Financial Resolutions for the New Year

If you watch the ball drop in New York’s Times Square on TV tonight, notice that the 2,688 Waterford Crystal Triangular Panels each contain a starburst.  The starburst represents optimism.  Olympic Gold Medalist Mary Lou Retton once said, “Optimism is a happiness magnet. If you stay positive, good things and good people will be drawn to you.”

Let’s all keep that in mind as we enter the New Year. For starters, here is my annual financial checklist for 2016.

1) Review Your Investments

2015 was a mediocre year for the U.S. economy. The final estimated third-quarter annualized growth rate for our Gross Domestic Product (GDP) was a mere 2%.   If you held on (stuck with your investment plan) through the market crash seven years ago, you should still be in great shape today. As of Monday, the S&P 500 index, which consists of large U.S. company stocks, was right around where it was at the beginning of the year.  Some asset classes were down, especially emerging markets and commodities.  By rebalancing your portfolio, you are forcing yourself to sell high and buy low. 

2) Review Your Estate Plan

Estate plans 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 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 remains at $14,000 for 2016.  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

College Savings Plans, (aka Section 529 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 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 advisor 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, CA93940 or email them to