Your 2021 Financial Checklist: 4 Questions to Ask Your Advisor

In 2020, we learned the importance of being prepared for anything. As you meet with your advisor to review your progress toward your financial goals, these four questions can help you identify areas of your financial life that may need more attention, and others that could benefit from adjustments to reflect changing economic and market conditions, as well as emerging opportunities.

Should I consider adjusting my portfolio in 2021?

The market saw dramatic spikes and drops last year, and some level of volatility is likely to continue in 2021, says Marci McGregor, a senior investment strategist with the Chief Investment Office for Merrill and Bank of America Private Bank. She suggests doing a gut check with your advisor to make sure your asset allocation still lines up with your circumstances and risk tolerance. If your strategy does not change, you will still want to check that your stock and bond mix remains on target.

With long-term interest rates likely to rise in 2021 and bond returns potentially under pressure as the level of income remains below average, “We expect long-term investors to raise their equity allocations to increase potential portfolio return,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, adding that investors should also look for tax efficiencies in light of potential changes in tax law.

Can I still have the retirement I want?

If you are unsure whether the financial effects of the coronavirus have had an impact on your retirement plans, work with your advisor to estimate your expected expenses and compare them with your assumptions about how much retirement income you will be able to draw upon, says David Koh, managing director and senior investment strategist with the Chief Investment Office for Merrill and Bank of America Private Bank. If your expected income does not match your estimated expenses, you should find ways to boost your savings. Try to increase your 401(k) contributions enough to take advantage of any company match and consider making “catch-up” contributions to your 401(k) and IRA if you are 50 or older.

If you are already retired, take the time to evaluate income streams from your retirement strategies and solutions, along with your investment portfolio and real asset holdings. “Look at how they have weathered recent market volatility, as well as how they are positioned going forward,” Koh says.

You may also want to reprioritize or make some tradeoffs, potentially looking for ways to reduce spending or delay certain goals, both of which your advisor can help with.

What are my options for managing rising health care costs?

Tax-advantaged savings accounts such as flexible spending accounts (FSAs) and health savings accounts (HSAs) are options worth exploring, says Koh. Both are offered by employers and funded with pretax contributions. They are not taxed on withdrawal and can be used for a wide range of medical costs. To open an HSA, you need to enroll in a qualifying high-deductible health plan (HDHP). An HSA permits you to roll over unused funds into future years or another HSA. Self-employed workers can also open one. Post-retirement, your HSA can be used to pay for Medicare and long-term care insurance premiums or other eligible expenses.(1)

How can I be better prepared financially for emergencies?

Check your level of preparedness for future financial shocks — or unexpected personal expenses — with your advisor. “Your advisor can review with you how much liquidity there is in your portfolio and suggest strategies to help you fund future needs without potentially jeopardizing your investment assets,” says Koh. You might also want to make sure you have an updated will and documents that state who would be in charge of your finances if you become ill or incapacitated.

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For more information, contact Merrill First Vice President, Senior Financial Advisor Percy D. McGee, Jr. in the Oakland, CA, office at
510.208.3805
or [email protected]

 

 

 

 

 

 

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