If history is a guide, this coming week nearly half of us will make resolutions seeking to improve some facet of our lives, many of which will be focused on personal finance. If one of your goals for the New Year is to get your financial life in order, here are a few key areas which should be included on your 2015 financial planning checklist.
As you begin compiling your 2015 financial goals, one of the first items on your list should be to calculate how much money you'll need in retirement. It’s one of the most significant math problems you’ll do after you finish grade school. Once you have arrived at the answer to this math problem, you need to examine if that answer will create a problem for you as you prepare for retirement.
With that target in place, pay heed to the advice in an article from Seacoastonline.com titled “Start your 2015 financial planning checklist.” Consequently, you should create a strategy that will help you achieve that goal. A savings plan is one method you can use—and take maximum advantage of any tax-deferred savings opportunities available to you along the way.
For instance, if your company has a 401(k) plan—especially where they match your contributions—it’s imperative that you defer as much of your pay as possible to this account to enhance your retirement security. That’s free money that your employer is setting aside for you just for being smart and planning for retirement!
In 2015, the 401(k) contribution limit is at $18,000. If you are age 50 and older, you can enjoy an additional $6,000 catch-up contribution.
If your employer doesn’t have a 401(k) program, then you should start and contribute to a traditional IRA. You can put in $5,500 pre-tax ($6,500 for those age 50 and older). In addition, you can contribute to a Roth IRA, which, for 2015, has the same limits.
Eligibility to make Roth contributions, however, starts to phase out as your modified adjusted gross income exceeds $183,000 for married couples and $116,000 for single tax filers. The article suggests that, to maximize growth potential, it's typical to make traditional and Roth IRA contributions early in the year, instead of waiting until the contribution deadline (April 15th of the next year).
Take a look at your insurance coverage and make sure that your financial plan is not derailed by an unforeseen disability or untimely death. Acquire adequate long-term disability insurance so you will have income to pay expenses and to fund other goals. Although many employers offer group disability and life insurance coverage at a low cost, that coverage may not be sufficient. Supplement this with individual coverage to provide adequate security for you and your family.
Last, but certainly not least, your 2015 checklist should include setting up and maintaining a complete, up-to-date, estate plan with an experienced estate planning attorney. As one of the most neglected areas of personal finance, you should have, at a minimum: (i) a will to designate beneficiaries for your assets (ii) a durable power of attorney to designate an agent to act on your behalf in financial dealings; and (iii) a health care proxy to designate an individual to act for you when health care decisions are required. You should also discuss a living will with your attorney so that you can make your wishes known for life-prolonging treatments you want or don’t want.
In addition, trusts can play an important part in an estate plan. A revocable trust can simplify estate settlement for family members: it isn’t part of the probate process and provides for ongoing management of your financial resources in the event you become incapacitated.
Contact Robert A. Gordon, an experience estate planning attorney, of Redkey Gordon Law Corp for more information.
Reference: Seacoastonline.com (December 28, 2014) “Start your 2015 financial planning checklist”
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