Ask the Adviser: How can I best maintain my financial plan?

Q: I have a solid financial plan in place. How do I make sure I stay on track?

A: While creating a financial plan is a good first step, maintaining the plan is just as crucial to achieving a successful retirement.

You might think of it like servicing a vehicle. We all know that regularly maintained vehicles are more reliable, durable, and valuable when it comes to resale. Much like caring for a vehicle, financial planning is an ongoing process—not a once-and-done event.

A good financial plan is based around an individual or couple’s goals for the future. When we work with clients to create compre­hensive financial plans, we evaluate current income, bank accounts, investment and retirement accounts, real estate, business assets, insurance, debts, and estate planning documents. Then we create a realistic roadmap for saving, spending, and investing to help them reach their goals.

Once a solid plan is in place, follow-through is every­thing. But without purposeful habits, managing the details quickly gets overwhelming. To help, we’ve outlined some regular mainte­nance intervals to serve as guidelines:

Annually

• Review your initial planning assump­tions and make any necessary adjustments.
• Evaluate your income tax bracket to determine: 
  • If you will be subject to capital gains, or if it’s appro­priate to take losses (called “harvesting”).
  • If you should consider Roth IRA conver­sions.
  • If you have withheld enough tax, or if any estimated payments are necessary.
• Review your tax return to look for ways to minimize taxes for the following year.
• Review your tax return to look for any errors. (Yes, there can be mistakes!)

Quarterly

• Review any financial decisions you might need to make.
• Evaluate your current income to determine if any increase or decrease might require you to change your tax withholding or quarterly estimated payments.

Monthly

• Evaluate your invest­ments to determine if they’re performing in line with expec­ta­tions and appro­priate benchmarks.
• Replace any poorly performing invest­ments with invest­ments that have been screened for management objec­tives, consis­tency, fees, turnover, etc. (for example, we use a 25-point screening process).

Weekly

• Monitor prices, ratings, and current events for any individual bond holdings in your portfolio.
• Evaluate your overall allocation between growth and fixed invest­ments to determine if you need to do any rebal­ancing to maintain your target percentages.

Daily

• Review account balances and trans­action history to ensure proper execution of trades and any money movement between accounts.

As needed or when changes occur

• Consol­idate your accounts to simplify the management of your finances.
• Track your spending habits to determine if you are living within your means and not negatively impacting your financial plan.
• Evaluate your potential sources of retirement income.
• Determine an optimal tax-efficient withdrawal strategy for big expenses or everyday living needs.
• Make sure your insurance and estate documents reflect any changes in family dynamics and new or updated assets.
• Review your income tax deduc­tions to maximize potential tax savings.
• Maximize retirement account contri­bu­tions where possible to reduce income taxes.
• Consider funding Roth IRAs to allow assets to receive tax-free growth and possible tax-free withdrawals.
• Consider Roth IRA conver­sions before drawing Social Security to maximize the lower income tax brackets.
• Consider distrib­uting chari­table gifts from your retirement accounts (once you are age 70 ½) or from appre­ciated investments.
• Obtain quotes for long-term care insurance coverage to determine the potential cost and value of policy benefits.
• Review your liability coverage and upgrade to an umbrella policy if warranted.
• Consider opening Roth IRA accounts, 529 plans, or custodial accounts for your children or grandchildren.
• Evaluate the best methods to save for college expenses for your children or grandchildren.
• Coordinate your financial plan with all members of your profes­sional team—including accoun­tants, lawyers, and insurance providers.
• Commu­nicate your plans to family members or others who may be involved at some point to ensure your inten­tions are known.

This is not a compre­hensive list that fits every need, and your personal situation deserves specific planning and evalu­ation. But as you can see, there’s a lot to evaluate on a regular basis to keep up with your financial plan.

So ask yourself: are you keeping up with your financial plan’s mainte­nance schedule? Devel­oping the right habits can go a long way in avoiding costly mistakes and missed oppor­tu­nities down the road.