Time for Some Fall Cleaning

Kathy Longo, CFP®, CAP®, CDFA Tuesday, 06 October 2015

Time for Some Fall Cleaning

Time for Some Fall Cleaning

Fall is officially here and it’s time to clean!  I know we usually think about cleaning as a chance to freshen things up when Spring arrives, but Fall is a perfect time for financial cleaning.  Let’s make some progress with a few of these financial cleaning moves:

More Isn’t Always Better – As we mature in our financial lives, we can accumulate many investment accounts along the way.  With the average person changing jobs after about 4 ½ years, retirement accounts can start to accumulate if we don’t do some cleaning.  Take a look at your current accounts to determine if any can be consolidated.  Consolidation can provide a better overview of your portfolio while creating greater efficiency in managing your overall investment plan.  There may also be cost efficiencies along with simplified recordkeeping and tax reporting.

A Compounding Lesson – If your child has earnings from a summer job or works part-time, consider a contribution towards a ROTH IRA account before their summer earnings are spent.   For 2015 they can contribute the lessor of $5,500 or their earned income.  For example, if the child earned $3,000 over the summer, he or she could contribute up to $3,000 in a ROTH IRA.  I also like the idea when possible of parents or grandparents matching the dollars the child contribute to maximize the contribution.  One option would be for the child to put $1,500 in the ROTH IRA, then the parents or grandparents match with the other $1,500.  There are great lessons for your child to learn from their investment account including the power of saving early and compounding growth, tax benefits of the ROTH account, and learning about investment management. 

Avoid Surprises with a Check on the Paycheck – Personally I am not a fan of surprises as my Mom will tell you about the time from my teenage years when I chose to unwrap my Christmas presents early because I couldn’t wait to find out what I was getting.  When it comes to taxes, most of us don’t like surprises either, so review your paycheck now while there is still plenty of time to make adjustments before year-end.  Two areas to review are retirement plan contributions and tax withholding.  Can you increase your retirement contribution for the rest of the year or even maximize this contribution for the year?  For 401k plans, the annual limit is $18,000 for 2015 and for those 50 years and older an additional $6,000 can be contributed for a total of $24,000.  Also, take a look at your projected federal and state tax liability along with your planned withholding and estimated tax payments to see that they are in lin e and there are no surprises.  Even though I sometimes hear the joy that comes with a tax refund, it is really a better investment to have those dollars in your pocket or better yet put towards your savings plan.

Start the Giving Season Early – We all get hectic during the holiday season and yet many of us wait until year-end to give the majority of our charitable gifts.  By creating a charitable plan now, in the Fall, we can better reflect on the amount to give as well as the organizations that are important to us which will result in a more meaningful giving plan. 

You can also plan for any family gifts which can be up to $14,000 per year to any family member without affecting the lifetime gift tax exemption or the estate tax exemption.  For married couples, the amount can be doubled to $28,000 to a family member when each spouse participates in the gifting process.  For 529 plans, there are special rules that allow one to advance up to five years of gifts in one year.  There are many personal benefits to an early gifting process including the opportunity to fund education needs, support a down payment on a first house, or share assets for a memorable family vacation. The gifts can also be made to grandchildren with the opportunity to provide seed money for a life experience. 

Protect Your Identity – It is a good idea to check your credit score on a periodic basis.  A free credit report can be pulled once a year from the web site www.annualcreditreport.com for each of the three credit reporting agencies.  Alternatively, you could choose to pull one report every four months to stay on top of any changing activity throughout the year.    

Find Your Long Lost Money – A quick cleanup project is to search the web for any missing money.  The free site we use for clients is www.missingmoney.com.  It’s always fun to find some money they you may not have known was missing in the first place.

Completing any of these Fall cleaning projects will go a long way to keeping your finances in good order.  The team at Flourish Wealth Management uses many of these same tools and guidelines while working on behalf of our clients.  We encourage you to incorporate a Fall cleaning to benefit your short-term and long-term finances!

About the Author

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo, CFP®, CAP®, CDFA

Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.

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