Your Annual Review Checklist

by Cathy S. Butler, Morgan Stanley

Preparing for an annual financial review may be easier with a checklist to help you focus on important matters. With that in mind, here is a list of key considerations that you may want to discuss with your financial advisor.

  • Do I need to rebalance my asset allocation? Depending on the performance of your investments, you may want to examine whether your mix of stocks, bonds, cash and other assets is close to your target. If you have not reviewed your portfolio lately, you may be surprised at what you find. It's possible that your current asset allocation has changed quite a bit since the last time you checked, due to the different performance of the various investments in your portfolio. If that's the case, or if your outlook has changed, it may be time to readjust.

    Rebalancing can be accomplished in two ways: You can sell existing assets and use the proceeds to bring your portfolio closer to your desired mix, or you can leave your portfolio as is and allocate new investments to the areas you want to increase. Rebalancing may involve tax consequences, especially for non-tax-deferred accounts.
  • Am I on track to fund my retirement? Making sure you are on track to amass the assets you will need for your later years should be one of your key concerns. If you participate in an employer-sponsored retirement plan, consider investing as much as you can afford. If you do not have access to an employer-sponsored plan, or if you do and can afford to contribute even more, consider funding an individual retirement account (IRA).
  • What were my yearly capital gains and losses? If your year-end planning entails selling certain assets, be aware of rules regarding capital gains and losses. Gains on investments held less than one year—known as short-term capital gains—are taxed as ordinary income, while those on investments held for one year or longer, or long-term capital gains, are taxed at a maximum rate of 20 percent, for federal income tax purposes. State tax rules may differ. On the federal level, capital losses offset capital gains and are netted against each other. If net capital losses still remain, up to $3,000 may be used to offset ordinary income. Capital losses not used in a given year can be carried forward to future years. Note that different rules apply for gains on the sale of collectibles or qualified small-business stock.
  • Am I taking full advantage of tax-advantaged accounts? Remember that certain types of investments receive favorable tax treatment. Employee contributions to a traditional 401(k), for example, are deducted from your paycheck before taxes are assessed, which lessens taxable income during the year the contribution is made. Contributions may potentially grow free of federal income taxes until qualified withdrawals are made during retirement. If you are age 59½ or older and have maintained the account for a minimum of five years, qualified withdrawals from a Roth IRA are tax-free. (To contribute to a Roth IRA, investors must meet income thresholds established by the Internal Revenue Service. Learn more at
  • Is my insurance coverage sufficient? You may want to conduct an insurance needs analysis. There are many forms of insurance, but unfortunately, there is no one-size-fits-all policy. Life insurance, for example, may be a vital necessity if you have a spouse and children, but perhaps is less important for a single person. But disability insurance, which provides an income stream if you are unable to work, may be important for everyone.
  • Is my estate plan current? If you have not already made an estate plan, your annual review may be a good time to start. Even if you already have a plan in place, it is good to revisit it yearly to make sure your beneficiary designations are up to date and that your plan still reflects your current wishes. This is also a good time to consider tax-efficient gifting strategies, so you can potentially minimize gift and estate taxes and keep more of your assets for those you care about.

You may have additional concerns unique to your situation, but this checklist may help you keep your investment portfolio in order. iBi

Cathy S. Butler, CFP, CRPC is a financial advisor with the Butler/Luthy Group of Morgan Stanley. For more information, visit