4 financial tasks you shouldn’t put off
You’ve probably got one or two financial jobs on your to-do list that you were too busy to get to or perceived as boring administrative work. Here are some tasks that a) frequently fall by the wayside and b) don’t take a lot of time to rectify.
For higher-income savers with good-quality 401(k) plans, it’s easy to see why putting additional funds into an IRA might not seem like a must-do. But making $7,000 annual contributions for 30 years and earning a 6% return would translate into an additional $550,000 in retirement.
Tips to get it done: To make hitting IRA contributions more doable and palatable from a budgetary standpoint, put them on autopilot, instructing your investment provider to deduct whatever amount you can swing from your checking account on a monthly basis.
If the conversion is done shortly after the contribution, the investments won’t likely rack up much gains in the interim, and any taxes on conversion are also apt to be limited. But if too much time elapses and you invested in something that has enjoyed nice gains since you bought it, you’ll owe ordinary income tax on that appreciation when you finally get around to converting.
Tips to get it done: It’s wise to wait at least a few days after the contribution to make a conversion. To make sure you don’t forget, schedule the conversion date on your calendar at the same time you make the contribution.
As a long-term savings vehicle, health savings accounts are hard to beat because they offer a trifecta of tax benefits: tax-free contributions, tax-free compounding, and tax-free withdrawals for qualified healthcare expenses.
But inertia is no doubt a stumbling block for some HSA contributors, too, as the process for getting the funds invested can be cumbersome.
Tips to get it done: The name of the game is to invest your HSA in line with how you’re using it. If you’re tapping it for ongoing healthcare expenses and/or you need to maintain a minimum balance in the savings account, it’s wise to maintain a balance in the savings option even as you’re directing additional assets to the investment option.
Beneficiary designations are one of the most important aspects of an estate plan, in that they typically supersede what’s stated elsewhere in the plan.
Yet as important as they are, beneficiary designations can become outmoded for a few key reasons. First, people change investment providers; while the assets may transfer over successfully, the account owner will likely have to redesignate beneficiaries with the new provider. Second, and most obviously, lives change: People get married and have children, loved ones die, and once-close bonds can fray. All of these life events can affect whom you want to inherit your assets. Finally, estate plans might have implications for beneficiary designations; if you’ve created a trust, for example, the trust might now be the beneficiary of a given asset versus a human being.
Tips to get it done: Because the “right” beneficiary designation can change over time, check them annually as a component of your annual portfolio review. And if you’ve gone to the trouble of creating an estate plan with the help of an attorney, get their guidance on how best to designate beneficiaries. (Most attorneys will give you very specific instructions on this when you wrap up your estate plan.) Finally, if you haven’t reviewed your beneficiaries for a long time, use this article as an impetus to do it now.
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This article was provided to The Associated Press by Morningstar. For more personal finance content, go to https://www.morningstar.com/personal-finance
Christine Benz is the director of personal finance and retirement planning at Morningstar.
Related links:
1. You can make IRA contributions at any age, but should you? https://www.morningstar.com/retirement/you-can-make-ira-contributions-any-age-should-you
2. Backdoor Roth IRAs: What to know before stepping through https://www.morningstar.com/retirement/backdoor-roth-iras-what-know-before-stepping-through
3. How I invest my health savings account https://www.morningstar.com/personal-finance/how-i-invest-my-health-savings-account
4. What you need to know about estate planning https://www.morningstar.com/personal-finance/what-you-need-know-about-estate-planning.
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