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Five Key Considerations for Your Annual Review
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Anytime of the year is a good time for an annual financial review. If you are planning on meeting with your advisor, here are five key issues to consider.
If you have not reviewed your portfolio in more than a year, it may be time to schedule a session with your financial advisor. Specifically, consider discussing the following areas:
Consideration 1: Your asset allocation. Have the stock market's ups and downs of the past few years altered your asset allocation from your desired mix? If they have, your financial advisor can present suggestions for rebalancing. You may be able to reduce holdings in areas where you are over weighted and invest the proceeds in areas that are below your target. Rebalancing strategies may involve tax consequences, especially for non-tax-deferred accounts.
Consideration 2: Your retirement nest egg. Given longer life expectancies, you may find yourself funding a retirement that lasts 20 or 30 years or even more. Qualified retirement accounts, such as an IRA or an employer-sponsored retirement plan, can help you build the assets you are likely to need over time. For the 2010 and 2011 tax years, you can contribute a maximum of $5,000 to an IRA, plus an extra $1,000 catch-up contribution if you are aged 50 or older. If you participate in a 401(k) plan or a 403(b) plan at work, the employee maximum contribution for 2011 is $16,500, plus a potential catch-up contribution of $5,500 if you are aged 50 or older.
Consideration 3: Your exposure to risk. Depending on your circumstances, review your life insurance, disability insurance, homeowner's insurance, and auto insurance to make sure you have adequate coverage. Life insurance policies are subject to substantial fees and charges. Death benefit guarantees are subject to the claims-paying ability of the issuing life insurance company. Loans will reduce the policy's death benefit and cash surrender value, and have tax consequences if the policy lapses.
Consideration 4: Your exposure to taxes. Within taxable accounts, your tax bite is influenced by the types of investments you own and your holding period. Short-term capital gains on investments held for less than one year are taxed as ordinary income. The maximum rate for 2011 is 39.1%, up from 35% in 2010. Long-term capital gains on investments held for one year or longer are taxed at 15% in 2010; the rate is scheduled to increase to 20% in 2011. Qualified dividends will be taxed at ordinary income tax rates.
Consideration 5: Your ability to save and invest. Too much debt can make it difficult to pursue long-term financial goals. If you have a credit card balance, consider whether reducing or eliminating it could be to your advantage. Scour your budget with the goal of identifying areas where you can reduce or eliminate expenses, potentially saving more.
© 2011 Standard & Poor's Financial Communications. All rights reserved.
© 2011, Kelly Ruggles, Spokane, WA. Web site
Kelly C. Ruggles, Spokane, WA. is a fee-based financial planner located in Spokane.
Kelly C. Ruggles, Spokane, WA. President of American Reliance Group, Inc., a registered investment advisor.
Kelly Ruggles, Spokane, WA. is the author of "The Financial Playbook" for Retirement
Kelly C. Ruggles, Spokane, WA. Does not intend to provide personalized investment advice through this publication and does not represent the strategies or services discussed are suitable for any investor. Investors should consult with their financial advisors prior to making any investment decisions.
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