Why It's Critical to Do A Midyear Financial Checkup in 2025

Just as you might schedule regular health checkups, your financial plan deserves the same attention. This year's midyear checkup is particularly important given the evolving economic landscape, potential changes to tax laws, and continued market volatility. 

In this episode, Leisl L. Langevin, CFP® CDFA® breaks down how to do your own midyear financial checkup, and what to be particularly aware of for 2025.

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Transcript

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Welcome to You & Your Money. Today's episode features Leisl Langevin, Managing Partner, Advisory at WHZ Strategic Wealth Advisors. What should listeners be paying attention to in this year in terms of a mid year financial checkup? Right, exactly. I mean you summarize it pretty well. We've got quite a bit going on out there. Again the Big Beautiful bill that's going through Congress and that has tax cuts and jobs act provisions that are set to expire. So it would expand some of those provisions. We have the jobs report that will be coming out again, probably showing somewhat of a slowdown and but that could indicate kind of where we might head with the Federal Policy Reserve and any adjustments that they'll be making. So we've also got continued geopolitical uncertainty. So it's a lot to navigate, but it does have us take a second to pause and just see where we are and where we go from here. Let's start with something that might seem intimidating to a lot of the listeners. Portfolio rebalancing. Can you explain what that is and why it matters? Sure. I'll relate it to something that we all might be able to relate to a little bit easier, which is think of like your car tires and they become unbalanced. And so you know, the treads on one tire maybe. And I keep my money in my tires by the way. Oh yeah, there you go. Perfect. But you might take it to the garage to get your tires rebalanced. And that's sort of the same idea is that with portfolio rebalancing you're adjusting your investments back to your original asset, asset allocation or investment mix. So if you set out with a 60% stock portfolio and a 40% bond portfolio. And as I mentioned, both of those are up on a year to date basis. Stocks up a little bit more. So you might have a little more stocks, like 65% stocks, 35% bonds. So if you take a look at that and rebalance, you'll get back to your original target. And then you're within that same risk tolerance that you set out to be in. Just making sure that you're keeping that in check is really important. So you're actually selling the investments that are doing well. That seems counterintuitive. Yeah, and it's the, I mean, the whole sell high and buy low. And it's sort of that same idea as selling investments that have done well on a year to date basis and then buying some that haven't either done as well or are negative. So it's sort of balancing it between the two. So how often should people be doing this rebalancing? Yeah, it really depends. But generally, I mean, we take a look at it on a quarterly basis, but typically we're doing it one to two times a year with the portfolios that we manage at whz. Again, it really depends on the drift. I had mentioned you have a 6040 portfolio, and maybe it's gone to 65 stock, 35% bond. If you're within those targets, you might consider rebalancing back and adjusting. Do you get people that don't rebalance, but yet in the big picture they ended up doing okay? That would mean that the more risky stocks have done well. And if they're okay with that, we might adjust them to a higher portfolio anyway. So where they're instead of 60, 40, they might be in a 70% stock, 30% bond. So we might switch them and say, hey, if you're okay with taking on this additional risk, why don't we move to that next risk level? Lysel speaking of targets, how does somebody know what their optimal asset allocation should be? I imagine it's not one size fits all. No, that's exactly right. We work with our clients and we have them take what's called a risk tolerance questionnaire. And that's actually a set of 10 or so questions that ask you some things that are sort of outside of investing. It might say something like, if you inherited some money, would you invest in this really risky business? Or would you buy CDs with it? So it sort of gives us a sense for what you're thinking and how you'd be able to Take that risk. It's called the sleep factor. We want to make sure you can sleep at night. And typically we'll say, hey, okay, this is where you tested on that risk tolerance questionnaire. But if Your portfolio dropped 10% in a particular year, how would you feel about that? We can gauge how they feel about it and then gauge their portfolio. Its a really good reality check. What other factors matter in this time horizon is crucial. If you need access to money that you're trying to invest in the next year or so, probably not the best thing. If you had invested in January of this year and you needed that money in April, well, guess what? That first week of April, that's when markets shot down you know, 10, 15%, depending on where you were in the market. So you could have, if you started with 10,000, you might only have 8,500. And so it really depends on what your goals are. But we always say if it's beyond three years and five years would be ideal, then you might consider investing versus keeping something in more conservative or CD type investments. Liza Lif, the market is pretty much even, but yet my portfolio drops 10%. Is that something that WHZ advisors take a look at and see and notify me, the customer, that something has to change in that portfolio? Yeah, we do that. Typically on a quarterly basis, we'll make adjustments. But in any given year, we have a perfect chart that shows over the last 35 years historically, in the S&P 500 of those 35 years, 30 of them have experienced 10% intra year declines, and then they ended the year positive. So it's not out of the ordinary to have a decline in any given year. You mentioned strategic versus tactical allocation. What's the difference? Yeah, so with a strategic allocation, that's really determining. Okay. Based on your fundamental circumstances and factors that we discussed. So risk tolerance and how much risk do you have to take on make sure that you can achieve your goals? That's something that we set in the beginning. So we say, okay, the strategic allocation would be that 60% bond or 60% stock, 40% bond investment mix. But the tactical allocation, exactly what you were just mentioning. If I have stocks or things that are down in my portfolio, would you make a change there? And we might, based on what the economic fundamentals are telling us. And it's possible that there might be a stock in there that's overvalued, so we might readjust that. That makes sense. Now, life doesn't stand still while we're investing, how should people think about adjusting their financial goals when their circumstances change? Yeah, well, that's really important. I mean, people. They might overlook that. And honestly, your financial plan really evolves with your life. I mean, throughout your life, things will change. There's marriages, there's, unfortunately, divorces, there's deaths. Babies are born. So there's all these things that happen throughout your life. And so as you sort of gain what's most important to you and your goals that's when. We can help to create that plan and it adjusts over time. It's not something that we set and you let it go. Lasley, you talked about life changes. What kind of life changes should trigger a financial plan review? Well the mid year is really a perfect chance to really stop and say, okay, have there been any significant changes, especially with family, career developments, Maybe you got a promotion you changed companies, started your own business. Anything like that one is health can be another factor that you would consider and it might change your situation. So it's those bigger things that could have your path going down a different road. Do you discuss long care, long term health insurance with your clients? We do, yeah. It's more of a greater discussion around what is your long term care plan. If you, God forbid, needed some kind of care at home, who would take care of you? Would you want to pay for that care? So that's a whole nother radio show. But yeah, that is a discussion that we have. Come back and do that one down the road. But if you do come up with some kind of a financial calamity because of your health, that's where your long term investments might come into play. That's exactly right. And we do plan for that in financial plans. And we say, well, if there was a health event and sometimes people are really concerned about it and other times it's something that they have in the back of their mind, oh yeah, I'll deal with that when it comes. But we really try to have them think about what the plan would be. How do you keep helping clients prioritize when there are competing financial goals? Yeah that's a really great one I think. I mean the main one that we plan for with clients is retirement, of course, and then it's working your way back from there. What sorts of goals do you have? And it really should reflect your current priorities. And so I mean, things change. I mean I had clients come in and they had a parent pass away, so they inherited some money. So now they're thinking about changing some of what they're doing and getting into real estate versus their day job. So those things do happen. And it's saying, okay, how does that impact your financial plan and can you do that? Let's talk about everybody's favorite topic, tax planning. And I know this is especially important this year with potential changes to the Tax Cuts and Jobs Act. That's exactly right. And again, those changes are looming. I will say though, in the big beautiful tax Bill I mentioned a couple of times so far, the tax cuts would remain that had been originally in the Tax Cuts and Jobs Act. So largely, I'll say there would be some, some changes to Medicaid. Also there's some changes to Social Security. If you're receiving Social Security, likely a $6,000 deduction. I know people have talked about the salt state and local tax deduction that would increase pretty significantly from 10 to 40,000. So there's these provisions that could have a on your situation. So we just want to make sure that when it comes to taxes that we are considering those. But also what can we control? Things like tax loss, harvesting in your portfolio and making sure that we're offsetting gains if we've taken those on a year to date basis by selling losses. What about charitable giving? That can have tax benefits, can it? It can, yeah. And again, I mean this is another one with the standard deduction being so high. Instead of giving, for example, we might, we call it bundling where you're giving instead of 5,000 on a scheduled basis for the next five years, you might give 25,000 and bundle it into one year and that would get your standard deduction or you'd be able to itemize in that case. So it's thinking of things like that and also using appreciated secur for charitable giving. That can also be very tax efficient. So there's lots of different tax strategies. We're having a mid year financial checkup with Essential Steps for 2025 with Liza Langevin from WHZ Strategic Wealth Advisors. Let's talk about retirement accounts. Are there specific moves people should consider? Yeah, and I mean with the uncertainty of tax rates, we've talked with a lot of clients about converting Roth IRAs to or converting to a Roth IRA. And again this really depends on the situation in life that you're in. Typically you're not doing that while you're working. Might be something that you do after the fact but just again taking advantage of lower tax rates when they're here and what we know they will be and we don't know what the future will hold, but taking advantage of that. Can you give a retirement 101 summary of the difference between a regular IRA and a Roth IRA? Who would use a Roth and who. Would use a regular Yeah so a regular or a traditional ira, that's an IRA that you can save on a pre tax basis. So if you make 50,000 a year and right now the current amount you can contribute to a traditional is 7000. If you're over 50, it can be another 1000. But if you make 50,000 a year and you contribute to a traditional IRA, it reduces your income. Let's say you made a$7000 contribution. Now you're only taxed on$43,000 for the year, whereas a Roth IRA, you're making that after. So if you make 50,000, you make a $7000 contribution, you're still taxed at 50,000. Now when you go to retire, you can pull that traditional IRA money out since it's put in pre tax. Now you're taxed on it in retirement, whereas the Roth you're putting in after tax, so you're not taxed later in retirement. And so those with lower incomes probably saving in Roth IRAs versus those with higher incomes are probably saving with a traditional. So would you have people that when they're 40 might use a Roth and when they're 60, they might use a traditional or vice versa? Yeah, exactly. And I mean, typically as you move throughout your career, you have your higher earning years later, so you would be more likely to save on a pre tax basis to try to reduce your income as much as possible. For somebody listening who has not done any of this stuff, where should they start? Yeah, well, it's gathering all of your statements, figuring out what your goals and priorities are. And then have there been any major life changes that have occurred this year? And of course, I mean, this might have some people feeling overwhelmed. And that's why working with somebody like our team could help you make you feel a little bit better, build a financial plan for you. But we would, we go through the whole plan well, invest well, live well, process and that again, a regular review of your financial plan, regular review of your investments, and then that hopefully has you living well. Sam For more information regarding wealth management and customized financial planning with WHZ Strategic Wealth Advisors, please visit whzwealth.com. WHZ Strategic Wealth Advisors offer securities and advisory services through Commonwealth Financial Network Member FINRA sipc, a registered investment advisor Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret Street Pomfret Center Center, Sa CT 06259 and 392-A Merrow Road, Tolland, CT 06084. They can be reached at 860-928-2341. WHZ Strategic Wealth Advisors do not provide legal or tax advice. The tenured financial services team strives to support clients in achieving their financial life goals while providing Absolute Confidence and Unwavering Partnership, For Life.