Financial Housekeeping

by Celeste Stewart

Death and taxes, they say, are inevitable. They sure aren't fun to think about, but by taking stock of your finances and estate planning documents each year, you will ease the burden on loved ones and give yourself peace of mind.

Spring is as good a time as any to schedule your financial checkup. Think of it as financial spring cleaning. File your income taxes then take a look at your bigger financial picture. Has your family situation changed? Are your investments performing as you had hoped? Is it time to increase contributions to a retirement plan or begin withdrawing? Has your house appreciated dramatically? What about the children's college plans? These are among the many questions you will need to ask yourself.

First, let's take a look at the family situation. If you have an addition or loss to the family, your will must be updated. If you don't have a will, then get busy. Even if you have a living trust in place, a will is still necessary for naming a guardian for your children. Will making software is readily available and easy to use. If you prefer, you could visit your estate planning attorney who will draw up the documents for you. Whatever you decide, plan on reviewing your will each year to make sure it still reflects your wishes and that all beneficiaries are still living.

Next, check your investments performance. Do they still meet your needs? Has your portfolio grown in such a manner that your allotment mix has changed? You may need to transfer some funds out of stocks and into bonds to realign the mix to your desired risk level.

If you are nearing retirement age, you may want to crunch some numbers and try out a few different scenarios to begin planning your withdrawals. Sometimes it makes sense to begin taking early Social Security withdrawals at age 62; for others it makes more sense to wait until reaching the full retirement age of 67 and receiving larger monthly benefits.

If you're not near retirement, you may want to ask yourself the following questions. Are you in a position where you can increase your contributions to your 401K plan? Do you have an IRA? Does it make sense to convert a traditional IRA to a Roth IRA? If you don't have any retirement plan in place, then by all means, do something. Many financial institutions will get you started with an IRA with a minimal opening contribution and small monthly contributions. Even if retirement is decades away, it's in your best interest to start now because the power of compound interest is on your side.

If your house has appreciated a great deal, you may be in a position to eliminate costly PMI, or private mortgage insurance. In addition, you should review your homeowners insurance to make sure you are still adequately covered.

If you have children, consider opening a college plan, even if they are just babies. Numerous options are available from prepaid tuition to Coverdell accounts and 529 plans. It'll take a little research to determine the plan that's right for your family, but taking these steps early gives you the upper hand and will make college an attainable goal.

As the final part of your financial check up, create a document listing all of your important personal financial records and make it available to the person you have named as the executor of your will. This will make his or her job easier when the time comes. Include all bank accounts, investment accounts, insurance plans, pensions, assets, debts, property tax information, employment and income, names of people to contact in case of emergency and the location of important documents such as birth certificates, passports, marriage license and so forth. This document is highly confidential and should be placed in your safe or safety deposit box. It will allow the executor of your estate to continue to pay your bills, find all of your money in various accounts, contact the people you love, and more. Once it's made, the hard part is done. Review it annually and make minor changes as needed.