Position Yourself Financially To Define The New Year With Confidence

Forbes - December 15, 2020


While many are counting the days until we can finally put 2020 in the rear-view mirror, I can’t think beyond Christmas. In fact, I haven’t been this excited about the holidays since I was a kid. That’s because something truly special is coming my way on December 25th—give or take a few days. That’s when my second grandson is due. He’ll enter this world at a tumultuous time, amidst a global pandemic and economic recession. Yet, all he will know is the love and warmth that surrounds him from his parents, big brother, doting grandparents, and aunts and uncles.

As our family eagerly awaits our new addition, I’m reminded that even in the darkest of times, there’s always hope and joy to be found. Recent news regarding the approval and distribution of several COVID-19 vaccines can attest to that. While this has been a tough and worrisome year for so many, the vaccine puts hope on the horizon for people’s lives and livelihoods, and the economy at large. It also speaks to human ingenuity at its best. Never before has one vaccine been developed and readied for distribution in so short a period of time, let alone three. That’s something we can all be grateful for and feel hopeful about, as the new year approaches.

Yet, we know we still have a long way to go before vaccines are available to all Americans and are distributed throughout the world. That makes the next few months critical for public health and the economy. While the disappointing November jobs report showed a net gain of 245,000 jobs, it represents the slowest month of growth since the recovery began. The unemployment rate ticked down to 6.7%, from 6.9%, according to the Bureau of Labor Statistics, but the decrease was primarily due to a large number of workers leaving the labor force. Unemployed Americans, many of whom don’t know how they will pay their rent, mortgage or utility bills in the coming months, or put food on the table, are in dire need of another round of economic stimulus. So too are thousands of small business owners struggling to remain open and avoid further layoffs. As I write this, bipartisan support for a new economic relief proposal continues to grow. This is likely the last chance Congress has to pass a bill in 2020, before it can consider a larger package in 2021. However, the clock is ticking as Congress prepares to recess until January.

If 2020 taught us nothing else, it’s that circumstances can change quickly. As this year winds to a close, it’s likely that you have spent time reflecting on this unusual year and the impact it’s had on you and your family. As a result, you may find yourself re-evaluating your priorities for the new year. Your finances play a significant role in this exercise since they help you to live purposefully as you seek to accomplish today’s objectives and tomorrow’s goals.

What has changed?

As you think about where you’ve been and where you’re going, keep in mind that any changes in your circumstances can have important planning implications. For example, did you recently welcome a new child or grandchild, or celebrate a milestone event, such as retirement, or turning age 50 or 65? Did your income increase or decrease due to a job change or loss? These are all reasons to work closely with a financial advisor to review your financial plan or put one in place.

In 2020, many people experienced significant changes in their spending habits and priorities. If some of the things you used to spend money on are no longer important, think about redirecting those savings to support other goals or new priorities, such as building your emergency fund and increasing your retirement plan contributions.

What will change in the new year?

Periods of increased market volatility and rising equity values can cause your portfolio to become misaligned with your risk target. Do you need to review your asset allocation or rebalance your portfolio? If you’re retired, think about where you will draw income in today’s low interest rate environment. Is your strategy as tax efficient as it could be? Will your taxable income to be higher or lower in 2021?

What about your estate planning and legacy goals? Have recent tax law changes or your own priorities or circumstances impacted how you will define your legacy going forward, or how assets will transfer to your heirs? I’ve spoken with a number of clients this year who said the pandemic created a renewed sense of urgency about ensuring their estate planning is up to date. Do you have the right legal documents in place, including a will, durable power of attorney, and healthcare directives? Are they current or do they need updating? When was the last time you reviewed the beneficiary designations on your retirement accounts and life insurance policies?

These are all important considerations as you work together with your financial advisor to prepare for the year ahead. As we think back to this time last year, none of us could have predicted the massive changes that 2020 would bring to individuals and businesses. While we expect to see significant progress on the road to recovery in the new year, nothing is guaranteed. Advancing and protecting a lifetime of wealth requires a personalized and focused approach. That’s why it’s so important to take the actions now that will best position you to weather financial change so you can continue to pursue your goals with hope and confidence, no matter what is taking place around you.

Ron Carson Contributor


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