It’s Time for Your Financial Spring Cleaning

For most of the US, the arrival of April brings thoughts of 1040s, deductions, and maybe last-minute IRA contributions, as the deadline for filing our tax returns rolls around. This year, Californians affected by the winter storms of this past season get an extra six months to file, but as the weather warms and we start to think about tidying up, de-cluttering, and all the other tasks that go along with spring cleaning, it’s also a good time to do some financial sprucing up, as well. Since you’re already looking at various financial matters in connection with your taxes, why not take a little extra time for some routine maintenance for your other financial affairs?  Following are a few ideas for some financial spring cleaning that can help you keep your accounts in tip-top shape all year long.

  1. Check your credit report. It’s a good idea to review your credit report at least once a year, just to make sure it is accurate, up-to-date, and free of anything that looks suspicious. According to the US Consumer Financial Protection Bureau, you’re entitled to a free report each year from each of the three main credit reporting services: Equifax, Experian, and TransUnion. Make it a habit each spring to order your reports and give them a careful examination.
  1. Review your Social Security account. Especially for persons in their 50s or later, it’s important to check your earnings record with the Social Security Administration to make sure you’re getting credit for all your years of work and that your record accurately reflects the income on which you’ve paid Social Security taxes. If you haven’t already, you should also set up your free online MySocialSecurity account (at https://www.ssa.gov/myaccount/). The account will give you access to free tools and calculators you can use to plan your retirement, estimate your benefits, and other helpful activities. Once your account is set up, it’s easy to log in and look around.
  1. Dump your debt. The number-one financial “fix-up” that most Americans need is to get rid of high-interest (mostly credit card) debt. So, as part of your annual spring cleaning, start looking at your debt and forming a plan for paying it off. Whether you use the smallest-balance-first cascading payoff method or go after the highest interest rates first, set up a plan and stick to it until your debt is dealt with. Your future self will thank you.
  1. Boost your savings. Nothing prepares you for a comfortable, satisfying retirement like beefing up the balances in your 401(k), 403(b), IRA, or other qualified retirement plan. Did you know, for example, that a 45-year-old earning $70,000 who increases their retirement plan contributions by just 1% could have an extra $42,000 by full retirement age? And a 35-year-old earning $60,000 who takes the “1% challenge” would have an extra $85,000.* The point is that even small increases, when pursued systematically, can make a big difference over time, especially in your younger years, when you have more time for compounding to work in your favor.

At Empyrion Wealth Management – Mercer Advisors, we specialize in helping investors implement smart strategies for achieving their most important financial goals. To learn more about planning for a secure retirement, click here to see our “Financial Planning Checklist for Retirement.”

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*Approximation based on a 1% increase in contribution rate. Continued employment from current age to retirement age, 67. We assume you are exactly your current age (in whole number of years) and will retire on your birthday at your retirement age. Number of years of savings equals retirement age minus current age. Nominal investment growth rate is assumed to be 5.5%. Hypothetical nominal salary growth rate is assumed to be 4% (2.5% inflation + 1.5% real salary growth rate). All accumulated retirement savings amounts are shown in future (nominal) dollars. This assumes no loans or withdrawals are taken throughout the current age to retirement age.

Your own plan account may earn more or less than this example and income taxes will be due when you withdraw from your account. Investing in this manner does not ensure a profit or guarantee against a loss in declining markets.

Investing involves risk, including the risk of loss.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate, but is not guaranteed or warranted by Mercer Advisors. Content, research, tools, and stock or option symbols are for educational and illustrative purposes only. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.