Personal Wealth Management
Five Timely Financial Resolutions for 2015
The start of a new year is a time to reflect on the past and ponder possibilities for the future. From a financial perspective, two things become clear: you have important goals as an investor and you need a plan to help you meet those goals. So when you make your list of New Year’s resolutions for 2015, consider the following suggestions:
What do you want to accomplish financially in 2015?
- Get your retirement assets in shape and consolidate. If you have multiple IRAs or 401(k) accounts, consolidating them into one IRA or one rollover IRA may result in reduced or eliminated annual fees. Fewer monthly statements, as well as IRS-required annual reporting statements, will be mailed to you. In addition, if you are over age 70-1/2, your Required Minimum Distribution (RMD) will be easier to track.
- Increase your retirement contributions. With every new year, you are one year closer to retirement. Contribute now for 2014 with one easy contribution. (The deadline is April 15, 2015.) The 2014 contribution limit for Traditional and Roth IRAs is $5,500 and may include an additional $1,000 “catch-up” opportunity for individuals age 50 and older.
- Implement an asset allocation plan. The underlying principle of asset allocation is to diversify your investment portfolio among several different asset classes in an effort to reduce the risk and volatility of your overall portfolio — and potentially improve your overall returns. Even if you’ve already constructed a plan, changes to your investment profile such as time horizon or risk tolerance may require adjustments to your asset allocation plan. Plus, the plan you established last year may not be appropriate this year as a result of economic fluctuations or changes in your personal or financial circumstances.
- Review your life insurance policy. Life insurance is often overlooked when reviewing your entire financial picture. If you own life insurance, it is important to review your policy on a regular basis to ensure you are taking advantage of competitive premiums, have updated your beneficiaries, and are properly protecting those most important to you. Your life is changing all the time, and you need to make sure your insurance keeps up with it.
- Open a college savings account. If funding a child’s or grandchild’s college education is on your mind, it’s never too early to start saving. Section 529 plans offer a simple yet effective way to save for the rising cost of higher education. And they offer a variety of important features and benefits. For starters, anyone can establish a Section 529 plan, as there are no adjusted gross income limits or age restrictions. In addition, Section 529 plans are flexible. While low initial investment and subsequent contributions may be required, at the same time more substantial deposits can be made. You can contribute up to $70,000 per beneficiary ($140,000 for married individuals filing jointly) in the first year of a five-year period without incurring any federal gift-tax consequences, provided you do not make any additional gifts to the same beneficiary in the same five-year period. Moreover, your investment will grow tax-deferred and can be withdrawn tax free if the money is used for post-secondary qualified educational expenses. Section 529 plans generally offer a variety of different investment options. When you move money into a Section 529 plan, it is moved out of your taxable estate but remains under your control as the account owner. You may change beneficiaries at any time, so more than one person in your life could benefit from your gift.
Take some time to consider these suggestions and make a New Year’s resolution to keep your investment plan consistent with your needs. Contact a financial advisor and schedule a meeting to review and implement your New Year’s financial resolutions.
RBC Wealth Management is not a tax advisor. All decisions regarding the tax implications of your investments should be made in consultation with your independent tax advisor.
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