Springtime is just around the corner and that means it’s almost time for spring cleaning. What I love about spring cleaning is the feeling of accomplishment once it’s done. It’s like you have removed all of the deadwood and are ready for new growth. Here’s how you can carry the concept of spring cleaning over to your finances:
1. Contribute to your IRA early. Most people wait until the end of the year or perhaps early the following year to contribute to their IRA. By investing early, you get the benefit of months of extra tax deferred growth. Between now and retirement, this can add up to quite a lot of extra money. For example, assume for the next thirty-five years you are going to invest $5,000 into your IRA each year. Assuming earnings of 10% per year, how much of an advantage would it be to invest in January of each year versus December? Just by investing early, your IRA would be worth an extra $135,000!
2. Dump the deadwood in your portfolio. Use this as an opportunity to review your investments. The stock market has had strong performance since March 2009. Now may be a good time to rebalance your portfolio. If some stocks or stock mutual funds have done exceedingly well, consider if it’s appropriate to take some profits and reallocate that money to other positions. You may have other positions that appear to be on life support with no chance of recovery and now may be a good time to cull them from your portfolio. We often find cases where someone is holding numerous positions too small to impact the portfolio no matter whether they rise or fall sharply.
3. Check your 401k contribution. In addition to reviewing your investments, check to make certain that you are taking full advantage of any matching contributions offered by your company. Also check both the primary beneficiary and contingent beneficiary designations for your retirement plan. Most often the primary is the spouse but the contingent is wrong or left blank. If left blank and your spouse happens to predecease you, the default will be your estate based on your will if you have one. This can cause undesirable results.
4. Review your estate plan. Finally, congress has settled the estate tax laws. It only took them ten years but now we know what the rules are and it means you should review your wills and overall estate plan. Two items of particular concern are:
· Family trust formulas. Many older wills direct that at the death of the first spouse, the maximum amount allowed by law goes directly to a trust that benefits the family. ‘Family’ sometimes includes the surviving spouse and sometimes it does not. Under the new estate tax law the amount going to this type trust could be the first $5 million. For many families, that would be 100%, leaving nothing going directly to the surviving spouse and potentially substantially cutting him or her out of the will.
· Power of attorney. In general, you need to update your power of attorney every three to five years or run the risk that a financial institution will reject it. In my home state of Alabama, this became such a problem that a group of attorneys got legislation passed in the state legislature in January 2012 requiring that financial institutions accept the power of attorney or face legal penalties.
5. Review your insurance policies. Ask yourself these questions: If I died suddenly, do I have enough life insurance? If I became disabled through sickness or a car accident, do I have enough disability income insurance? If necessary, how would I pay for extended nursing care? If you don’t like your answers, meet with your agent for a review and recommendations.
6. Turn spring cleaning into a money maker. Whether cleaning out your closets and donating your clothes to charity or holding a yard sale, you can turn a chore into a money making enterprise. For more cleaning services, visit squeakycleancarpet.com.au If you are looking for duct cleaning, repairing, resealing and even replacing with perfection. Dallas Air Duct Cleaning services has satisfied many customers till date. If the kids are old enough, involve them in your enterprise and let them share in some of the profits. You may be planting in them the seeds of an entrepreneur!