An annual financial review is a good opportunity to take a closer look at your financial health before one year ends and another begins. Gathering key financial documents can help you and your financial advisor identify changes in your income, investments, retirement accounts, taxes, insurance, and estate plans that may warrant attention.
A year-end financial review does not necessarily mean making major changes. Instead, it can help you assess whether your current financial strategy continues to reflect your goals and identify potential planning opportunities for the year ahead.
Here is a financial checklist to help you get started:
Start With Your Investment Statements
Investment statements can provide a useful snapshot of your portfolio at the end of the year. Review your account statements with your financial advisor to discuss how your investments have performed and whether your current asset allocation still aligns with your goals and risk tolerance.
Together, you may also want to review:
- Investment gains and losses
- Changes in your asset allocation
- Dividends and interest received
- Contributions and withdrawals
- Cash balances
- Taxable investment transactions
Investment records can also be important when preparing your tax return. The IRS recommends keeping records that establish the basis of investments, including purchase and sales information, and other transactions.
If your portfolio has experienced gains or losses during the year, an annual review may be a good time to discuss whether any tax or investment planning strategies should be considered before December 31.
Review Retirement Account Statements
Retirement accounts should be another important part of your annual financial review. Gather recent statements for your 401(k), 403(b), IRA, Roth IRA, pension, or other retirement accounts.
Consider reviewing:
- Current account balances
- Contributions made during the year
- Employer contributions
- Investment allocation
- Beneficiary designations
- Required minimum distributions, if applicable
If you are approaching or in retirement, review whether your current withdrawal strategy remains appropriate. If you are required to take a required minimum distribution (RMD), make sure you understand the applicable deadline and whether you have completed the required distribution. RMDs generally start at age 73 (for those born 1951-1959) or age 75 (for those born in 1960 or later).
Retirement plan records can include account balances, contributions, earnings, participant statements, and other documentation.
Gather Your Tax Documents
Tax documents may not arrive until after the calendar year ends, but reviewing the information you already have can help you prepare for tax season and identify potential year-end planning opportunities.
The following tax information can help:
- Your most recent tax return
- Pay stubs and year-to-date income information
- Estimated tax payments
- Investment gains and losses
- Charitable contribution records
- Mortgage interest and property tax records
- Retirement contribution information
- Health savings account or flexible spending account records
- Records related to self-employment income and expenses
The IRS recommends keeping records related to income, deductions, credits, investments, home ownership, and other tax-related items.
Reviewing these records early can also give you time to discuss potential tax planning strategies with your financial and tax professionals.
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Review Insurance Policies
Insurance documents are another useful component of an annual financial review. Review your current coverage for life, disability, homeowners, auto, and other applicable policies.
Consider whether your coverage still reflects your circumstances. Changes in your income, assets, family situation, or financial responsibilities may affect your insurance needs.
The goal is to make sure you understand your coverage and identify any gaps or outdated information that may need further attention.
Take a Look at Your Estate Planning Documents
Your year-end review can also be a good time to revisit your estate planning documents, particularly if your circumstances have changed.
Depending on your situation, this may include reviewing your:
- Will
- Trust documents
- Powers of attorney
- Health care directives
- Beneficiary designations
- Ownership information for significant assets
An annual review does not mean these documents need to be changed every year. However, reviewing them periodically can help ensure they continue to reflect your wishes and work together with your broader financial plan.
Review Your Financial Goals for the Coming Year
Once you have reviewed your documents, step back and consider the bigger picture.
Are you still on track for your retirement goals? Has your income changed? Are you planning a major purchase? Do you expect changes in your family or employment situation? Are you approaching a milestone such as retirement, Medicare eligibility, or required minimum distributions?
These questions can help turn a document review into a more meaningful annual financial review.
Frequently Asked Questions
What financial documents should I review at the end of the year?
Common documents include investment and retirement account statements, tax records, insurance policies, estate planning documents, and beneficiary designations. The specific documents you should review will depend on your financial circumstances.
Why should I do an annual financial review?
An annual financial review can help you identify changes in your financial situation, review progress toward your goals, and determine whether your financial strategy may need to be adjusted. Working with a financial advisor can also help you evaluate how different areas of your financial plan, such as investments, retirement, taxes, and estate planning, work together. It can also help you identify year-end planning opportunities before important deadlines pass.
When should I start my year-end financial review?
It is generally helpful to begin your year-end financial review well before December. Starting early gives you time to gather documents, identify questions, and discuss potential planning opportunities with your financial advisor, tax professional, or other members of your professional team.
Should I review my beneficiary designations every year?
It is a good practice to review beneficiary designations periodically and after significant life events. An annual review can help you identify outdated designations and determine whether they continue to reflect your wishes.
Make Your Year-End Review Part of Your Financial Plan
At Bill Few Associates, our financial advisors can help you review your financial health, identify areas that may warrant attention, and keep your financial strategy aligned with your goals. If you have questions about preparing for the year ahead, or want to schedule your annual financial review, contact us today.
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Source: https://www.irs.gov/
