December is a month full of activities. It is quite common for us to come home to a list of things to do and places to be.
We often engage ourselves in gatherings with friends and family. It is also a time for us to review how our year has gone in our financial lives. Consider these items a good place for you to begin your annual review. Review your asset allocation: Asset allocation is how we decide to put our investment money to work. When choosing investments we decide between cash, stocks and bonds. Each of these investments behaves differently during various market cycles. Over time your mix may change. We have to check the performance of our assets every year to determine if we have the right balance of growth versus risk. We often decide our Asset Allocation with a goal in mind. Determine if the allocation you have still makes sense for your goals. You can rebalance your portfolio by selling assets. You can then invest the money in a new asset. Remember that selling may trigger a tax consequence. Check your retirement plan: Whether retirement is close or far, there is likely one coming. You will largely determine the type of retirement you have. Determine if you are on track to get what you want. Decide if you need to make changes. A great way to fund your retirement goal is through an automatic saving plan. A company retirement plan such as a 401(k) is a good choice. Another alternative is an Individual Retirement Account (IRA). Check capital gains and losses: Tax rules may change from time to time but we know that they will always be there. You should stay current on the federal and state rules. You may prefer speaking with a tax professional. It is often beneficial to sit down with someone to review the possible changes in the rules. You may determine strategies that help you benefit from your situation. Use tax advantaged accounts: Taxes can eat away at our earnings. Fortunately, there are ways for us to lower our tax bills and keep more of what we make. A great way to lower your taxable earnings and save money for your future is to deposit money in a 401(k) or 403b. Paycheck deductions help lower your taxable income. Contributions will grow tax deferred. Other tax advantaged accounts you could use are IRAs and Roth IRAs.
Galaham Zuanich is a financial adviser with Morgan Stanley Wealth Management in Santa Cruz.