Financial Resolutions for the New Year


Happy New Year!  It’s always a good idea to start off the year with a few important financial resolutions and pay particular attention to the ones you know you must do but have been putting off.   Here is 2015’s financial checklist to help you think through the things you need to take care of.

1) Review Your Investments 

2014 was a stellar year for the U.S. economy. The final estimate of Gross Domestic Product (GDP) for the third quarter of 2014 gave an annual growth rate of +5.0%, which was the highest quarterly rate since 2003 and the first time since 2003 that GDP had increased by more than 4.0% for two consecutive quarters. 

If you held on (stuck with your investment plan) through the market crash six years ago, you should be in great shape today. As of Monday, the S&P 500 index, which consists of large U.S. company stocks, was up around 13%, driven primarily by higher earnings.  But as usual, not all asset classes were up--at least not nearly as much as large U.S. stocks.  By rebalancing your portfolio--selling invesment positions that have outperformed and are now overweight and buying positions that have underperformed and are now underweight--you are forcing yourself to sell high and buy low.

2) Review Your Estate Plan

Estate plans should include a will, a revocable living trust, and advance directives for health care (e.g., health care proxy/durable power of attorney for health care, living will, do-not-resuscitate order, organ/tissue donation form, funeral arrangements or burial plans, etc.).  Review all your documents. 

Have there been any changes in your family (births, deaths, divorce, or changes in health)?  Verify the beneficiary designations on your retirement accounts. 

3) Help Your Kids or Grandkids and Reduce Your Estate

The annual gift tax exclusion in 2015 remains at $14,000 for individuals and 28,000 for married couples.  This is the amount you can give to any one person and not file a gift tax return.  You can still pay educational and medical expenses for your children or grandchildren and the payment won’t count against the $14,000 exclusion if you make the payment directly to the educational institution or medical provider.

4) Save More for Retirement

Many employers offer defined-contribution retirement plans (401k, 403b, etc.).  These plans allow you to divert part of your paycheck to a retirement plan.  Take advantage of this opportunity, especially if your employer makes matching contributions. If you already participate, then bump up your contribution.  The sooner you start and the more you save the more money you will have for retirement.  You, not your employer and not the government, are responsible for your retirement.

5) Save for College

529 College Savings Plans allow you to save for college and avoid paying tax on the earnings, which compound tax-free.  Withdrawals are tax-free if the beneficiary uses the money for qualified higher-education expenses. 

6) Review Your Life Insurance

If you died tomorrow, could the people that depend on you today survive your sudden departure without undue financial hardship?  If not, then figure out how much they would need to meet their income needs and buy term life insurance.  It’s cheap if you are in good health.  Don’t put it off.  As you age, your health will deteriorate and life insurance will be more expensive.  Lock in an appropriate term, which should extend past your planned retirement age. 

Kenneth B. Petersen CFP®, EA, MBA, AIFA® is an investment manager and Principal of Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investing, taxes, retirement, or estate planning.  Send your questions to: Ken Petersen, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to