Before the busy holiday season kicks in for you and your clients, make time to add even more value as their trusted investment advisor.
Show—don’t just tell—your clients about these three simple actions to take before year-end, which can help them: 1) reduce their tax burden, 2) increase their chances of retiring comfortably, and 3) make sure their investments remain on track.
Over the long haul, these three moves will be their holiday gifts that keep on giving, and they’ll be grateful that you checked in with them.
1. Make an extra contribution to save on taxes
Your clients have until the end of the year to make an additional contribution to their 401(k)s—which will not only boost their account balances, but also help them save on taxes for the year.
In 2017, the maximum 401(k) contribution for individuals is $18,000. You can advise them to add up their contributions to date, and then figure out how close their are to reaching that limit.
If your clients are over 50-years-old, they can make additional catch-up contributions of $6000, for a total of $24,000.
2. Increase contributions for next year
Many people take a “set it and forget it” approach to retirement savings, but it’s smart to revisit the amount deferred to retirement savings at least once a year.
Ask your clients if they received salary raises this year, and inform them that they may wish to raise their 401(k) contribution by the same percentage increase.
If a company offers an automatic escalation feature, advise them on the benefits for signing up, and their contributions will rise every year to get them closer to savings goals.
3. Check on investment performance, fees, and allocations
Advise your clients to review their investment strategies at least once a year to make sure they are on track. You can help them review all the various parts of their investments:
Show them how and where to check on performance of their investments—find out if they are happy with their investment performance relative to averages and/or benchmarks.
You should also ensure that your clients know how much they are in paying investment fees. For example, a large cap stock fund should charge no more than about 1.25% in fees; small cap funds charge a little more, averaging 1.4%.* And fees on ETFs or exchange traded funds can be even lower, around 0.53% on average.**
Help them make sure their funds aren’t eating up their returns with unnecessarily high expenses.
You can also help your clients review their portfolios against their target asset allocations.
The stock market has done well this year, and they may have more than they expected in their stock funds. If so, help them to transfer some of the money into other asset classes to diversify and rebalance back to their target.
Helping your clients with their year-end check-up should be part of your regular annual service. Most importantly, doing so will help keep your clients’ retirement savings plans on track.
That’s one way to increase the chances that they (and you) will enjoy financially secure holidays for many years to come.
*Thuna, K. (2017, February 14). Average Expense Ratios for Mutual Funds. Retrieved from https://www.thebalance.com/average-expense-ratios-for-mutual-funds-2466612
**Why Are ETFs So Cheap? Retrieved from http://www.etf.com/etf-education-center/21012-why-are-etfs-so-cheap.html?nopaging=1