Looking back, 2016 gave us plenty of market shocks, such as China’s surprise currency devaluation and slowdown in growth, UK’s Brexit vote and the U.S. election. As a whole, the year taught investors to expect the unexpected. Our investment professionals say more of the same might be in store for 2017. How can you take control of your finances when facing continued uncertainty?
John Leis, Vice President of Personal Financial Solutions, advises clients to concentrate on what they can control and keep a long-term focus. Here are some items to consider.
Don’t Just Dream It—Make It a Goal
Make sure you identify specific goals and when you want to reach them. This can include your retirement plans, purchasing a new home or car, or saving for college. Create a plan or review your current one to make sure you’re still on track.
Determine Your Savings Options
Once you’ve established your goals, consider the best type of account for your investments. For retirement, you might evaluate short- vs. long-term tax benefits, such as:
- Potential shorter-term tax benefits: Traditional IRA or 401(k)
- Potential longer-term tax benefits: Roth IRA or Roth 401(k)
Additionally, a 529 college savings plan may have tax advantages that you can’t receive using a taxable account to save for college.
When looking at timelines and purpose, not all savings are created equal. Finding the right investment vehicle will help you stay on track with your financial goals.
Make Windfalls Matter
The first of the year is when many people receive pay raises, bonuses and tax refunds. Rather than spending them on stuff you might not really need, improve your chances of financial success by making an additional contribution to one of your accounts or slightly increasing your monthly savings allocation. Modest changes can make a big difference over time.
Simplify Investing—Make It Automatic
Take advantage of automatic plans where you can. Sign up for systematic investing with your retirement plan and investment accounts, and leverage auto increases when possible. This can help you save more than hoping you’ll get around to it when you have “extra” money.
Automatic monthly savings add up
See results for 3 different amounts
This graph illustrates the effects of investing $50, $100 or $200 monthly. Hypothetical results are based on a $2,500 beginning balance, investments made at the beginning of the month and an 6% average annual return. All projections are before taxes. This chart does not represent the performance of any specific investment product.
Check in on Your Investments
It’s easy to underestimate the importance and impact annual portfolio reviews can have on long-term savings. The financial markets adjust throughout the year, so take the time to review how this affects your investment accounts. Maintaining the appropriate balance in your portfolio is one of the most important keys to success, so resist the temptation to put it off.
Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.
Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59 ½.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.