When Trenda Boyum recently met with her financial adviser for her annual financial checkup, the retired Rasmussen University president had just sold her suburban house to move near downtown Minneapolis.
“It was a good opportunity to talk about my financial goals and actual numbers after the sale,” said Boyum, 58, who is divorced and works as a part-time executive coach. “We came to a new plan that has me working fewer hours for a few more years, and that feels really energizing to me.”
Financial advisers recommend giving yourself such an annual review to check your finances and make adjustments if needed.
“Just like our physical health, it’s important at any age to have a financial checkup, but the stakes are higher at 55 and up, especially as retirement looms,” said Greg McBride, chief financial analyst for personal finance company Bankrate. “It’s an opportunity to revisit your goals — how retirement savings, emergency savings, debt and annual expenses stack up.”
Joe Stepanek, a Thrivent wealth adviser in Andover with about 30 years of experience, likes a year-end review to look back and forward, and take any actions that must be done by Dec. 31. The start of a year before the tax deadline is also a good time.
Some parts of an annual financial checkup, such as reviewing and adjusting your expenses, you can do yourself. For others, you may want professional advice and help.
Financial experts recommend an annual checkup that includes at least these 10 elements:
1. Consider life changes
First, take stock of changes in your life that may affect your income and spending habits. Did you remarry? Do you plan to retire soon? Do you plan on making a major purchase next year?
“It’s important to plan major expenses,” said Roya Moltaji, an independent financial planner affiliated with MML Investors Services. “Plan out big-ticket items over the next five to 10 years. You don’t necessarily want to pull a lot of money out of the stock market or your retirement accounts. You want your money in the right spots tax-wise.”
Debi Espe, a 71-year-old retired flight attendant who lives in Woodbury, began getting an annual financial checkup when her husband died about 10 years ago. “I prefer to be intentional and proactive versus reactive,” she said.
2. Audit expenses
Know your expenses. Perhaps you can trim. “Are you still paying for subscriptions or memberships you no longer use?” McBride said. “The reality is that over time, expenses rise with inflation and lifestyle creep.”
3. Update designated beneficiaries
People often designate beneficiaries on accounts but never revisit them. It’s a good idea to update your beneficiaries, especially if there’s been a change in circumstances like a death or divorce, experts advised. Also check that the beneficiaries on your estate plan documents, such as a will or trust, match those named on your accounts, such as a 401(k) or mutual fund.
4. Consolidate debt
If the interest rates are high on your credit cards, consider paying off the balance or consolidating them. The average credit card interest rate is about 21% to 23%.
If you’re paying high interest rates, “does it make sense to carry those balances or pay them off?” said Ravie Singh, branch manager for U.S. Bank at the Broadway location in north Minneapolis. “If you have four or five credit cards, you can consolidate them with one interest rate.”
5. Reallocate and rebalance investments
Review your portfolio’s performance and check if you need to reallocate (change the percentage of invested assets depending on your risk tolerance or timeline) or rebalance (sell or buy assets to remain in the same percentage range) any investments based on market or economic conditions.Consider setting up automatic rebalancing.
In a year like 2024, when the stock market has seen very big gains, some investments may need realigning “just like you realign the tires of your car,” Moltaji said. For example, the allocation of 10% of your invested assets in large-cap growth funds may have grown to 15%, she said.
When Espe meets this month with her financial adviser, “we’ll review all of my accounts — have they changed, good, bad — and, if needed, we rebalance those allocations if they’re out of alignment,” she said. “At my age, we’ve gone to more softer, safe investments.”
6. Donate
Consider whether you want to increase or change your charitable giving this year or in 2025, said Jackie Larson, a financial adviser and branch director of RBC Wealth Management in Minnetonka, keeping in mind an expected decrease in the estate tax exemption when the 2017 Tax Cuts and Jobs Act expires on Dec. 31, 2025.
You can reduce your taxable estate by making annual gifts — up to $18,000 for an individual donor for the 2024 tax year or $19,000 for the 2025 tax year — without incurring taxes, Larson said. For people 70½ or older, she said, another option is to donate to charities directly from their IRA retirement account, which isn’t considered taxable income and may count toward your annual required minimum distribution.
At her recent year-end review, Colleen Breen, 80, of Minneapolis discussed altered end-of-life plans, which affected her charitable giving.
“I don’t want a prolonged end of life,” said the retired psychologist. She can now spend and give away some of the retirement money she had aggressively been saving in lieu of long-term care insurance. “I’ve decided to give money to individuals now while I’m alive.”
7. Reevaluate insurance needs
One of the biggest issues that arises is needing long-term health care, Stepanek said. Consider buying long-term care insurance while you’re younger and healthier, before it gets too expensive, he added.
“About 50 percent of our clients get declined,” said Stepanek, a former Vikings player who bought his long-term care insurance policy in his late 40s. “Early 60s and 70s may be too late.”
Also, check that your life insurance coverage fits your current situation, and that your property and casualty policy covers your current assets.
8. Manage cash
If you’re retired or heading into retirement, consider how much cash you want to have on hand. It’s a balancing act of not having too much cash sitting on the sidelines with enough in an emergency fund to cover sudden expenses, financial advisers said.
With interest rates expected to decline over the next year from 20-year highs, now is a good time to evaluate your cash and fixed-rate holdings, such as high-yield savings and certificates of deposit (CDs), to ensure you’re getting the best returns. Federal Reserve data shows that 70% of retirees have savings, money market accounts or CDs.
Lock in investment income at fixed rates “through CDs and high-quality bonds that generate predictable income at returns that are likely to outpace inflation for the next several years,” McBride advised. Rates can be as high as 5.15% on high-yield savings and 4.7% on longer-term CDs, according to Bankrate in early November.
Some actions must be taken by end of the calendar year or tax year, which is April 15 for most people.
9. Save for retirement
If you work, annual employee contributions must be made by Dec. 31 for 401(k) retirement accounts and by the tax filing deadline for traditional IRA or Roth IRA accounts. Aim to make the maximum contributions to an employer-sponsored retirement account, especially if your workplace matches your contribution, because basically it’s free money.
The maximum contribution for 2024 is $23,000 ($23,500 for 2025)for a 401(k) account and $7,000 for an IRA in 2024 and 2025. If you’re 50-plus and working, see if you can swing the catch-up contribution, up to $7,500 in your 401K and $1000 to an IRA account for 2024 and 2025, by Dec. 31.
10. Take retirement distributions
You may be able to withdraw funds from an employer-sponsored retirement account or roll them into an IRA account — without penalty — if you’re age 55-plus and still working for the same company, or 59½ if you’ve left. “You may want to do this if your work plan doesn’t have a lot of investment options or you want to invest in a certain product,” Moltaji said. “It gives you more options and more control.”
If you’re 73 or older, don’t forget to take your required minimum distribution from certain retirement accounts by Dec. 31 or face a penalty for 2024 of 25% of the amount not withdrawn.
Of course, you can review your finances more than once a year.
More often “never hurts,” Singh said. “Know where you’re at with your finances at all time — that puts you in the driver’s seat.”
Just ask Boyum. After her annual financial checkup, she decided to spend some of the proceeds from her house sale on a trip to Italy in October. “I feel like I’m rediscovering this new chapter of how I want to live my older years,” she said.
