“My experience working with clients is that changes happen all of the time,” says LeAnn Erenberger, Wealth Management Advisor for U.S. Bancorp Investments, an affiliate of U.S. Bank. “It might be something new with your employment situation, a death in the family or developments that affect your children. There’s a lot to consider.
“I liken it to maintenance work on your home or car,” Erenberger continues. “You want to insure everything is running smoothly. Good maintenance practices will extend their lives, and this is true of a financial plan as well.”
8 areas to review in your mid-year financial checkup
- Check on your financial goals. Your goals are subject to change. Perhaps a child has altered plans for college. Maybe your retirement date is affected by changes to your work circumstances or investment portfolio. You may even want or need to add a new goal to your list. This is a time to put more careful thought into whether your goals remain accurate or if you need to update them and make appropriate adjustments to your financial plan.
- Assess your investments. It’s important to review investment performance to make sure your portfolio remains well positioned to help you meet your long-term goals. Don’t just base that judgment on recent results, but on how your investments perform over time.
Notably, every market is bound to experience both certainty and volatility as time goes on. “We’ve currently got volatility in a lot of different areas, such as inflation,” says Erenberger. “But this too will pass. Good markets, bad markets, uncertainty, certainty — the one thing you need to know about the investment world is that it’s constantly changing.”
That’s where creating a good investment plan comes into play. As you review your investment strategy, always be sure you’re comfortable with the level of risk you’re taking on and rebalance your portfolio when necessary. And if you have cash in savings or money market accounts, make sure you’re getting the best rate available.
- Take a look at your interest rates. It’s important to assess that you’re getting the best interest rate available to you and look for alternatives if not. “Some people don’t have a clue on their home equity line of credit,” says Erenberger. “It was at 3% and now it’s at 9%, and they don’t realize that that’s a real problem.”
You can also take advantage of higher interest rates by refreshing fixed-income products or old annuities. Review your investments and accounts to see when and where you can put high interest rates to use.
- Bump up your retirement plan contributions. Just as your cost-of-living inflates over time, so too should you increase the amount you contribute to your workplace retirement plan or IRA accounts to keep up with the higher costs you’re likely to experience in retirement. A mid-year review is a good opportunity to consider if and how much you can boost your retirement savings.
And if you’re 50 or older, check your contribution amount to make sure you’re taking advantage of catch-up contributions. Some plans update automatically while others have to be manually updated. “Some of the older plans didn’t have a Roth provision,” notes Erenberger. “Now they do, and you may have missed that. Make sure you’re taking full advantage of all the tax options inside of those retirement plans.”
- Protect your assets. All insurance coverage, including life, health, disability income and home insurance, should be reviewed annually. You want to be certain that any significant changes in your life are accounted for in your coverage. If your income has changed substantially, life insurance and disability income coverage should be adjusted to account for that. For benefits given through an employer, evaluate your package to assess if you can get those same services elsewhere at a better premium. Despite a slight cooling in the housing market, home values have risen significantly in the past few years, so be sure your home insurance still covers true replacement costs.
Additionally, have insured valuables like jewelry appraised periodically to determine if their value has increased. Often, people forget about these items, and they end up underinsured. All products of significant value within your household should be insured appropriately with the correct coverage. Use this annual insurance review checklist to assess that coverage.
- Get ahead of the game on tax planning. Taxes are a constant consideration. “It’s important to remember that the best tax planning is an ongoing effort throughout the year,” says Erenberger. Decisions you make now and prior to December 31 will impact your tax returns next April. Also check the amount withheld from your paycheck to cover taxes. If you typically owe money when filing your tax returns, you may want to increase the withholding amount. If you usually receive a large refund, you could cut back the amount withheld and put the money saved with each paycheck to work toward your goals.
According to Erenberger, you should be sure to evaluate tax loss harvesting as you review your tax position. This involves selling investments (within taxable accounts) at a loss, so those losses can be applied against capital gains that may be realized from the sale of other investments or that are paid out by mutual funds. “You don’t want to wait until the last minute to take advantage of this strategy,” says Erenberger.
- Consider Roth IRA conversions. Erenberger also recommends looking into Roth IRAs. Moving existing assets from a traditional IRA to a Roth IRA can bolster your retirement income strategy. Having assets available in a Roth IRA that may qualify for tax-free withdrawals provides a great deal of flexibility in managing your tax liability in retirement. “I often help clients take full advantage of their existing tax bracket by shifting traditional IRA assets to Roth IRAs,” Erenberger says.
Such a conversion is a tradeoff. The amount you convert will be taxed as ordinary income, but if holding period requirements are met in a Roth IRA, withdrawals are tax-free. “This is a case of managing your tax bracket and only converting an amount that doesn’t exceed the level that would move you into a higher tax bracket,” says Erenberger. Starting that process in the middle of the year allows enough time to develop an income plan for the remainder of the calendar year that properly manages the tax impact of a Roth conversion.
Consult a tax advisor to ensure these options work for your specific circumstances and tax bracket.
- Review your estate planning documents. Check your beneficiary designations on financial accounts, insurance policies and retirement accounts to make sure they’re up to date. You may also want to take a fresh look at your will and/or trust to confirm that the beneficiaries named and specifications you’ve laid out are still valid.
If you’re considering gifting money to your children, note that the lifetime estate and gift tax exemption today (almost $13 million per person) is scheduled to be reduced to approximately half that amount in 2026. You may want to take advantage of the exemption amount now to help reduce potential estate taxes in the future.
Build confidence in your financial situation
Financial planning now looks a lot different than it might have 10 or 20 years ago. “This is no longer an extensive, one-time only process that results in a thick financial planning document that sits on a shelf and collects dust,” says Erenberger. “With our ability to aggregate data and the current information that can be at a client’s fingertips, a financial plan today is much more dynamic.”
Erenberger says with the technology available to clients today, the financial review process is much more informative and productive. “We’re dealing with real time information about evolving markets, economic shifts and personal changes,” she says. With your entire financial picture readily at hand, “it turns into a much more meaningful discussion for all involved.”
By accounting for all that may be going on in the markets, the broader economy, or your own life, a mid-year financial checkup can help affirm that you’re doing all you can to steer your financial life in the right direction.
Learn more about our goals-focused approach to financial planning.