Five Steps to Financial Success in the New Year

Sandy Spring Bank Logo - 5 Five Steps to Financial Success in the New Year

By John Molster, Vice President and Director of Financial Planning, Sandy Spring Trust

The start of a new year is a great opportunity to take stock and organize your finances so that you’re set up for success. Here are five easy actions you can take today to help ensure a financially healthy year ahead.

  1. Review your retirement savings and contributions. Make sure you are making the most of any company match. If you are not currently maximizing your contributions, strive to increase your contribution. Even a 1% increase may have long-term benefits. Many company retirement plans are now offering a Roth option. Also, ensure your beneficiaries are up-to-date and that you have named both primary and contingent beneficiaries on all retirement accounts. 

    While you are reviewing your retirement savings, also make sure you are getting the most out of company benefits. The new election period is approaching.

  2. Update your estate planning documents. This includes your will, advanced medical directives and powers of attorney. In some cases, a Revocable Trust may be appropriate. Also make sure that your life insurance beneficiary information is up to date. It is important to have these documents in place and in good order in the event something happens to you. This will make it easier for your loved ones. 

    If you do not have these essential documents, consult an attorney. If you need help finding an attorney, we can assist you. 

  3. Build your emergency fund. The need for liquidity is important in the event of an emergency or a new opportunity. Generally, 3 to 6 months of expenses is recommended, but your situation may require more. Historically, many have relied on home equity or other borrowing to meet these needs. Higher borrowing costs may not make that a good option. 

    In this higher rate environment, you may be able to earn more from your savings. It’s a good time to seek out higher rates on cash.
     
  4. Review your investments. Talk to your advisor/portfolio manager/investment professional about tax loss harvesting. Tax efficiency is important to your long-term wealth accumulation and preservation. Explore tax-efficient strategies. This includes retirement, education and gifting. Regularly review your overall asset allocation. Your allocation should align with your financial goals and risk tolerance. 
     
  5. The 2017 Tax Cuts and Jobs Act (TCJA) will sunset at the end of 2025. This may have a meaningful impact on your future tax picture and now is the time to prepare for the expiration. Consider ROTH Conversions to shield future distribution from taxation. While you will have to pay taxes now on amounts converted, you may be able to save on taxes in future years since distributions are not required from Roth IRAs. 

    Federal Estate Tax Exemption Amounts will likely change. The actual exemption amount has yet to be determined. There may be steps you can take now to take advantage of the higher exemption amount and reduce your overall estate tax liability. 

    One example is review gifting strategies. Currently you can give anyone $17,000 without being subject to estate tax reporting. A couple may gift up to $34,000 a year to any one person.

    Gaining a better understanding of your unique situation and goals is the most important action you take. Contact one of our Private Client Advisors to discuss what strategies make sense for you and your family.

Sandy Spring Trust is a division of Sandy Spring Bank, Member FDIC. Sandy Spring Bank, Sandy Spring Trust, and the SSB logo are registered trademarks of Sandy Spring Bank.

Wealth products Not FDIC Insured | No Bank Guarantee | Not a Bank Deposit | Not Insured by Any Government Agency | May Lose Value.

This material is provided solely for educational purposes by Sandy Spring Trust, and is not intended to constitute tax, legal or accounting advice, or a recommendation for any investment strategy or transaction. You should consult your own legal, accounting, tax advisers, and/or portfolio manager regarding your specific situation and needs. Our staff will work closely with your advisers to coordinate your overall plan.