Cents & Sensibility — Year-end actions

Beth Peabody

This month’s advice continues the theme of November’s column to assist with improving financial security before year-end. Listed below are a few more actions items to consider during December.

  1. The volatility in financial markets this year has been extreme, with most stock markets posting losses for 2022. In addition, bond investors have been disappointed with poor returns. Use these declines as an opportunity to review the asset allocations of your investments and make adjustments if you are not on track with target allocation goals.
  2. Now that interest rates have moved significantly higher, review balances held in bank accounts. If the interest rate paid on these balances is still minimal, consider moving these monies to a brokerage account and using the custodian’s money market fund. Yields on money market funds have increased significantly since the beginning of the year and may now be approaching 3.5%.
  3. The move to higher interest rates has also impacted lines of credit, credit card rates and interest charged on home equity loans. Check with your providers to determine the current rate and consider paying down the balance as a more effective use of your monies.
  4. With Christmas Day approaching, many may be searching for that “perfect gift” for younger loved ones. As advised last year, what if your gift could have a more lasting impact than a toy that may be discarded after a few weeks? Why not consider establishing or adding money to a 529 savings plan?

These savings plans work very much like a Roth 401(k) or Roth IRA. After-tax contributions grow tax-deferred and can be withdrawn tax-free if the money is used to pay qualified education expenses. The balance can be invested in a broad array of mutual and collective funds offered by various state plans.

Nearly every state offers Section 529 plans to their residents, but you are not limited to using your home state’s plan. Accounts are easy to establish on-line and there is great flexibility in how you can make deposits. Contributions may be made in a lump sum, deducted from your bank account on a pre-determined basis or you can mail a check.

For more information and specific resources regarding 529 savings plans, please review the December 2021 column at https://therecordnewspaper.org/cents-sensibility-the-gift-of-a-529-savings-plan/.

  1. And finally, use the holiday day season as an opportunity to discuss with family and friends specific goals for improving financial security in 2023.

 

Beth Stegner Peabody, CEO of Stegner Investment Associates, is a graduate of St. Agnes School and Sacred Heart Academy.

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