Have you ever thought “I would like to pay more in taxes”? You can still reduce your 2021 taxes by topping off your retirement account for 2021! The maximum contribution is $19,500 for a 401(k) or 403(b). The deadline is December 31st.
Portfolio Review and Retirement
Also, during this time of year, it’s good to review the asset allocation of your retirement plan. The stock market has been great in 2021, which can result in portfolios moving away from their target allocation. For example, if your target asset allocation is 80% equity and 20% bonds, there’s a good chance that your equity allocation is higher than 80% due to a strong stock market in 2021. It’s best to rebalance your portfolio back to the planned 80/20 plan.
If you don’t, you might have more stock exposure than you will be comfortable with the next time the market goes down. More specifically, if markets go the wrong direction in 2022, you will lose more due to a higher than necessary equity allocation. Further, and more importantly, your asset allocation in your retirement plan should complement the rest of your investment portfolio. This means that the target asset allocation should be 80% equity and 20% across your entire investment portfolio (all of your investment accounts). This will take some time to analyze and rebalance all the accounts, but it will be worth it in the long run.
Additionally, review your beneficiary(s). Are they still consistent with your wishes? Have you named contingent beneficiaries, just in case something happens to the primary beneficiaries? This can be done in a few minutes by updating your information.
You should also look at the expense ratio of the funds in your retirement plan. For example, many target date funds charge a higher expense ratio than simply holding a diversified portfolio of stocks and bonds. I can help you review this.