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posted: 7/5/2017 1:00 AM

Financial Planning Checklist for 2017

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  • CAMMY CORSO

    CAMMY CORSO

 

Have you thought about how much money you need to retire? Or if there is anything more you and your family business can do to save taxes throughout your lifetime? These are just a few questions you can answer by doing a comprehensive financial plan.

According to a national survey conducted in 2016 by the Certified Financial Planner Board of Standards, Inc., more than 52 percent of American households are unsure if they will have enough money in retirement. Only 35 percent have used a financial planning professional to assess their situation and create a plan for the future. Financial planning can benefit people of any income level by answering some of these "unknowns." Here are seven financial planning areas to think about in 2017.

1. Set your savings goals and create your cash flow plan. Have you put you and your family's financial goals on paper? Do you know where you will be financially this year, or next year, or in retirement? Putting a cash flow plan in place and keeping it current every year will help you achieve what you and your family business set out to do.

2. Create your estate plan. Basic estate planning documents include a will, a durable power of attorney for financial matters, a health care power of attorney for health care matters, and a living will. Significant life events often lead to changes in your goals, so documents should be reviewed.

3. Get an insurance review. Consider all types of insurance needs, including life, long-term care, and disability coverage. New products become available, premiums may go up or down, and what you needed five years ago may be different from what you need today.

4. Understand your investment strategy. Is your investment strategy still in line with your risk tolerance, your time horizon for retirement, and your cash flow needs now and in the future? A financial plan will show you how much risk you need to take on to grow your assets to the amount you will need in the future.

5. Look at asset location. Where are you holding your assets? From a tax standpoint, there are three different "buckets:" (1) a taxable account; (2) a tax-deferred account like a Traditional 401(k) or a Traditional IRA; and (3) a tax-free account like a Roth 401(k) or a Roth IRA.

6. Consider a Roth conversion. A Roth conversion can be a powerful tool in your overall financial plan. Assess your personal situation and see where your tax bracket is today vs. where it might be in the future. If you are in a lower bracket today, it may be an opportunity to shift money from a tax-deferred bucket (Traditional IRA) into a tax-free bucket (Roth IRA). If you can use lower tax rate years to move money into tax-free accounts, this will minimize the taxes you pay on traditional retirement distributions over your lifetime.

7. Do a multiyear tax plan. Your cash flow plan will help lay out your taxable income levels over the years. The biggest tax savings come from taking advantage of deductions in high tax rate years and taking advantage of income recognition in lower tax rate years. Running a tax projection every year to see how the current year compares to the following year will help identify tax savings opportunities and reduce the taxes you pay over your lifetime.

Your plans will change throughout your life and your financial plan should change with you.

• Cammy Corso is principal, CPA, CFP, CDFA at DHJJ in Naperville. Contact her at ccorso@dhjj.com.