You’ve probably got one or two financial jobs on your to-do list that you were too busy to get to or perceived as boring administrative work. Here are some tasks that a) frequently fall by the wayside and b) don’t take a lot of time to rectify.
Pain point 1: Contributing to an IRA
For higher-income savers with good-quality 401(k) plans, it’s easy to see why putting additional funds into an IRA might not seem like a must-do. But making $7,000 annual contributions for 30 years and earning a 6% return would translate into an additional $550,000 in retirement.
Tips to get it done: To make hitting IRA contributions more doable and palatable from a budgetary standpoint, put them on autopilot, instructing your investment provider to deduct whatever amount you can swing from your checking account on a monthly basis.
Pain point 2: Converting ’backdoor’ contributions to Roth
If the conversion is done shortly after the contribution, the investments won’t likely rack up much gains in the interim, and any taxes on conversion are also apt to be limited. But if too much time elapses and you invested in something that has enjoyed nice gains since you bought it, you’ll owe ordinary income tax on that appreciation when you finally get around to converting.
Tips to get it done: It’s wise to wait at least a few days after the contribution to make a conversion. To make sure you don’t forget, schedule the conversion date on your calendar at the same time you make the contribution.
Pain point 3: Investing health savings account assets
As a long-term savings vehicle, health savings accounts are hard to beat because they offer a trifecta of tax benefits: tax-free contributions, tax-free compounding, and tax-free withdrawals for qualified healthcare expenses.
But inertia is no doubt a stumbling block for some HSA contributors, too, as the process for getting the funds invested can be cumbersome.
Tips to get it done: The name of the game is to invest your HSA in line with how you’re using it. If you’re tapping it for ongoing healthcare expenses and/or you need to maintain a minimum balance in the savings account, it’s wise to maintain a balance in the savings option even as you’re directing additional assets to the investment option.
Pain point 4: Keeping beneficiary designations up to date
Beneficiary designations are one of the most important aspects of an estate plan, in that they typically supersede what’s stated elsewhere in the plan.
Yet as important as they are, beneficiary designations can become outmoded for a few key reasons. First, people change investment providers; while the assets may transfer over successfully, the account owner will likely have to redesignate beneficiaries with the new provider. Second, and most obviously, lives change: People get married and have children, loved ones die, and once-close bonds can fray. All of these life events can affect whom you want to inherit your assets. Finally, estate plans might have implications for beneficiary designations; if you’ve created a trust, for example, the trust might now be the beneficiary of a given asset versus a human being.