It’s Time For Year-End Review

The beginning of a new year is the perfect time to change your fire alarm batteries, review your budget and check your retirement plan statements. Your statements will give you a snap shot of the prior years activity. Take advantage of that snap shop by using them to plan your financial moves for the upcoming year.

Some investors use their year-end statements as their financial report card. You may want to do the same.

Check Your Financial Discipline

Did You Save Enough?

Check out a retirement calculator. There are many available online. The advantage of using a retirement plan calculator is that you can get a more accurate figure.

Did You Max Out?

If your employer matches your retirement plan contributions you should be contributing at least enough to qualify for that match. If you are not investing at least that much you may want to step it up.

Could You Have Saved More?

If it seemed difficult to find extra money to increase your investments into your retirement plans this year you may need to do some accounting.   Make a list of where you spent every dime this year. Determine from that list if your money was well spent or wasted, only you will know that. It’s a tedious task but in the long run it may help you find some extra money for your investments.

Check Your Fees

Did you overpay on financial fees last year?

Banks, insurance companies and mutual fund houses all charge fees for services. All of these fees should be listed right on your statements in a clear enough manner for you to review.

You have the control. If you feel the investment fees charged were too high switch investments. Most retirement plans offer a range of investments to choose from with different fee structures.

Check Your Risk Tolerance

Year end statements can be a good financial tool if you take the time to review them and look for what is important to you.

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Has anything in your life changed that would change your risk level? The markets have made many steady investors nervous so if you feel a bit nervous about risk, you are not alone.

Risk is a personal thing. There is no right or wrong level of risk that you should be forced to accept.  Since young investors have time for their investments to rebound, they generally can tolerate a higher level of risk. As you get closer to retirement you may be less risk tolerant. If you are already enjoying retirement you may be more inclined to invest in even less riskier investments such as certificates of deposit or money markets.

Only you can decide the risk tolerance you are comfortable with.

Is There A Change Of Plans?

Given the economy over the past year have your retirement investments dropped so much in value that you will need to change your retirement date?

Of course past performance is not indicative of future performance. Therefore your year-end statements can only tell you how your investments performed last year. They cannot serve as a crystal ball and tell you what the future will be.

Is Rebalancing Required?

Given that the market has seemed like a roller coaster ride this past year, do you need to rebalance your portfolio.

Rebalancing means that you bring your asset allocation back to your original desired spread. For example, if your asset mix included 50% international, 40% large cap and 10% mid cap but the market fluctuations changed your mix to 30% international and 70% large cap, rebalancing brings the allocation back to your original breakdown.

Report Cards Can Be Positive

Year end statements can be a good financial tool if you take the time to review them and look for what is important to you. Only you can decide that.