NEW YORK -- Preparing for an annual financial review may be easier with a checklist to help you focus on important matters. With that in mind, here is the balance of the list we started earlier this month of key considerations that you may want to discuss with your financial advisor.
Am I taking full advantage of tax-advantaged accounts?
Remember that certain types of investments receive favorable tax treatment. Employee contributions to a traditional 401(k), for example, are deducted from your paycheck before taxes are assessed, which lessens taxable income during the year the contribution is made. Contributions may potentially grow free of federal income taxes until qualified withdrawals are made during retirement. If you are age 59 1/2 or older and have maintained the account for a minimum of five years, qualified withdrawals from a Roth IRA are tax free.2 (To contribute to a Roth IRA, investors must meet income thresholds established by the Internal Revenue Service. Learn more at www.irs.gov.)
Is my insurance coverage sufficient?
You may want to conduct an insurance needs analysis. There are many forms of insurance but, unfortunately, there is no one-size-fits-all policy. Life insurance, for example, may be a vital necessity if you have a spouse and children, but perhaps is less important for a single person. But disability insurance, which provides an income stream if you are unable to work, may be important for everyone.
Is my estate plan current?
If you have not already made an estate plan, your annual review may be a good time to start. Even if you already have a plan in place, it is good to revisit it yearly to make sure your beneficiary designations are up to date and that your plan still reflects your current wishes. This is also a good time to consider tax-efficient gifting strategies, so you can potentially minimize gift and estate taxes and keep more of your assets for those you care about.
You may have additional concerns unique to your situation, but the checklist we have provided over the last two weeks may help you keep your investment portfolio in order.
1. Asset allocation and rebalancing do not assure a profit or protect against loss in a declining market. There may be a potential tax implication with a rebalancing strategy. Please consult your tax advisor before implementing such a strategy.
If you’d like to learn more, please contact Julia A. Peloso-Barnes , CFP®, CPM®, ADPA®, CPRC®
Article by Wealth Management Systems Inc. and provided courtesy of Morgan Stanley Financial Advisor.
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Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing. Certain of these risks may include but are not limited to:
Loss of all or a substantial portion of the investment due to leveraging, short-selling, or other speculative practices; Lack of liquidity in that there may be no secondary market for a fund; Volatility of returns; Restrictions on transferring interests in a fund;
Potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; Absence of information regarding valuations and pricing; Complex tax structures and delays in tax reporting; Less regulation and higher fees than mutual funds; and Risks associated with the operations, personnel, and processes of the manager.
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