Straight Talk

The top 10 items for your annual financial checklist

Jennifer Woods, special to
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You've probably heard the urban legend about the guy who got divorced and remarried — and then accidentally left millions to his ex-wife when he died because he forgot to change his beneficiaries. The problem is, this isn't a myth. These things can and do happen, more often than you might think.

That's why, as the end of the year approaches, many financial experts say it's a good time to take stock of your financial situation by reviewing all of your important documents — especially if you've had any major life events — and assessing your overall financial situation to see how you've progressed toward your goals and what, if any, changes need to be made in the year ahead.

Here's a look at 10 items that experts suggest reviewing before the end of the year.

By Jennifer Woods, special to
Posted 25 November 2015

Estate documents

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"You want to make sure you have all of your important documents in place, including a last will and testament, health-care proxy and power of attorney," said Harold Bollaci, an estate planning attorney in Carle Place, New York. "If you already have them in place, make sure they're current and that they reflect your wishes." (It's also important that your documents adhere to the laws of the state in which you currently live and reflect any new changes in federal laws.)

Designated persons

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Bollaci said you should also make sure that the people you've appointed to handle your estate, make medical decisions or act as guardians (if you have minor children) are still alive and capable and remain appropriate choices. Situations often change, and someone who may have once been the appropriate appointee may no longer be. For instance, many people list their parents as guardians of their children, Bollaci said. However, if your parents are now 65 years old, you may want to ask whether it seems appropriate for them to take care of your children down the line when they themselves may be needing care.

Bollaci added that it's also important to make sure your estate executor is a U.S. resident, resident alien and domiciled in the United States. If your nominated executor doesn't qualify and no other family member qualifies, the surrogates court may appoint the public administrator to represent your estate, adding delays and expenses.

Employer options

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For many people, the time to enroll in an employer's insurance plan options takes place at the end of the year. Thus, it's good to do an assessment of your insurance needs, as well as make sure that you are partaking of other company-offered benefits that you might need, said Francine Duke, a certified financial planner and owner of Aqua Financial Planning.

In addition to health insurance options, some benefits to consider include supplemental life insurance, long-term care insurance, supplemental disability insurance, health savings accounts and retirement savings accounts, such as 401(k)s and 403(b)s. Duke added that you should also be making sure that you are taking advantage of any retirement-plan contribution matches that your employer offers, as that is free money that shouldn't be left on the table.

Account and policy beneficiaries

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Particularly if you've had any major life events, estate planning attorney Bollaci said it's a good idea to look at any policies or accounts that "pay-on-death" and therefore allow (or require) a beneficiary to be named. This can include life insurance policies, and retirement accounts such as 401(k)s, CDs, savings or brokerage accounts.

If a beneficiary isn't named, the asset will pass through your estate and be distributed based on the terms of your will. Bollaci had one client who updated his will after getting married but never changed the beneficiary on his retirement accounts from his friend to his wife. "Because anything with beneficiary designation bypasses the will … when he died, his friend got all of the retirement money, and the wife just got the house."

Tax strategies

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The end of the year is the time to take advantage of any strategies that could help lower your tax burden. James Parks, a certified financial planner and president of Parks Wealth Management, said

There are several things you should be asking: With the recent market volatility, can you realize tax losses to offset realized gains before year-end? Have you come close to funding as much as your cash flow permits, or the maximum amount allowed, to your employer-sponsored retirement plans and/or IRAs? If you will be donating money to charity, could you gift appreciated stock as opposed to cash to maximize the tax benefit?


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Parks said it's also a good idea to go over your budget and your progress in reaching your financial goals. "Rerun your projections of funding your children's college expenses, retiring at a certain age, saving for that beach house or other goals you may have," he said.

Parks added that you should also look at how much you need to save each month and what realistic changes you should make to your monthly contributions, based on your cash flow. "Financial planning software has evolved over the years to make these projections possible and to utilize tax implications, inflation and other important factors," he said.

Emergency fund

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According to Duke at Aqua Financial Planning, it's important to have an emergency fund in place with money on hand that you can access in the event that you lose your job or encounter some other financial hardship. With the old rule, she said, it was recommended that you have enough money put aside to cover three to six months' worth of living expenses. But Duke believes that, these days, nine to 12 months is more appropriate.

However, she added, every situation is different, so it's important to consider your circumstances. "If you have a family with a few kids and one spouse doesn't work, you may need a bigger emergency fund than if both spouses are working." She added that a lot also depends on job security. "If you're over 50 and lose your job, it can take you much longer to find a new one than for someone in their 30s [to] 40s; thus, older individuals should have enough money put aside to cover this earnings gap."

Asset allocation

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The asset allocation of an investment portfolio can get thrown out of whack over time as the market fluctuates. Given the high volatility of the market — this year, in particular — a lot of portfolios are in need of a good rebalancing. So if you haven't already, the end of the year is a good time to take a look at your investment accounts to see whether you need to make some changes to bring your portfolio back in line with the target allocation that best suits your risk and return expectations.

Required minimum distributions (RMDs)

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Some retirement accounts, including traditional IRAs and 401(k) plans, require you to withdraw a certain amount of money each year beginning at age 70½ (if you're still working, your 401(k) RMDs may be deferred). RMDs apply to accounts that you opened for yourself, as well as ones you may have inherited as a beneficiary. Experts say it's important to make sure you've taken your required minimum withdrawals before the end of the year, as not taking them can result in stiff penalties from the IRS.

Credit report

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The end of the year, Duke said, is also a good time to get a copy of your credit report, which you can access for free once a year from each of the three major credit bureaus: Equifax, Experian and TransUnion. Your credit report affects everything from getting a mortgage and obtaining other credit to your homeowners insurance premiums and even sometimes getting a new job, she said. "See if there are errors in your credit report that you need to correct and, if there are, make every effort to do so," Duke added. "A review of your credit report can also motivate you to pay bills on time to maintain a good credit rating."