unemployment, remarriage, and deaths in the family can make a significant impact on the big picture of your estate plan.  Furthermore, if you have a trust currently in place, it’s always a good idea to review it periodically to make sure it still aligns with your goals and wishes.    

Let Us Partner With You

As you start the new year, make a commitment to yourself to regularly review your plan. Keep your financial plan up to date as life happens and changes in laws occur. If you’d like to review your financial plan, our team at Fiduciary Wealth Management can help. Schedule a phone call now and we’d be happy to help you assess your plan.

About Rocklin Senavinin, CFP®

With over 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc on LinkedIn or visit www.fidwm.com. If you have questions, feel free to schedule a phone call using this link.

DISCLOSURES 

The views expressed represent the opinions of Fiduciary Wealth Management, LLC and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person.

Additional information about Fiduciary Wealth Management, LLC is also available on the SEC’s website at https://www.adviserinfo.sec.gov/Firm/284324. Please call or email with questions.

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Sources: https://www.finance.senate.gov/imo/media/doc/Dr%20Janet%20Yellen%20Senate%20Finance%20Committee%20QFRs%2001%2021%202021.pdf

https://www.morningstar.com/articles/1017780/an-investors-guide-to-the-biden-administration

https://www.cnbc.com/2021/01/27/trump-cut-taxes-for-the-rich-biden-wants-to-raise-them.html