CHECK YOUR RETIREMENT READINESS. Try the simple calculators from AARP, Boston College and Vanguard Group. None requires you to create an account. Each will give you a somewhat different assessment—a reminder that such projections are a rough-and-ready business. Still, you should get a sense for whether your retirement is on track or off the rails.
GET A FREE CREDIT SCORE. You can learn your score at sites such as Credit.com, CreditCards.com, CreditKarma.com, CreditSesame.com, NerdWallet.com, Quizzle.com and WalletHub.com. Scores are also available from Capital One, Chase and Discover, even if you aren’t a customer. Not all these sites will tell you your FICO score—the most widely used scoring system.
CONSIDER A ROTH CONVERSION. You should have a good idea of your taxable income for the current year. Is it less than normal, so you’ll end up in a lower tax bracket? To take advantage, consider converting part of your traditional IRA to a Roth, where the money will grow tax-free thereafter. One warning: Make sure you have the necessary cash to pay the resulting tax bill.
PREPARE FOR A LONG LIFE. For a quick gauge of your life expectancy, try Social Security’s calculator. For an in-depth look, use this calculator built on academic research. What will you learn? First, the longer you live, the longer you can expect to live. Second, lifespans vary widely—with educated, health-conscious Americans living three or four years longer than average.
FILE FOR COLLEGE FINANCIAL AID. Hoping for grants and loans for the 2018–19 academic year? You can file the Free Application for Federal Student Aid starting Oct. 1. Income is based on your 2016 tax return. Even so, before filling out the FAFSA, you could increase aid eligibility by using taxable account money to pay down debt or fund retirement accounts.
CHECK YOUR FUND EXPENSES. If you own index funds, aim for weighted average annual expenses below 0.2%. If you own actively managed funds, you’ll pay more—but allocate enough of your portfolio to index funds to keep your average below 0.4%. By holding down costs, you’ll keep more of what you make, plus low-cost funds typically outperform high-cost competitors.
TALK TO YOUR CHILDREN ABOUT MONEY. Forget lectures—and instead teach your kids by telling family stories, setting a good example and sharing your financial life. Show them your account statements. Detail where your paycheck goes. Talk about your goals. Tell them about your financial struggles when you first entered the workforce.
TAKE ADVANTAGE OF YOUR GROWING WEALTH. You might avoid interest charges by paying cash for your next car, rather than borrowing. You could minimize financial account fees by always keeping the required minimum. You might save on insurance premiums by raising deductibles and lengthening elimination periods, and perhaps even opting to self-insure.
GIVE AWAY MONEY NOW? You might be considering a large financial gift to your favorite charity or to your children. Charitable contributions aren’t limited, though their tax-deductibility can be. Meanwhile, with our kids, we might take advantage of the $14,000 annual gift-tax exclusion. But before we do, we should check we have plenty for own retirement.
BUYING A CAR? Think twice before financing it through the dealership. While dealership loans are convenient, the interest rate charged will include the dealership’s markup. That means you can likely get a lower rate by going to a bank or credit union—or by using a home equity line of credit. Unlike an auto loan, the interest on home-equity borrowing is typically tax-deductible.
TAKE STOCK OF YOUR BONDS. Our financial lives are chockful of bond lookalikes, including savings accounts, our regular paycheck, Social Security and any defined benefit pension—all paying us regular income, either now or in the future. Set against these income streams is a big income drain: our debts. Result: Our finances may be riskier or more conservative than our bond position alone suggests.
COULD YOU DROP INSURANCE POLICIES? If the kids have left home or you have $1 million-plus in savings, you might no longer need life insurance. With a seven-figure portfolio, you could probably also drop disability coverage and skip long-term care. Even if you can’t cancel policies, consider raising deductibles and extending elimination periods as your wealth grows.
SEE IF ESTATE TAXES ARE AN ISSUE. With 2017’s federal exemption at $5.49 million, few Americans need worry about federal estate taxes. State estate taxes are an issue in just a third of states, though state exemptions are often below the federal level. For most Americans, the biggest “death tax” will be the income taxes owed on inherited retirement accounts.
PONDER WHEN TO CLAIM SOCIAL SECURITY. Start with the calculator offered by United Capital. Many folks are inclined to claim benefits as soon as they retire, but often it makes sense to delay. To understand why, learn more about Social Security, including the advantages of delaying and the different strategies that couples might use.
SUPPOSE YOU LOST YOUR JOB. How long could you go before your financial life unraveled? This isn’t an issue for retirees—which is why they need little or no emergency money. But if you’re working, your plan for unemployment might include a cash reserve, slashing discretionary spending, a home-equity line of credit and withdrawing Roth contributions.