The end of the fiscal year is a good time to review your financial plan. If your savings plan or the market as a whole has swerved off course, now is an opportune time to adjust accordingly. Here’s what to look for:
Are your long-term and short-term goals the same as they were last year? If your goals are both time and dollar specific, it’s easy to tell whether you are on target to meeting them.
Does the savings component of your financial plan include tax-deferred pension plans? Review the details of your pension plan to determine if the division of funds among its saving and insurance components is still relevant to your current stage in life.
Simply saving your money is not enough. Now comes the hard part – making sure your funds are invested properly. Your investments need to reflect your risk tolerance, growth objective, and time frame.
As the market moves and your portfolio balance changes, recheck your asset allocation to ensure that everything is in order. Often funds can change focus, requiring you to rebalance your portfolio. Furthermore, if a stock or other security does extremely well (or extremely poorly), this can also affect the balance of a portfolio. It may be time to buy/sell.
Review Your Winners and Losers
Before selling weak stocks/funds and actualizing profits, ask your accountant about the tax ramifications of such sales. Depending on your situation, it may be wise to hold onto investments for at least one whole calendar year, to qualify for the long-term capital gains rate (if you are a U.S. tax payer). While tax ramifications shouldn’t be the only factor in determining when to sell, they should certainly be taken into consideration.
Remember, it may be the end of the fiscal calendar year, but it’s only the beginning of the rest of your tomorrows. Make sure your finances are in the best shape to enable you to realize your dreams.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published December 7, 2015. Updated December 2019.