Study re­tire­ment ac­counts if you’ve let things slip Re­view beneficiary des­ig­na­tions Check your risk tol­er­ance

USA TODAY International Edition - - MONEY - Robert Pow­ell Colum­nist GETTY IM­AGES Robert Pow­ell is ed­i­tor of TheStreet’s Re­tire­ment Daily, www.re­tire­ment.thestreet.com, and con­trib­utes reg­u­larly to USA TO­DAY. Email Bob at rpow­[email protected]­ingsre­tire­ment.com.

No doubt the hol­i­day sea­son got the best of your plans to re­view your finan­cial plan. If that’s so, now would be good time to make sure you start the new year off on the right foot – es­pe­cially when it comes to your re­tire­ment ac­counts.

What should you be do­ing? Well, there’s the usual stuff. If you didn’t re­bal­ance your in­vest­ment port­fo­lio back to its tar­get as­set al­lo­ca­tion at year-end, do that now.

If you don’t have a tar­get as­set al­lo­ca­tion, cre­ate one. To do that, you’ll need to draft what’s called an in­vest­ment pol­icy state­ment. That state­ment, of­ten called an IPS, cap­tures your time hori­zon, in­vest­ment goal and risk tol­er­ance, and specifies how much of your money you should in­vest in stocks and how much in bonds and cash.

Here are some other things you should look at:

A good New Year’s res­o­lu­tion is to check your in­di­vid­ual re­tire­ment ac­count and em­ployer plan beneficiary forms, says Sarah Brenner, an IRA an­a­lyst with Ed Slott and Com­pany.

Be­gin by up­dat­ing for ma­jor life events. “For ex­am­ple, if you got mar­ried or di­vorced, had a child or grand­child born, or had a death in the fam­ily in 2018, your beneficiary forms may need to be up­dated,” she says.

And don’t stop there. “You don’t want to for­get con­tin­gent beneficia­ries,” she says. “You may think that if you name a pri­mary beneficiary you are done, but con­tin­gent beneficia­ries are crit­i­cal.”

Why? Be­cause they gen­er­ally will in­herit the re­tire­ment plan if the pri­mary beneficiary pre­de­ceases the re­tire­ment ac­count owner, says Brenner.

“Ev­ery re­tire­ment ac­count owner should have both a pri­mary and con­tin­gent beneficiary named,” she says. “Also, don’t for­get suc­ces­sor beneficia­ries. You may have an in­her­ited IRA. As the pop­u­la­tion own­ing re­tire­ment ac­counts ages, in­her­ited IRAs are be­com­ing in­creas­ingly com­mon. Who will in­herit these in­her­ited IRAs? Be sure that in 2019 your in­her­ited IRAs have named suc­ces­sor beneficia­ries.”

One of the benefits of rocky mar­kets is that we are pro­vided the op­por­tu­nity to test our true risk tol­er­ance, says Lynn Bal­lou, a cer­tified finan­cial plan­ner with EP Wealth Ad­vi­sors. “Given what we’ve ex­pe­ri­enced this past year, it’s time to have an hon­est con­ver­sa­tion with your­self about what you can tol­er­ate and what makes you too queasy.”

Her ad­vice: “Ex­am­ine your specific hold­ings in your re­tire­ment ac­counts and de­ter­mine what mea­sures up and what doesn’t for your new­found in­sight,” Bal­lou says.

In­crease your con­tri­bu­tion. This year, the amount you can con­trib­ute to your 401(k) rises to $19,000 a year, and if you turn 50 in 2019, you’ll be able to add $6,000 more us­ing the catch-up pro­vi­sion rules. Also, Bal­lou sug­gests “chang­ing your with­hold­ing amounts early in the year so you aren’t scram­bling in the fall to con­trib­ute all that you can.”

Early 2019 is also the time to think about mak­ing IRA con­tri­bu­tions, says Brenner. “A prior year con­tri­bu­tion for 2018 can be made up un­til the tax-filing dead­line, not in­clud­ing ex­ten­sions,” she says. “Be sure that you have clearly in­di­cated that con­tri­bu­tion is for the prior year, 2018. Fail­ing to do so can re­sult in the IRA cus­to­dian re­port­ing it for the cur­rent year – 2019 – which will cause a tax headache.”

It’s also a good idea, she says, to go one step fur­ther and get a jump-start on 2019 by mak­ing your 2019 con­tri­bu­tion. “Mak­ing a con­tri­bu­tion early in the year in­stead of wait­ing un­til the last minute can greatly in­crease the value of your IRA by re­tire­ment,” she says.

It’s also a good idea – given the changes that came with the Tax Cuts and Jobs Act of 2017 – to eval­u­ate whether to save for re­tire­ment us­ing pre­tax re­tire­ment ac­counts such as a 401(k) and IRA or post-tax re­tire­ment ac­counts such as a Roth 401(k) or Roth IRA. “I have had older mil­len­ni­als and GenXers in­crease pre­tax and re­duce post-tax be­cause of the limit on de­duc­tions for state and lo­cal taxes,” says Rita Cheng, the chief ex­ec­u­tive officer of Blue Ocean Global Wealth.

Re­view your RMDs

If you’re over age 701⁄2, check whether your re­quired min­i­mum dis­tri­bu­tions from your re­tire­ment ac­counts were in­deed done and whether the with­hold­ing from RMDs was “enough” to cover tax li­a­bil­ity for the year.

“Of­ten there is other tax­able in­come such as mu­tual fund cap­i­tal gain dis­tri­bu­tions in tax­able ac­counts that have no tax pay­ments at­tached and can be cov­ered by ad­just­ing with­hold­ing on RMDs,” says Steven Pod­nos, a cer­tified finan­cial plan­ner with Wealth Care.

Con­sider a Roth con­ver­sion

If you think you won’t be pay­ing much, if any­thing, in taxes be­cause you are liv­ing on your af­ter-tax in­vest­ments or cash re­serves for the year, this might be an ex­cel­lent time to start mov­ing qual­ified re­tire­ment plan hold­ings into a Roth IRA, says Bal­lou.

She rec­om­mends work­ing with a cer­tified finan­cial plan­ner and a qual­ified tax ad­viser to be sure you’re spot on in your num­bers and your think­ing.

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