In today’s fast-paced environment, careful financial planning is crucial when it comes to growing and preserving your wealth. The decisions you make today could have a lasting impact on your finances. Please use the checklist below to give yourself an idea of where you are with your financial planning and strategies.
☐ Where is your money?
Knowing where your money is, is the first step in designing or modifying a financial strategy to align more closely with your short- and long-term goals. Do you have all your money in one or two accounts, or have you spread it out to create diversity which helps to lower some of the risk of market volatility?
☐ I keep all my money in a checking and savings account
☐ I have a checking and savings account and invest in equities (stocks, bonds, mutual funds) in several retirement accounts including a 401(k), Roth IRA, traditional IRA, or another employer-sponsored plan.
☐ I have a checking and savings account and invest in equities, fixed income, and other investments in several retirement accounts including a 401(k), Roth IRA, traditional IRA, or another employer-sponsored plan.
☐ I have a checking and savings account, an emergency fund, and a diverse collection of investments including in several retirement accounts including a 401(k), Roth IRA, traditional IRA, or another employer-sponsored plan.
☐ How do you budget?
Creating a budget involves tracking how much money comes in, how much goes out, and where. Your expenses are generally broken up into fixed expenses and variable expenses. Fixed expenses are those that don’t change much from month to month such as rent or mortgage payments, water, garbage collection, utilities, insurance, and debt payments. Variable expenses are just that, they vary in their cost. How do you budget?
☐ I track and prioritize spending.
☐ I have created realistic goals.
☐ I have a clear picture of my income versus expenses.
☐ I plan to discuss budgeting strategies with my financial professional.
☐ Do you optimize your retirement accounts?
Getting the most out of your retirement accounts requires understanding how each works and how to use them strategically while aligning with financial goals.
☐ 401(k), 457(b), and 403(b) plans – The contribution limit is $23,000, or 100% of the employee’s compensation, whichever is less. If you are 50 or older, you can contribute an additional catch-up contribution of $7,500. The combined employee and employer contributions limit is $69,000.
☐ Traditional IRA – The contribution limit is $7,000.
☐ Roth IRA – To be eligible to contribute to a Roth IRA, your modified adjusted gross income (MAGI) must be under $161,000 if a single filer, or $240,000 if you are married and filing jointly.
☐ Pension-linked emergency savings accounts (PLESAs) – As of 2024, specified authorized employers had to add the option of a PLESA to their defined contribution retirement plans. Eligible employees who opt to contribute are allowed to add up to $2,500 per year (or a lesser amount determined by the employer). These differ from 401(k) and IRAs in that participants can make withdrawals tax and penalty-free before age 59 1/2.
☐ Discuss contribution limits and savings strategies with your financial professional – A financial professional might have insight into a strategy that you weren’t aware of or how a decision might impact you far down the road. It is critical to get the help of a professional.
☐ Are you up to date on all your tax planning strategies?
It is never too early to begin planning for tax season. Many of the decisions that we make throughout the year impact your taxes.
☐ Contribute to tax-advantaged accounts.
☐ Transform investment losses into tax benefits.
☐ Look into a Roth conversion.
☐ Provide financial gifts to loved ones.
☐ Meet with your financial professional.
☐ Are you going to make an IMPACT in your community?
Giving to charity is beneficial for several reasons but how you do it can impact you financially. Why do you want to give to charity this year?
☐ I give to charity for tax purposes
☐ I want to give to charity but don’t know how much is worthwhile.
☐ I want to start giving to charity in retirement without it impacting my retirement savings.
☐ I want to give to charity someday through a provision in my will.
☐ I plan to discuss my interest and the available options with my financial professional.
☐ I want to visit with a financial professional and have a deeper conversation on one or more of the following topics:
☐ I have estate planning questions
☐ I am interested in taking advantage of and exploring available tax benefits
☐ I want to ensure I am saving enough for retirement
☐ I have significant student loans still. What is the best approach to pay them down without impacting my retirement strategy?
☐ I am looking for professional financial guidance for what I don’t know enough to ask about
After analyzing the answers to your checklist, we hope you have gained some insight into how you think about your finances and new strategies you may be able to implement. Let us know your plan so we can help!
Important Disclosures:
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking tax, legal or investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
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Sources:
High Earners Face Retirement Challenges | CAPTRUST Nine Charts about Wealth Inequality in America (urban.org) Backdoor Roth IRA: What it is and how to set it up | Vanguard Fundamentals of tax planning: Going beyond the basics (vanguard.com)