Financial Checkup Time: Review These Annual Items

Key Points – Financial Checkup Time: Review These Annual Items

What Are Your Goals for 2025?
Understanding the Four Types of Wealth
Why Health and Financial Checkups Are Important
Six Annual Items to Review During Your Financial Checkup
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Happy New Year!

We hope that you’re having a wonderful start to 2025! What are your goals for the new year? Do you want to travel more? Do you want to find more time to spend with your kids and/or grandkids? Are there some new hobbies you want to try? Hopefully you’ve taken some time to review your goals for 2025 and have a financial plan that prioritizes those goals. Let’s review why the beginning of the year is a great time for a financial checkup.

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Remember the Four Types of Wealth

Each of the hypothetical goals that we just mentioned are contingent of several different factors—and it’s not just about having enough money. Remember that there are four different types of wealth: financial, time, social, and health.

Do you have time to achieve your goals? Are you healthy enough to go after those goals? And do you know if you are positioned financially to where you can achieve those goals and still have enough money to live out your desired lifestyle beyond 2025?

Finding Time for Health and Financial Checkups

Hopefully, you’ve either recently visited your doctor or plan to do so soon for a checkup so you have a good assessment of your health to begin 2025. It’s truly tragic to see someone have big goals—whether it’s while they’re working or in retirement—and have those dreams dashed due to health issues that could’ve potentially been prevented.

The same thinking applies for visiting your financial advisor for a financial checkup. It’s second nature for some people to try to avoid financial checkups just like some people do with health checkups because they’re worried about receiving bad news. Hopefully, you won’t receive bad news at your next financial or health checkup. But if you do, work with your financial advisor or your doctor to develop a plan to improve your financial situation/health by your next checkup.

Keep in mind that checkups can bring good news too. If you’ve done a good job of sticking to your budget, maybe you can dream even bigger with your goals for 2025 and beyond. As you’re preparing for your next financial checkup, make sure to review these six annual items, which can also be found on our 2025 Financial Planning Calendar.

2025 Financial Planning Calendar

Review Your Spending Plan (AKA, Your Budget)
Review Your Beneficiaries
What’s Your Gifting Strategy?
Review Your Estate Plan
Review Your Multi-Year Tax Strategy
Rebalance Your Portfolio

1. Review Your Spending Plan (AKA, Your Budget)

Speaking of sticking to your budget, that’s the first annual item to review on our list for financial checkups. Some people might cringe at the idea of having a budget, especially as they’re entering retirement. That’s why we like to think of a budget as a spending plan. A spending plan is a critical component of a comprehensive financial plan.

Do you frequently worry that you (or your spouse) are spending too much? Some individuals find out that they are spending too much at financial checkups, while others realize that they’ve been so focused on saving and could actually spend more. We encourage you to regularly review your spending plan to help gain confidence that you’re making informed decisions with your money.

2. Review Your Beneficiaries

Review your beneficiaries on your IRAs, investments, pensions, life insurance, bank accounts, etc. Along with this being an annual item to review during a financial checkup, it’s important to review your beneficiaries after major life events. For example, let’s say some got divorced and then remarried, but suddenly passed away shortly after they remarried. Can you imagine how their widow and children might feel if the ex-spouse was still listed as a beneficiary? That’s one of many examples why it’s important not only to have financial checkups, but to also have family meetings to make sure everyone understands who is getting what if you pass away or become incapacitated (or vice versa).

3. What’s Your Gifting Strategy?

Discuss your gifting strategy for family and charity. Many people make charitable donations to organizations that are near and dear to their heart before the end of each year. That way they can potentially get a tax benefit to help offset the cost of the donation. Yes, the tax benefit can be nice, but that’s typically not the reason people give to charity.

If it’s one of your goals to leave a legacy for your family, what do you want that legacy to look like? Remember that you don’t have to wait until you die for wealth transfer to take place. Don’t you think it would be fun to enjoy or witness your children/grandchildren making memories with the help your financial generosity? That may be true in many cases, but it also might be hard to put trust in your loved ones to be responsible with their inheritance. Make sure to review your gifting strategy as a part of your financial checkup.

4. Review Your Estate Plan

The second and third annual items to review on our financial checkup list leads us right into item No. 4. Review your estate plan, including your beneficiaries, health care directives, and power of attorney. Do you think having a will is enough or do you want to establish a trust? It all depends on your unique situation, and your situation can change from year to year. It’s important to review your estate plan during a financial checkup.

5. Review Your Multi-Year Tax Strategy

Review your multi-year tax strategy to help manage and potentially reduce your overall tax burden over time rather than focusing solely on a single year. This is a critical item to address during your next financial checkup given the uncertainty of the tax code. Today’s tax rates, which were established as part of the Tax Cuts and Jobs Act, are scheduled to sunset after 2025 unless Congress steps in. If that happens, tax rates would revert to the higher rates from 2017.

For 2025, Roth conversions may be something to consider within your overall tax strategy. A Roth conversion involves converting funds from a traditional IRA to a Roth IRA. There are pros and cons to that. You would be required to pay tax on the conversion. That might seem like a con when looking at it short-term, but there’s the potential to get tax-free growth from the Roth IRA earnings and distributions if you follow certain IRS rules. If you’re considering Roth conversions as a part of your tax planning strategy, download our Roth Conversions Case Studies to help understand whether they could work for you.

Roth Conversion Case Studies

6. Rebalance Your Portfolio

When was the last time you rebalanced your portfolio? Was it this time last year? If that’s the case, it’s important to understand that your current asset allocation may be much different than what it was when you last rebalanced your portfolio.

The S&P 500 had a strong year in 2024, but think about how much of that was due to the Magnificent Seven. And what in the world has been going on in the bond market? We’ve kept a close eye on it during the back half of 2024 as the Fed cut rates three times and following the presidential election. We don’t have a crystal ball to tell you what will happen in the markets in 2025, but regardless of how they perform, remember that it’s important to regularly rebalance your portfolio to achieve your overarching goals.

Have You Scheduled Your Next Financial Checkup?

We hope that this quick review of these six annual items has helped you understand why a financial checkup is something to strongly consider as we begin 2025. If you haven’t thought about these annual items recently and/or don’t have a financial plan that’s tailored to your current goals, start a conversation with our team below.

Schedule a Meeting

We want to hear about your goals for 2025 and beyond so we can help determine how you can try to accomplish them. We wish you nothing but the best this year and look forward to seeing you soon for a financial checkup.

Resources Mentioned in This Article

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Investment advisory services offered through Modern Wealth Management, Inc., a Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management a Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.