Checklist for the New Year

A year ago, I suggested in this column that optimism is the key to happiness, and we should be optimistic about 2016.  As it turned out, plenty of us were pleased and plenty of us were disappointed.  Cub fans celebrated, while Giants fans said “Wait till next year.” Trump fans rejoiced, Clinton fans despaired.  U.S. stocks were up, non-U.S. stocks were about even.  Whichever way 2016 went for you, be optimistic for 2017. You will be happier, and isn’t that what’s important?  Now here is my annual financial checklist for 2017.

Review Your Investments:  2016 was a good year for the U.S. economy.  2017 promises to be even better.  If you held on (stuck with your investment plan) through the market crash eight years ago, and again through the pessimism and doomsday forecasts that preceded the recent elections, you should be in great shape today. The S&P 500 index, which consists of 500 large U.S. company stocks, gained 12% in 2016. 5.0% of that gain occurred after the November 8th election.  The 12% gain in 2016 compares to a 1.38% gain the year before.  Review your portfolio.  By rebalancing , you are forcing yourself to sell high and buy low. 


 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 and the beneficiaries and successor owners on 529 College Savings Plans  and Life Insurance Policies.


 Help Your Kids or Grandkids and Reduce Your Estate:  The annual gift tax exclusion remains at  $14,000 for 2017.  Couples can give $28,000. 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. 


 Save More for Retirement:  Many employers offer defined-contribution retirement plans (401k,  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.


 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.  The sooner you start,  the better.


 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.  

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 ken@montereypw.com.