Mid Year Investment Review

This post is the final part of a mid year review and tune up series. The first post of this series was It’s Christmas time. The second post was on Planning for taxes.

Everyone of us might have started the year with new dreams and goals.  Now that half a year has gone by, there are likely to the changes in your financial position. For example, some of you might have gotten a raise, others may have moved, etc. We usually keep a close eye on our short term goals as they give us instant gratification but ignore our long term goals. So lets review our retirement and/or investment accounts and make sure they are working for us in the way we want them to.

Work your raises

For some of us, mid year is the time of performance review and raises. If you got a raise, consider increasing your 401k by at least half of your raise percentage (if you got a 5% raise, consider increasing your 401k by 2.5%), until you max out. If you are already maxing out your 401k, open a ROTH IRA and start contributing the 2.5% to it. Or divert the amount to your savings. Basically you have already learned to live without the raise, so continue to live like that and put the raise automatically in some sort of savings. If you are already maxing out your 401k make sure to adjust your contribution so that the raise won’t make you over-contribute

Increase you 401k/IRA contributions

Even if this is not the time of the year when you get your raise, it is good to check every 3-6 months and see if you can increase your retirement contribution by 1-2%. If you increase 1-2% every 3 months, the reduction in pay will be very little and you will learn to live without that 1-2%. If every 3 months is difficult, increase your contribution at least every 6 months. Now is the time to check and take action!

Make sure you are getting the maximum match possible

Check your contributions to see if you are contributing enough to get the maximum match from your employer. A lot of us assume we automatically get the money, but that is not the case. If you are not contributing enough to get the max. match, you are leaving free money on the table. Not good.

Check if your plans are what you thought they were: Fees, performance & asset allocation

We pick the plans when we enroll then forget about them. Mutual fund companies usually send out a cryptic statement whenever they make changes. I used to just ignore them. A lot of my funds changed, got new names and new fees. They no longer matched my criteria. This would be a good time to check if the fees are still low and that the performance & asset allocation are still in line with your expectations.

Rebalance

If all your retirement money is in one of those target retirement fund or asset funds, then you might not need rebalancing. But do give it a quick look to see if the asset allocation still matches your retirement goal. If it does, you are all set.

If you do not have your money in a targeted date retirement fund, you have a little more work to do. You will have to manually rebalance your portfolio. There are lot of flavors of rebalancing. Some people rebalance every year, every half year or at some interval (Periodic rebalancing) others adjust their asset allocation if a certain type of asset fall below a threshold (Threshold rebalancing). Whatever your rebalancing strategy is, now is a good time to give your investments a thorough look.

Final thoughts

This post concludes the mid year review series. I have mentioned only the major areas that need attention at this point of the year. Don’t forget to review your other goals and see how you are progressing. Now is a great time to reevaluate goals and priorities to make sure we are still on track!!!