If 2023 has been financially challenging, why not take a moment to reflect on the progress you’ve made and the setbacks you’ve faced? Getting into the habit of reviewing your finances midyear may help you keep your financial plan on track while there’s still plenty of time left in the year to make adjustments.
Goal Overhaul
Rising prices put a dent in your budget. You put off a major purchase you had planned for, such as a home or new vehicle, hoping that inventory would increase and interest rates would decrease. A major life event is coming up, such as a family wedding, college, or a job transition.
Both economic and personal events can affect your financial goals. Are your priorities still the same as they were at the beginning of the year? Have you been able to save as much as you had planned? Are your income and expenses higher or lower than you expected? You may need to make changes to prevent your budget or savings from getting too far off course this year.
Post-Tax Season Estimate
Completing a midyear estimate of your tax liability may reveal planning opportunities. You can use last year’s tax return as a basis, then factor in any anticipated adjustments to your income and deductions for this year.
Check your withholding, especially if you owed taxes or received a large refund. Doing that now, rather than waiting until the end of the year, may help you avoid a big tax bill or having too much of your money tied up with Uncle Sam.
You can check your withholding by using the IRS Tax Withholding Estimator at irs.gov. If necessary, adjust the amount of federal income tax withheld from your paycheck by filing a new Form W-4 with your employer.
Investment Assessment
Review your portfolio to make sure your asset allocation is still in line with your financial goals, time horizon, and tolerance for risk. How have your investments performed against appropriate benchmarks, and in relationship to your expectations and needs? Looking for new opportunities or rebalancing may be appropriate, but be cautious about making significant changes while the market is volatile.
Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. All investing involves risk, including the possible loss of principal and there is no guarantee that any investment strategy will be successful.
Retirement Savings Reality Check
If the value of your retirement portfolio has dipped, you may be concerned that you won’t have what you need in retirement. If retirement is years away, you have time to ride out (or even take advantage of) market ups and downs. If you’re still saving for retirement, look for opportunities to increase retirement plan contributions. For example, if you receive a pay increase this year, you could contribute a higher percentage of your salary to your employer-sponsored retirement plan, such as a 401(k), 403(b), or 457(b) plan. If you’re age 50 or older, consider making catch-up contributions to your employer plan. For 2023, the contribution limit is $22,500, or $30,000 if you’re eligible to make catch-up contributions.
If you are close to retirement or already retired, take another look at your retirement income needs and whether your current investment and distribution strategy will provide enough income. You can’t control challenging economic cycles, but you can take steps to help minimize the impact on your retirement.
More to Consider
Here are five questions to consider as part of your midyear financial review.
This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment. Fees and expenses are not considered and would reduce the performance shown if they were included. Rates of return will vary over time, particularly for long-term investments. Actual results will vary.
