Reality truly kicked in today. Do you feel the same way? Yep, Christmas and New Year's are over.
At the Krull home, the Christmas lights are down and the decorations inside are once again packed away with great care. In addition, the twins have left and their older sister leaves on Tuesday. The silence will, once again, be deafening at the Krull home.
Life is full of "hails and farewells," indeed.
This brings me to the point where I seque into the subject of today's post - New Year's Resolutions.
Have you made any? If yes, then creating (or updating) your financial plan is likely one of them.
If you are looking for a checklist to help you break the inertia, then you can thank the good folks at seacoastonline.com for their recent article titled “Start your 2015 financial planning checklist.”
You will want to review the original article, but saving and planning for retirement is a top resolution for many younger baby boomers I know. For instance, if your company has a 401(k) plan—especially where it matches your contributions—it is imperative that you defer as much of your pay as possible to this account to enhance your retirement security.
That company match is free money your employer is setting aside for you just for being smart and planning for retirement!
Note: In 2015, the 401(k) contribution limit is at $18,000. If you are age 50 and older, you can enjoy an additional $6,000 catch-up contribution.
What if your employer does not have a retirement program? Then you should open and contribute to a traditional IRA. You can put in $5,500 pre-tax ($6,500 for those age 50 and older). In addition, you can contribute to a Roth IRA, which, for 2015, has the same limits.
Eligibility to make Roth contributions, however, starts to phase out as your modified adjusted gross income exceeds $183,000 for married couples and $116,000 for single tax filers.
In much of life, timing is very important. The original article recommends making traditional and Roth IRA contributions early in the year, instead of waiting until the contribution deadline (April 15th of the next year). This enhances the tax-deferred growth potential of your savings.
Take a look at your insurance coverage and make sure your financial plan will not be derailed by an unforeseen disability or untimely death. Acquire adequate long-term disability insurance so you will have income to pay expenses and to fund other goals.
Although many employers offer group disability and life insurance coverage at no cost, that coverage may not be sufficient. Supplement this with individual coverage to provide adequate security for yourself and your family.
What about protecting your retirement funds in case you need long-term care when you do reach retirement? Without delay, consult with an insurance professional about long-term care insurance. Gretchen and I secured our own policies six years ago. We walk this talk because we never want to be on Medicaid and/or otherwise financially dependent on our daughters.
Last, but certainly not least, your 2015 checklist should include setting up and maintaining a complete, up-to-date, estate plan with an experienced estate planning attorney. If you have an estate plan that is more than a few years old, then you will want to schedule a top-to-bottom review given all of the recent tax and non-tax law changes.
As one of the most neglected areas of personal finance, your estate planning should include (at a minimum): (i) a will with appropriate beneficiary designations (e.g., life insurance and retirement funds) (ii) a durable power of attorney to designate agents to act on your behalf in financial dealings; and (iii) a durable power of attorney for health care decisions to designate individuas to act for you when health care decisions are required. You should also discuss a health care treatment directive with with your loved ones and make your wishes clearly known as to life-prolonging treatments.
In addition, trusts can play an important part in an estate plan. A revocable trust can simplify estate settlement for family members.
A "properly funded"* revocable trust bypasses the probate process when it comes to distributing your estate to loved ones at your death and, before that, provides for ongoing management of your financial resources in the event you become incapacitated. Accordingly, it may be time to consider transitioning from your will-based estate plan to a revocable trust-based estate plan.
When it comes to getting these and other issues checked off your resolutions list, be sure to engage appropriate financial and legal advice. Too much is at stake these days to be your "own physician" when it comes to these ever more complex personal responsibilities.
*Your assets must be retitled in the trust's name while you are alive or made the beneficiary of assets upon your death (e.g., life insurance) to function as designed.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: seacoastonline.com (December 28, 2014) “Start your 2015 financial planning checklist”