My wife and I are huge baseball fans, and as such, the All Star Game marks the middle of summer and hence the middle of the year for us. Now that the All Star Game is over (Go National League!), it's a great time to review your finances and make midyear adjustments as needed.
Check your retirement plan contributions
If you have a retirement plan like a 401(k) or a 403(b) through your work, take time to review how much you’re contributing. Start making contributions if you haven’t started yet. And if you are contributing, make sure you're contributing enough to get the full match offered by your employer. (Repeat after me: Never turn down free money!)
The 401(k) and 403(b) contribution limit for 2011 is $16,500, or $22,000 if you're age 50 or older. This limit applies to your contribution, so your employer's match is on top of this amount.
Check your IRA contributions
Anyone with earned income is eligible to make contributions to an IRA. Contributions to a Traditional IRA are tax-deductible when made and taxable when withdrawn. Contributions to a Roth IRA aren't deductible but withdrawals are tax-free. Pairing after-tax Roth IRA contributions with pre-tax 401(k) or 403(b) contributions is a great way to balance current and future taxes.
The IRA contribution limit for 2011 is $5,000, or $6,000 if you're age 50 or older. You have until April 15, 2012 to make a contribution for 2011.
Check your portfolio allocations
The recommended mix of stocks and bonds for your portfolio will depend on things like your age, time horizon, and risk tolerance. But whatever your ideal mix is, your actual allocations will vary over time due to market fluctuations.
Rebalancing your portfolio back to your ideal allocation helps manage risk since it forces you to "sell high" (i.e. decrease exposure to investments that have gone up) and "buy low" (i.e. increase exposure to assets that have gone down).
Evaluate your estimated tax situation
Do you normally receive a large tax refund? Then you should consider changing your withholding to have less money withheld throughout the second half of the year. On the other hand, if you usually owe money at tax time, then you could increase your withholding to avoid having to write out a check to Uncle Sam next year.
Since taxes can be complicated - and penalties incredibly steep if you make mistakes - consider having a CPA or EA review your situation and make recommendations.
Start budgeting for the holidays
It’s no secret that the holiday season can strain our budgets. By starting to plan for now for the expenses associated with travel and gift giving at the end of the year you can avoid getting yourself into financial trouble. You can use www.bankrate.com to find a great high-yield savings account for your holiday savings fund.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
