SAN FRANCISCO--(BUSINESS WIRE)--The Financial Planning Association (FPA) of San Francisco announced today the top 10 financial planning strategies for individuals to consider for 2013. Ranging from developing a comprehensive financial plan to diversifying portfolios and benefitting from the latest tax changes, these tips will enable investors to begin 2013 on the right track.
#1. Get Started Today
The best way to take control of your financial future is to review your financial plan. If you don’t already have one, make a plan. You’ll want to analyze your asset base, earning potential, and spending. Additionally, you’ll want to review your goals. Are they still attainable? A professional financial planner has the knowledge and the tools to calculate what it will take for you to reach your goals while helping you manage your finances.
#2. Spend Less. Save More.
The best way to provide the money you will need in the future is to save more now. One way to start is to pay yourself first through payroll deductions into your 401(k) or savings accounts. Another place to find savings is to look at your credit cards. If you have a balance, consider making it a priority to pay down that high cost debt. By doing so, you’ll be getting a net return of 12, 18, or even a higher percent, which is the return you’ll be getting on the extra payments you make.
#3. Got profits? Realize them.
With tax rates expected to rise next year, now can be a good time to realize capital gains in your investment portfolio and pay the taxes at a lower rate than in the future.
#4. Take Advantage of Tax Preferred Investing
One of the best ways to build wealth is to invest in tax-advantaged accounts, such as employer sponsored retirement plans or IRAs. Earnings in the accounts grow tax-free until you take them out, so continue putting away as much as possible. If the contributions are on autopilot, you're less likely to stop investing when current events seem discouraging. Also, dollars are invested throughout the year, so in a market that is up one month and down the next, you won't buy all your shares at high points and you'll get more shares at low points.
#5. Keep an Eye on a ReFi
With interest rates continuing to set new lows, it's a good time to explore if refinancing makes sense. Even 30-year rates are below 4% now, so it can make sense to refinance even if you just did so in the past year or two. If the break-even point is much more than two years out, paying points on a mortgage might not make sense. Even though rates are really low, they could always go lower and if you’ve paid points on your mortgage to lower your rate, then this benefit is lost if you refinance again before the break-even point arrives.
#6. Consider a Roth
Explore whether converting all or a portion of your Traditional IRA to a Roth IRA makes sense for you. It can be particularly relevant if you have a year with much lower income because you could pay taxes in that year at a lower tax rate than you typically pay when your income is at normal levels. It can also make sense if you expect tax rates to rise in the future, either because of changes in tax law or because you expect to have higher income in retirement. It generally only makes sense to do a Roth conversion if you can pay the taxes with money outside of your IRA. Consult a financial planner or tax professional for assistance.
#7. Get Smart About Gifting
A great way to donate to a charity is to use a Donor Advised Fund (DAF). Rather than making donations with cash, consider using appreciated securities to fund the DAF. The securities are then sold within the fund and this avoids capital gains tax. The assets of the account can be invested in pooled funds for tax-free growth to fund future granting. Grants can be made to any public charity as low as $50 or $100 typically. The tax deduction is taken in the year when the account is funded with the securities and avoids the need to keep a record of every receipt issued from the charities for tax purposes.
#8. Resolve to Review Beneficiaries
Use the start of the New Year to review all beneficiary statements for 401k plans, IRAs, and life insurance policies. Remember that retirement account assets pass by beneficiary statement and not by will; the same is true for life insurance policies. Every financial planner has stories of clients who divorce and never revise their beneficiary statements; the client dies and a life insurance policy or 401k is paid to the ex-spouse, leaving a current spouse or children with nothing.
#9. Expect Volatility.
Avoid listening to the screaming heads on the financial news programs. While we will most likely face a similarly volatile year as we did in 2012, selling stocks when prices are down is not a successful long-term investment strategy. And remember -- when media headlines proclaim, “investors are dumping stocks,” someone else is buying them.
#10. See A Financial Planner
Financial planners can help you navigate your way through these perilous economic times. No one knows what the future will bring, but a good planner can provide the kind of experience and objectivity that can bring clarity to difficult financial decisions. If you have a financial planner, and you haven’t updated your plan in light of recent economic changes, it makes sense to check if you’re still on track, or if there are adjustments you can make to take advantage of new opportunities. If you need help finding a financial planner near you, visit http://www.fpanet.org/PlannerSearch/PlannerSearch.aspx.
For more information on these strategies, or to arrange a speaker on these topics, please contact Holly Wilkerson, Executive Director, at (877) 260-3218 or firstname.lastname@example.org.
About the San Francisco Chapter of the Financial Planning Association
The Mission of the Financial Planning Association of San Francisco is to advance the financial planning profession in accordance with the highest ethical and professional standards by providing education, community, networking and leadership for our Bay Area members and through them the public they serve.
For more information, please visit www.fpasf.org