As the days get longer and the air gets warmer, many Mainers turn their attention towards the ocean, trails and lakes that surround us. Short work days give way to long weekends, and holidays give way to vacations. As we all make the most of Vacationland in its prime, it is easy to let the pieces of our financial puzzle fall into disarray. Rather than waiting for the inevitable back-to-school scramble, I often suggest that my clients focus on quick, objective tasks to organize their financial lives. This summer, in between innings of wiffleball games, take a whack at these tips to improve your financial health.
Update your beneficiary designations: A beneficiary designation controls the flow of money from a retirement or insurance plan in the event of our death. Most of us complete these documents in haste while enrolling in new retirement or life insurance plans. Ideally, your beneficiary designation should reflect your estate plan—directing assets to specific people in specific percentages. Too often, life changes make old designations obsolete (at best) or damaging (at worst). Since beneficiary designations supersede wills or “next of kin” rules, your life insurance check or retirement savings could go to an estranged sibling, deceased parent, defunct trust, or ex-spouse—leaving your loved ones or dependents in a lurch or creating legal battles for your survivors—so check the designations on your retirement accounts and insurance policies. It just takes a quick call to customer service or your HR representative. If they’re outdated or inaccurate, update them.
Rebalance your accounts: As financial markets shift and swing, a thoughtfully constructed portfolio can experience significant changes to its asset mix. Imagine you’re trying to maintain your accounts with a 50 percent exposure to stocks. An extended bull market could see your stocks creeping above 60 percent, exceeding your risk tolerance without you even noticing. Rebalancing your accounts is an important function of financial health. Take advantage of some summer downtime to examine your account(s). Reposition your investments to more closely align with your target allocation.
Clean up accounts: As you make your way through life and career, it is easy to establish an impressive collection of retirement funds and bank accounts. I’ve had many clients describe such an array of “orphan accounts” as overwhelming, preventing them from implementing a cohesive or uniform investment policy. Spend some time in the AC and pull your statements together. Try to identify rollover or consolidation opportunities. Switching from four IRAs to one IRA may give license to take control of your investments and accounts. It may also reduce fees, eliminate redundancies and provide clarity.
Once you start turning over rocks, new and interesting challenges may present themselves. Even so, these practical exercises are excellent steps towards a healthier financial life. Furthermore, such tasks often serve to empower and inform my clients—paving the way for further improvements and organization. Don’t know where to start? Try working with a fiduciary, fee-only financial planner on an hourly basis to tackle such projects one-by-one.
Scott Mazuzan is a certified financial planner for F.L. Putnam Investment Management Company, an independent firm that provides investment management and financial planning services. www.flpfinancialplanning.com/planning-blog