Financial Advice for the New Year
- Author: Michael Bordonada
- Posted: 2024-05-06
The Basics
Most Americans do not like to think about insurance and see it as just another bill to pay each month. Insurance is actually an investment, and it serves as the foundation to protect you and your family from ruin. The arrival of the new year is an excellent time to ensure you have sufficient life insurance to keep your mortgage up to date, pay for your child's college tuition and cover general living expenses if something happens to you. This applies to health, car and home insurance as well. Make an appointment with your attorney to review your estate planning and update your beneficiaries, if necessary.
Tax Plan
The new tax plan that President Trump recently signed into law means certain people will be paying more, and the majority will be paying less. Deductions that you have been used to taking, like the interest paid on your mortgage along with local and state taxes, have been significantly reduced or eliminated altogether. This may make you feel uncertain of how to proceed. The first step should be a thorough analysis of the tax benefits you have been receiving. This will help you minimize any losses related to a lower net income or the increased cost of owning a home. If you currently live in a state with high taxes and are closing in on retirement, you may want to consider moving to a location with a lower tax rate, such as Florida. You can also change how much is withheld from your paycheck to align with your new tax situation. Any windfalls from taxes should be directed to a savings account.
Retirement
If you are still working, chances are you will not receive a pension from your employer when you retire. This means you need to check on your 401k and independent retirement account (IRA) and make sure they are building the amount of wealth you will need for your senior years. A typical investment portfolio is 60 percent stocks and 40 percent bonds. You should have a look at your holdings and ensure that your risk level is not too high. One way to regain balance is to sell off investments that have performed well and place the proceeds in assets that you are still building. If you do not want to sell anything, consider redirecting funds to the high-cost investments. You can also diversify by investing overseas. As for your your 401k, you can reduce your tax liability by maxing out your pre-tax contribution.
Home Affordability
Buying a home in the current economic and financial climate is not as friendly as it was in the recent past. This is especially true in areas like New Jersey, New York and California where the taxes are very high. It can still pay off to see if your current home or one that you have your eye on in another state is affordable for your family. If you want to reduce your home costs and move, consider a state away from either coast. Texas has both cheap housing and a lower cost of living than most of the country, so even with fewer home-related deductions, you can still come out ahead. Both Nevada and Wyoming have no income tax, and the latter has extremely affordable housing. In Tennessee, you can also avoid income tax although you will have pay taxes on your investments. Lowering your overall cost of living will help you to save for your golden years and avoid some of the pain of the tax law changes.
A new year means a new beginning. By planning and making a few adjustments now, you will help your family weather any storms down the road and ensure that you have a secure financial future. Call your broker, consult with your attorney and get started today.
