Most people take stock of where they are financially at the turn of the new year. I have a different approach and look just as hard at the mid-year milestone we just passed.

It’s possible I like July 1 because my firm Aegis Wealth was born on July 1, 2005 but I think that is just strong coincidence. I think it’s more likely because six months of time in the rear-view mirror is enough of a sample-size to see where our year is heading. Six months remaining is enough time to change course (or increase effort!) before year’s end.

Some Halfway Mileposts

401Ks, IRAs, Withholdings…Oh My

1. If your income for 2018 is significantly higher (or lower) than 2017 now is a great time to check your withholding at work. You can also determine whether you need to make estimated tax payments. Taxes are generally not withheld on investment income or self-employment income. Estimated taxes for this income need to be paid four times per year to the IRS (and to most states).
2. Have you contributed to a 401k this year? The contribution limits for 2018 went up slightly ($18,000 –> $18,500) and the catch-up contribution limit for those 50 and older stayed the same at $6,000. If you put off contributing for 2018 now is the time to up your deferrals to save on taxes this year. You will also improve your lifestyle in retirement in the future.
3. The same logic applies to an IRA contribution. While the limit remains $5,500 per year (plus another $1,000 if age 50 or over) there’s no good reason to wait until year’s end if you have the money now. With regards to Roth IRAs: income limits apply to eligibility to make a Roth contribution. Roth IRAs are made with after-tax money. Contributing to one is making a bet that your marginal tax rate in the future is going to be higher than it is today. This is generally a safe bet for working people more than ten years away from retirement. For our Millennials this is perhaps the greatest feature of the current system: years of tax-free growth and compounded returns!
4. Ok, back to 401k’s one last time: do you understand what’s in your 401k and why it’s there? Like it or not, we are now all responsible for managing our own retirement savings. Many 401k plans suffer from a bewildering array of investment options. There is little guidance to distinguish the good from the bad or the ugly. Which funds are best for you? Do you know how much your plan costs you every year? If you don’t know the answers to these or aren’t comfortable evaluating these factors it’s vital that you talk to someone who can help you through it. Most people I know would check online reviews or Consumers Reports before buying a dishwasher, yet millions are facing the biggest financial challenges of their life (planning for retirement) alone without help.

Lifestyle Changes and More

1. Nearly everyone puts off the annual review of their estate plan ( based on my experience with new and prospective clients). Consider this a friendly reminder to take a look. First question: if you had to put your hands on your will or other vital estate documents (power of attorney, advanced medical directive, etc) could you do it? How long would it take you? Most people wait for some unpleasant medical emergency to go through this drill, but you don’t have to.
2. Has anything significant about your residence changed? Have you moved to a new home? Kids move out, and sometimes move back in. All of these are reasons to review your homeowners coverage to make certain you are not over- or under-insured. Graduating high school seniors leaving for college this fall should consider renter’s coverage for their belongings at school in a residence hall or rented apartment.
3. When is the last time you checked your credit report? Everyone is entitled to receive a copy of their credit report from the three major credit reporting agencies once annually. Go to Annual Credit Report.com and jump through the hoops. You should be able to download a PDF of your credit report within a few minutes. This will allow you to spot errors in your record that may hinder your ability to get new credit or affect your interest rate. It’s much better to do now than when you head out to buy a new car or home.