Wednesday, January 26, 2022

12 Suggestions for 2019

Ask The CFP® Practitioner

“Endurance is not just the ability to bear a hard thing, but to turn it into glory.”

~ William Barclay, Scottish author and theologian (1907- 1978)

Question: What recommendations do you have as we begin 2019?

Answer: Focusing on the elements we are able to influence is a realistic way to approach 2019. The tumultuous nature of 2018 served as a reminder that control over various facets of life is mostly an illusion. Since the majority of resolutions are health related, we’ll adhere to this tradition with twelve fiscal health resolutions to start the year.

1. Pinpoint your current location.

Identify a starting point with December 31, 2018 as the effective date to update your personal balance sheet. Simply stated this is what you own, minus what you owe. Next, identify the cost of running your household on a monthly basis. Classifying income sources and matching them with fixed expenses leads to discretionary income amounts that may be used to assist with obtaining financial goals. Taking time to update these figures provides a foundation for solid financial planning to determine if your financial situation matches with your current lifestyle.

2. Review cash flow habits and trends.

Grade last years’ success and identify what worked, what didn’t, and what you’ve learned. If there are fundamental changes in your life impacting finances or a few one-off expenditures, make note and incorporate those and any “what ifs” into your plan. Healthcare is a wildcard that is tough to pin down precisely; do your best while maintaining some flexibility.

3. Review the titling of accounts.

Many couples choose to live together rather than marrying. If assets aren’t properly titled they likely cannot be readily accessed by the survivor. The solution may be as straightforward as changing to joint accounts, but it’s not always that simple. Adding adult children to your accounts may or may not be the right answer as you could expose yourself to additional risks. In fact, titling has implications across a wide range of estate planning issues, as well as other situations such as Medicaid eligibility and borrowing power, to mention just a few. Account titling is more than just using the right form; it can also be a tool for estate planning. Review your account titling and determine if that’s still the arrangement you want.

4. Designate and update beneficiaries.

We’ve all heard the example of an ex-spouse unintentionally receiving life insurance proceeds or retirement account assets when beneficiary designations aren’t update. You need to correctly document and update your beneficiary designations to ensure your wishes are carried out rather than a default plan dictated by federal or state law, or the document used in your retirement accounts. Anytime something changes in life (divorce, remarriage, births, deaths, state of residence) it’s a signal to review and likely change beneficiaries. Don’t overlook wills, life insurance, annuities, IRAs, 401(k) s, qualified plans … the list goes on. If you’ve designated a trust as a beneficiary, has anything changed in the tax laws regarding trusts that could affect your heirs? Have you provided for the possibility that your primary beneficiary may die before you? Have you provided for the simultaneous death of you and your spouse? You need a good estate planner to walk you through the various scenarios.

5. Evaluate cash holdings.

The standard rule of thumb is to have six or more months’ worth of living expenses set aside in cash accounts that can be quickly and easily accessed. This is a guideline and your situation may be quite different.

6. Revisit portfolio’s asset allocation.

Market activity, up or down, affects asset allocation over time. Your portfolio may reflect an asset allocation and risk profile different from your original intentions. This is why it’s important to review your current and ideal asset allocation at least annually and rebalance as needed (Tip: Instead of selling appreciated securities, consider rebalancing with new contributions to help avoid capital gains taxes). Are you still comfortable with the current level of risk in your portfolio? Risk tolerance changes based on net worth, age, income needs, financial goals and various other considerations. Meet with your financial advisor and make whatever adjustments are indicated.

There is no assurance that any investment strategy will be successful. Asset allocation does not guarantee a profit nor protect against loss. The process of rebalancing may result in tax consequences.

7. Evaluate income sources.

Income sources include Social Security, pension(s), retirement portfolios, rental properties, notes receivable, inheritances, and of course earned income. How secure is each source? Can you really count on that inheritance, could there be vacancies in rental properties interrupting cash flow, are notes receivable backed with collateral? How much of total income is in each category? If a majority of income is from sources considered to be less than solid, it may be time to reposition your assets.

8. Review your Social Security statement.

The Social Security Administration (SSA) no longer mails statements of accrued benefits. You’ll need to go online to be sure all your earnings over the years have been recorded. Use the SSA’s online calculator to compute your benefits at various retirement ages (it’s generally best to wait as long as possible to begin collecting). Revise your spousal plan if indicated – this won’t apply to everyone.

9. Review the tax efficiency of any charitable giving.

Think strategically about your contributions – donate low-basis stocks rather than cash, for example. Consider establishing a Donor-Advised Fund, which enables you to take an upfront deduction next year for contributions made over the next several years – and provides other benefits. Give, but do so with an eye toward reducing your tax liability.

10. Check to see if your retirement plan is on track.

“We’ll be fine when our retirement portfolio is worth $X” just isn’t the way retirement works anymore, if it ever did. Assess these variables; types of assets you have, cash flow situation now and in the future, assumed rate of return and inflation rate, life expectancy, and anything else that defines a successful future. The truth is that retirement has a lot of moving parts that must be monitored and managed on an ongoing basis. Do you have a Plan B?

11. Make indicated changes.

After completing steps one through then you should have a good picture of what your financial situation looks like and where there are shortfalls or other challenges. Do you need to adjust your contributions to your IRA or other retirement plans? Do you need to adjust your tax withholding? If you’re due for a raise, how about channeling the extra money into a retirement account? Are you taking full advantage of your employer’s retirement plan options, particularly any contribution match program? Regardless of whether you’re years away from retirement or fairly close, the effects of compounding can be very significant – if you take advantage of them. Go after any problems areas – or opportunities – systematically and promptly.

12. Set up a regular review schedule with your advisor.

Work with a CERTIFIED FINANANCIAL PLANNER™ professional who has steered through many market cycles. She or he can help you with specialized tools, impartiality, and with the experience earned by dealing with and many different client situations. It’s vital that you communicate fully with your advisor, telling him or her not only what’s happening in your life today but what’s likely to happen or might happen in the future. Are you going to move, change jobs, send kids to college, face the possibility of significant medical expenses? Advisors can’t help you manage what they don’t know, so err on the side of over-communicating what’s happening in your life.

Since most New Year’s resolutions don’t survive the first month, make yourself a promise to really follow through on these pledges. Also, give yourself permission to spend a day lazing around watching movies, eating cookies and enjoying time with family and friends. One of the real joys of this holiday season is the opportunity to say thank you and wish you the very best for the New Year. Stay focused and plan accordingly.

Consult your tax advisor to assess your situation. Raymond James advisors do not provide tax advice and are not qualified to render advice on legal matters. The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. “Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email Website:

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