Year End Personal Finance Review

Reviewed: December 16, 2014
By FinanceWeb

Annual Review of Retirement

The New Year brings most investors a year closer to retirement. For those near retirements, it is a great opportunity to assess future needs with present and future resources. With low bank interest rates, bonds have a natural focus; however, steady income strategies can be broader than bond investments. Many high-yield funds provide no-load investment opportunities, and many feature low management fees. Investors should consider indexed investments that follow high dividend stocks for short and long term advantages.

Late Career Moves

For the Baby Boom generation, an emerging trend is delayed and phased retirement. Perhaps because earnings in the later years have been interrupted by the state of the economy after the Great Recession, many Baby Boomers have delayed retirement in favor of an extension of full-time work into part-time work. Achieving a double benefit, they can delay using retirement resources and continue to add to retirement accounts and savings.

Review Financial Goals

Many investors take a long view of the market and select investment strategies based on equity and capital growth. Profits can be the centerpiece of the annual review and a long-term course modification. An investment in funds indexed to high-yield dividend stocks offers an excellent balance for investment strategies keyed to long-term growth. Many experts take the position that profits are the tangible rewards of investment and that the market trends can affect equity.

Assessing the Portfolio

In an era of low bank interest rates, bond issues can be more attractive than stocks. Being mindful of the potential for interest rates to change, many investors have a difficult choice on the term of bonds. Longer term bonds offer higher returns and also carry the risk of tying funds to bonds if interest rates change. Diversification can ease the difficulty and a mix of large cap stocks with long-term bonds may bring the best of both sides of the equation. Fast equity growth and the reliability of bond yields. Another often overlooked area for review and consideration is insurance. Life insurance plans can be an important asset to protect other retirement resources. Particularly in cases of late life illness, an insurance policy can provide a source of cash and equity.

New Year and New Opportunity

It is a tradition that seems to cross cultures and continents that the New Year symbolizes a new beginning. While logically, there is no special calling from the turn of the calendar, it is a widely held view and borders on belief. Taking advantage of the impetus to improve in the New Year is a wonderful thing regardless of the reason. One can assess financial health and well-being and to align actions and goals. It is time to explore additional investment options and particularly those that can add income to an equity and capital growth centered investment strategy. Futures and Exchange Traded Funds may not have been prominent parts of the past investment menu, but each can add important elements of diversification and profits. Available in mutual funds, these investments can help investors focus on current opportunities in the market such as the low rates of interest on home loans and the low price of crude oil. REITs and oil or energy indexes can be beneficial areas for investment in high yield mutual funds and ETF funds.

Tax considerations

Harvesting losses at year-end can be a wise move. Selling an asset at a loss can cover gains in other areas and reduce overall tax liability. ETF and mutual fund managers sometimes make year end sales and distribution of assets to investors. For some investors, it is better to sell the investment than take the tax consequence of the year-end distribution. Buying a mutual fund just before the annual distribution can create a tax choice. Some investors feel it is unwise to receive a distribution just in time to pay taxes on it when one did not have use of the funds for the entire tax year. Another annual consideration is the capital gains tax. For assets held less than a year, a higher tax rate applies than if held for more than one year in which one might get the ore preferred long-term capital gains rate. Charitable contributions can lower taxes, and one must complete them before December 31, 2014.