You probably have several savings goals and accounts. Your annual financial review should revisit each of your priorities. If your life situation has changed, make adjustments as necessary.
At the same time, check the beneficiaries you've listed on your accounts. Your retirement account assets (for example, money in a 401(k) or IRA) pass directly to the beneficiaries you designate with your account custodian, trustee, or plan administrator. Your beneficiary designations supersede any directions in your will for accounts that have them—so consistency in who you name as a beneficiary is important.
2. Check your investments
This is also the time to see what you own, ensure that your investment mix continues to meet your needs, and make any changes that might be necessary due to the past year’s market performance. In general, if any of your allocations are more than 10% away from your target, you may want to rebalance it back to your desired investment mix.
Then, look at specific investments and evaluate their role in your portfolio. If you own mutual funds, see whether they are performing as you expected and if there have been any changes to the fund's investment approach. If you own stock in individual companies, evaluate each company’s current status and prospects, and decide whether they justify being kept in your portfolio.
3. Get a tax break
A simple way to reduce your taxes is to take advantage of opportunities to lower your taxable income by contributing to tax-advantaged retirement accounts like a 401(k) or IRA. If you have a high deductible health plan (HDHP) and are eligible for a health savings account (HSA), contributing to the HSA can also give you a tax break. A taxpayer with a marginal tax rate of 24%, for example, could potentially realize a tax savings of $240 for every $1,000 in pre-tax dollars contributed to an HSA, traditional 401(k), 403(b), or IRA.
4. Protect what's yours
It's wise to evaluate your insurance needs annually to make sure you have the right amount and type of insurance to cover unforeseen circumstances that can derail your finances.
Life insurance may be a good place to start. If your family is growing, you might want to increase the amount of your life insurance to protect your loved ones. You might also benefit from looking into long-term care insurance, which may offer a variety of features and options. Don't forget disability insurance as well. You may be covered at work. But it’s a good idea to make sure you're adequately covered just in case anything prevents you from working and earning a paycheck for an extended period of time.
5. Review important paperwork
Thinking about a will, health care proxy, and power of attorney can be an uncomfortable topic, but consider the alternative: Do you want someone else making important financial and health decisions on your behalf without any input from you? If you don't have any of these key documents, take the time to set them up.
If you have them, review your paperwork and think about any life events you’ve been through. Marriage, divorce, birth, and death are 4 big events that can affect estate plans, but there are other factors that could affect your planning.