As the year draws to a close it is wise to make a quick check on your financial picture to ensure you are prepared for what 2013 may throw at us. These 5 quick tips can be done fairly easily and can help ensure a smoother ride next year.
Check your beneficiaries
It is a wise person who ensures that the next generation will receive their inheritance with the least amount of hassle and in the manner they so wish it to be. I make it a standard in my practice to review the beneficiaries of all my clients at least annually. Life changes quickly, and so may your choices for whom will get your hard earned money. Births, deaths, divorces, and marriages all can change the way you allot your assets, so make sure to check all of your accounts at least annually. It is also a good idea to add contingent beneficiaries in case the primary is no longer living or may not wish to receive the asset.
Check your tax allocation percentages
Now is the time to ensure your tax picture is in order. Especially in the case of assets that will face taxes in the future. Divide your portfolio up into three categories-taxable, tax deferred, and tax free. Your goal may be to have the highest percentage in the tax free category, maybe as much as 50-70% of your portfolio, especially if you feel taxes may rise in the future. This is a good way to get a feel of the overall tax status of your estate and allow you to begin to plan how to move assets around for a more favorable tax future.
Check your liability limits
Due to the type of society we live in, you may face the unhappy future of being sued, or having to sue someone else. In either case, it is important the you have proper liability protection. Start with you auto and homeowners policy. The state minimums in PA are set way too low for any real protection in todays high priced world. Talk to your agent, ask about how to increase your protection. Maybe even look into an umbrella policy. This may be a low cost way to help protect the rest of your assets in an uncertain world
Check your overlap
Overlap occurs when you purchase multiple mutual funds inside your portfolio that hold the same underlying equities or bonds. This may subject you to increased risk and give you a false sense of true diversification. There are some good online tools available to help you check how much overlap you may have inside your mutual fund and stock portfolio. I see this occur on the majority of new clients when they bring in their statements. A quick check may help you reduce risk and provide some much needed diversification.
Following these quick steps may help you begin 2013 with an improved financial picture and get you off to a better start for that rosy financial future we all dream of.
Joe Wirbick is the President of the Lancaster, PA financial services firm Sequinox. Joe specializes in retirement planning and distribution. This allows him to concentrate on developing strategies that help address the unique issues that confront retirees and those approaching retirement.
Tax advice provided for informational purposes only. Tax returns should be completed in conjunction with a qualified tax professional. Sequinox Financial and JWC/JRAG do not offer tax advice and are not affiliated. Mr. Wirbick is an Investment Advisor Representative offering advisory services through Jonathan Roberts Advisory Group and securities through J.W. Cole Financial, Inc. Member FINRA/SIPC. The opinions expressed are those of Mr. Wirbick and based on information believed to be reliable but not guaranteed and subject to change and do not necessarily reflect the position of JWC/JRAG.