5 Retirement Planning Tasks for a Better 2021

By Jason Newcomer

December 18, 2020

5 Retirement Planning Tasks for a Better 2021

In a few more days, fireworks will go off around the world, and the Times Square Ball will drop in New York City as we ring in the new year. Many people will be relieved to have 2020 in the rearview mirror. While there have certainly been bright spots this year, we have all been impacted by unfavorable events outside our control. We can hope that there are brighter days ahead, but there are some retirement planning items within our control to set ourselves up for a better 2021. So, with that, let’s take a look at five retirement planning tasks you can do for a better 2021. 

1. Increase Your 401(k) Contributions

If you enroll in your company’s retirement plan, you’ve already taken a big step towards having a more secure retirement. According to a recent Morningstar report, about 56% of all workers participate in a workplace retirement plan. 

For 2021, the contribution limit for employees in a 401(k) plan is $19,500. If you’re a worker over the age of 50, you’re allowed an additional $6,500 in savings (called a catch-up contribution), potentially bringing your annual contribution limit to $26,000. Vanguard recently released data on how Americans save for retirement and found that of its customers, “only 13% of participants saved the statutory maximum…”

Even if you cannot save the maximum allowable amount in your 401(k) plan, a good habit is to increase your contributions over time. Some plans have an automatic contribution escalation feature, meaning every January, they will automatically deduct an incremental percentage from your paycheck and save it to your 401(k) account. Even if your plan does not offer this feature, you can manually adjust your savings at the start of each year.

An additional savings of 1% of your paycheck may not seem like it would make a big difference, but the more time you have until you retire, the more significant the impact will be. Chances are you probably will not notice the reduction in your take-home pay very much, if at all. We previously wrote about the impact an annual savings adjustment could make on your retirement nest egg.

5 Retirement Planning Tasks for a Better 2021
on America’s Wealth Management Show

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5 Retirement Planning Tasks for a Better 2021

Links Mentioned in this Episode

Complimentary Consultation Finding the Good Things in 2020 The Power of the Consumer 401(k) Survival Guide

Dean Barber: Thanks so much for joining us on America’s Wealth Management Show. I’m your host Dean Barber, along with Bud Kasper. Bud, happy new year to you.

Bud Kasper: Well, same to you, Dean. I’m looking forward to this year. I hope it’s going to be better for everybody than it was last year.

Dean Barber: We did that show in mid-December on the bright spots of 2020. Anybody that didn’t get an opportunity to listen to that. I mean, Bud, I think that the old saying that hindsight’s 2020 and we want to leave it in the rearview mirror, we want to leave 2020 in the rearview mirror. However, I don’t want to forget some of the really positive things that came out of 2020.

I encourage our listeners to get to an article out there written by my brother Shane. He’s one of the partners, and he wrote an article on finding the good things in 2020. A lot of great stuff out there, but that’s a good one.

Shaping a Better 2021

What we’re talking about today is five retirement planning tasks for a better 2021. This time of year is always a good time. Here we are on January 2nd; hopefully, everybody’s heads cleared from the crazy times they had on New Year’s Eve. And they’ve come to the realization here that it’s 2021 now. What does that mean? Where do we go now? What are we going to do? And how are we going to shape our lives, shape our futures, and especially our financial lives for a better 2021? 

“Budget” Isn’t a Dirty Word

Bud, something that you and I may see as obvious, but most people don’t, which is surprising, and that is to sit down and create a budget. If you have a budget already, which is very rare, review that budget and make sure that you’ve got enough money to go into savings. Or, be sure the savings is going into the right areas, and your expenses aren’t exceeding your income. Be sure that you’ve got your cash reserves and everything’s in line. But bottom line, the creation of that budget is so critical.

Bud, how many times do you and I sit down with people that are, say five, seven, eight years out from retirement, and they’re saying, “Okay, I’m ready to get serious now. I want to make sure that when the day comes, I’ve got everything perfect.” And we say, “Great. Let’s take a look at your budget.” And we get that deer in the headlights look. They look at each other, and they’re like, “Well, we don’t have a budget.” And what do you say, Bud?

So Few People Have a Good Budget in Retirement

Bud Kasper: Yeah, and they never had a budget, and they’re so surprised with that. If I had to put a number on it, I’d say 10% of the people that we do plans for ever had a budget before they came to us. But the importance of the budget from a financial planning perspective is that it allows us to truly understand where the spending need is. Then, matching up where the savings is and everything else so we know that this is a budget we could live with and build on that into the future.

Keeping the Lifestyle

Dean Barber: Right. And so one of the things people might say, we hear this often, “Well, I would like whenever I retire for my lifestyle to stay the same as it is now.” Okay, great. What does that lifestyle consist of, and what does it cost? That’s where the budget comes in. And you even have to budget out as far as how often are you going to do vehicle replacements?

How often do you need to plan for home improvements and regular home repairs? You need to budget for increased property taxes over time. You need to budget for the possibility of increased taxes. All of these things need to be in your budget, and that budget should be a living, breathing part of your financial plan. As you near or begin retirement, areas that lack clarity more than any others are how much am I allowed to spend and not ever have to worry about whether or not I’m going to run out.

Difference Between Working Years and Retirement Years

Dean Barber: When we’re working, we have that clarity because we know we to go to work, we get our paycheck, our taxes are withheld, our 401(k) deposits are made, and whatever goes into my checking account if I don’t spend it all then I shift some over to savings. Okay, we’re good. But in retirement, we have to go into reverse. We have to look at the budget first, then we look at the resources and determine where we go to first, second, third, and so on from those resources to solve for that spending need, Bud.

Bud Kasper: Yeah, that’s exactly right. I mean, most people, when you say budgets, they think of spending, but you need to be thinking of budget in savings because the savings, of course, is what’s going to finally get you to the finish line when it’s time to retire.

When you calculate the savings or what the need is at the end of the plan or, let’s say, I like to refer to it as the beginning. You’re now retired. So, how much money did I have on the day that I retired? Well, we should know what we have to do every year to reach that goal.

Speaking of Savings…Heard About Those 401(k)s?

Dean Barber: Exactly right. And speaking of savings, Bud, one of the number one things on our Five Retirement Planning Tasks for a Better 2021 besides the budgeting, is checking out that 401(k) plan. If you’re still employed, let’s look at the contributions of that 401(k) plan and make sure that we’re maximizing the match that our companies are making.

Let’s make sure that we’re putting into the right part of your 401(k). Should I contribute to the Roth portion of my 401(k), or should I contribute the traditional part of my 401(k)? And what are the rules in that 401(k) as far as how often can I rebalance? And that’s going to be a topic here later on in the show; what are the rules for how I get the money out once I retire?

We think that early in the year, every year is a great time to take a look at that 401(k). It’s one of those things where people get their statements, they open it up and take a look, and then they toss it in a drawer, toss it in a file, or maybe they check their online balance every once in a while, but they don’t give it the attention that needs.

Look into Roth 401(k)s

Bud Kasper: You’re exactly right, Dean. What I want people to be able to do if you haven’t looked at a Roth 401(k), or maybe your company doesn’t offer you that. Still, if they do, by golly, you should start looking at putting some of your savings that you typically put in your traditional IRA into the Roth or maybe all of it. There are advantages we know will make a significant difference when it comes to the overall financial plan when they’re retired.

Dean Barber: Exactly right. And here’s one thing that everybody should be considering right now, start 2021 out the right way. Schedule a complimentary consultation from one of our advisors by clicking here. Let’s sit down and talk about your overall priorities, your plans, look at the resources. This can be done through the telephone, a virtual meeting, or we can do it face-to-face. 

Start the New Year Off Right

Dean Barber: Okay, Bud, Let’s start the New Year right. I have a great idea on how everybody can start the year off right this 2021. It’s a time where we reflect on what we did in 2020. Some of us say, “Gosh, let’s just forget about 2020 altogether.” Trying times for sure. But a lot of good lessons learned in 2020. And there were a lot of good things that came out of 2020

While you’re out there if you truly want to start the new year off right, visit with a CFP® about your situation. Let’s make sure that 2021 gets off on the right track for you. That complimentary consultation obviously could be done through telephone, virtual meetings, or face to face. Just click here to schedule your consultation.

So, we’re talking today about five retirement planning tasks for a better 2021. And we talked earlier in the show about creating a budget. If you have a budget already, which is very few of you, monitoring that budget, updating that budget, forecasting for 2021 and beyond.

We also talked about looking at that 401(k) plan and making sure that you’re taking advantage of the company match, understanding whether you should be making a Roth contribution, whether you should be making a traditional contribution. What are the rules when you get the money out of that 401(k) plan?

401(k)s and 2021 Tax Planning

Dean Barber: I want to stay on the 401(k) theme from a tax perspective. And I want to say to people that January should be the time when you’re putting your finishing touches on your 2021 tax plan. The 2021 tax plan should have begun in 2020, and January is when you put the finishing touches on that 2021 tax plan. Your tax planning has to be done in advance.

This isn’t about gathering your documents and preparing to file your 2020 tax return. This is about trying to do things now, affecting how much or how little tax you pay in 2021, 2022, and onward. Remember, as long as we live in the United States, as long as we have money or make money, taxes will be a fact of our life.

Talk to a CPA About Tax Planning Sooner Rather than Later

Dean Barber: So early in the year, this is the CPA’s least busy time of year. January is when your CPA has the most time to visit with you to strategize about what you should be doing for required minimum distributions; whether you should be considering QCDs, whether you should be considering Roth conversions, the list goes on and on and on. 

That’s one of the things that you can do in that Complimentary Consultation. For goodness sake, let’s make sure that 2021 is the best year ever when it comes to tax planning.

Retirement Savings Time Bomb

Bud Kasper: Yeah. That’s a great thing to understand and move forward on. It reminds me, Dean, a very good friend of ours that we’ve been learning from for, I guess, 13 years; Ed Slott. He wrote a book titled The Retirement Savings Time Bomb. And that book was probably ten years ago, I would guess, maybe more.

Dean Barber: I think closer to 15, Bud.

Bud Kasper: Yeah, but it’s timely. I mean, it’s an issue that people absolutely have to get their arms around because what he’s talking about here is we have all this tax-deferred money in 401(k)s, IRAs, 457s, all the different types of savings vehicles that companies and government agencies have. Yet, while we’re saving as hard as we can and investing as smart as we can, one of the issues that we aren’t thinking about is getting the money out as smart as we should. And that comes in from understanding that you do have a time bomb in your 401(k), in your IRA. We’d like to be able to diffuse that for you.

Dean Barber: Right. That’s the second part of the title of that book, Bud. It’s The Retirement Savings Time Bomb and How To Diffuse It. Ed Slott talks about in that book that you need to work with somebody who is an expert when it comes to retirement plans, IRAs, 401(k)s, et cetera. And as Bud said, he and I have spent the better part of about a decade and a half; I think ’07, Bud? It was either ’06 or ’07 when Ed Slott started his Elite IRA Advisor Group. And, of course, I’ve been on his advisory board for about ten years now.

The Rules Can Get You

There is so much information and so many different rules. And the great thing about the rules is there are rules there that are to your advantage if you understand the rules, but they can also be a huge “Gotcha!” if you don’t understand the rules. And that’s why I say that early in the year is the time to think about your financial plan’s tax portion.

Yeah, okay, we’re going to talk about some rebalancing stuff here in a little bit. We’re going to talk about some ways that you should be looking at your investments, making sure that you’re doing all the other right things. Still, the tax piece is one of the elements where I think people have a better ability to control the outcome of their financial plan. If you can control your taxes, if you can minimize the taxes and keep that money for yourself, that’s a huge win.

Residual Benefits of Tax Planning

Bud Kasper: Yeah. You get residual benefits out of that as well, Dean, because if you’ve got a 401(k), now let’s say you’re retired, it’s over in an IRA account, and you’re taking distributions, which are going to be 100%, every dollar that comes out of that is going to be taxed. But as that income comes out, it’s now impacting your Social Security, and it has to pay more tax on that. You see how one entity begets the other regarding the tax liability you would have in retirement.

When we have the opportunity to control that, either, as you mentioned, Dean, using the 401(k) Roth option, as opposed to the traditional option. Now, if you don’t have that option with your company, talk to your human resource people to ask them why you don’t. Because when you think of it, folks, we got very excited when 401(k)s were first introduced because you now could put money into a 401(k) and not have it taxed before it goes in, pre-tax contributions going in. But the-Go ahead.

401(k) Survival Guide

Dean Barber: I was going to say, Bud, you’re right. And one of the resources that we have for all our listeners is something we put together called the 401(k) Survival Guide.

Bud Kasper: Exactly.

Dean Barber: We’d love to have you get a chance to review that 401(k) Survival Guide. There are so many things there, Bud. And speaking of the 401(k), let’s get to the idea here of rebalancing that 401(k). If you started 2020 with 60% in equities and 40% in fixed income, you don’t have 60% in equities and 40% in fixed income anymore. You’re out of balance. You probably have a seven to 8% variance of too much money in equities now, if indeed that 60/40 portfolio is what you want.

Rebalancing Your 401(k)

Going and rebalancing that, taking some of those winnings from 2020 off the table, and getting them into the security and safety of the fixed income pieces of your portfolio may be precisely what you need to do. Thinking about rebalancing that 401(k) plan, Bud, I think is critical this time of year.

Bud Kasper: Well, not only, it readjusts your risk as well. So, that’s the necessity of understanding where that isn’t. If you go back even to 2019, 2020, you’d probably have some pretty darn good gains if you were investing right. And yeah, this is the time to be able to readjust that.

Now is the Time to Look at Your 401(k) and Tax Situation

Dean Barber: Well, let’s go back and look at any of the positions you hold outside of that 401(k) plan. Look at the gains that are in there. Look at whether or not you’ve got some long-term capital gains that you can realize. Maybe they’re offsetting some capital losses from back in 2018. Now is the time to look at your 401(k) and your tax situation. There are all kinds of things you need to be doing to impact your 2021 positively.

It’s easy to get a headstart by scheduling a complimentary consultation by clicking here.

Contemplating the Future

(Piano Music Playing)

Dean Barber: Bud, this music makes you want to sit back, have a little cocktail, and contemplate the future. What do you think? 

Bud Kasper: Yeah, a little tickle of those ivories makes you a little thirsty, does it? One of the things about being in a new year, it does make you feel re-energized. You think, “oh boy, now I get to start this year off on the right path and reflect a little bit on what 2020,” the good as well as the bad, of course. But this is a great time to recharge our batteries and go forward.

Dean Barber: Well, you think about this as a time to reset and think about the future. And that’s why we’re discussing five retirement planning tasks for a better 2021.

Reflecting on the Past and the Future

But when we talk about resetting, I think we have to reflect on the past to reset. I did something really interesting with my employees towards the end of 2020. And I sat down, thanked them for all the hard work coming through all of the issues with COVID-19, the remote work, and everything else. I just said, “I want you to think about what went right in 2020. What could we have done better in 2020? If you could go back and do something different, what would it be?”

How Does Your Money Connect with Your Life?

That’s my reflection, Bud. I think for us personally, from an emotional level, that reflection has to get a little deeper. Because to us, we talk about financial planning, talk about money, and talk about taxes. And yeah, that’s all cool, and it’s essential. But the reality is it’s about life. And our process and our Guided Retirement System™ is all about connecting money to your life in a significant way. To do that, we have to understand what you want.

Sometimes people are moving so fast, caught up in all of the things going on around them, whether it’s battling the issues with COVID, whether it’s employment situations, or working from home. We get so caught up in the day-to-day that we forget to step back and think about, you know what? I have one day at a time. Every day, there’s one less day that I have. Let’s live each day with the greatest amount of pleasure and reward possible. What does that look like for you? 

If we can understand that, we can take you through our Guided Retirement System™ and realize what’s truly important in your life. Then we look at money as a tool to allow you to do the important things to you. That’s where the art of financial planning comes in. And it changes the way people think about their daily lives, Bud.

A Letter from a Listener 

Bud Kasper: Absolutely. One of the best gifts I got for Christmas came from a client, happens to be a widow who listens to the show almost religiously. And she wrote me a note and said, “I’ve been trying to learn more and more about this. Once again, the show you and Dean did, which was about three weeks ago, absolutely was perfect. And I learned so much from it. And I appreciate what you guys are trying to do for all of our listeners.”

Dean Barber: That’s great. And so she is a client, yet she’s still listening. We’re always learning. There’s so much to know. And you can read a book on financial planning. You can go to a website on financial planning. But if you want to get serious about taking control of your financial life. The keyword there is “your” financial life. It’s all about you. Every conversation with a financial planner, it’s all about you. And that Guided Retirement System™ makes such a difference.

Start 2021 Off on the Right Foot 

I encourage you. If you want to start 2021 off the right way, get out to our website. Do some reading of some of the fantastic articles that we’ve put out there to help you build a better financial life. And while you’re out there, schedule a complimentary consultation by clicking here. You can schedule your meeting. You can go 15 minutes, 30 minutes, an hour, whatever you want to do. We can do a phone call, a virtual meeting, or we can do in-person meetings. But it’s so simple to schedule your complimentary consultation right there. 

Let us know if you want to speak with one of our CPAs or a CERTIFIED FINANCIAL PLANNER™. Let’s get the conversation started so that we can make 2021 and the rest of your future as bright as possible. 

The Truth About Tax Refunds 

Bud, I think that this is a time also when people need to be looking if they’re still employed, looking at your withholding from your paychecks. So many people wind up getting refunds back when they do their taxes. And to me, that’s a crazy thing to do. 70% of Americans are getting refunds. And the average refund is almost $3,000. That means that you’re loaning the government your money all year long, interest-free, for them to use, and then give you back at the end of the year or the end of the tax year. It’s a crazy thing.

Adjust Your Withholding, Take Advantage of that Money Now

Look at ways to adjust your withholding. Get more specific with that. Use that money for yourself throughout the year. Be putting that into an IRA, a Roth IRA, using it to fund kids’ or grandkids’ college, using it for a vacation or something that you can enjoy. Don’t let the government have that money. And if you wind up owing every year and wind up writing a check, you may need to adjust for some additional withholdings. But you need to pay attention to that because I think that’s part of putting together a good, solid, forward-looking tax plan, Bud. 

Bud Kasper: No doubt about it. One of the things that bothers me, though, is when people tell me, “Well, I do that…” meaning that they are withholding not enough. They come and say, “Well, that’s the way I save.” And I go, “Come on now. Let’s think about this.” Time-value of money! You have to put that into consideration.

Paying Off the Mortgage 

But there are other little savings things that I like. I was talking to one of my sons the other day. We were talking about his mortgage and all that. I commented to him, “How much is your mortgage?” And he gave me a number. 

I said, “Hey, how much discretionary money do you have at the end of the month? Could you go in and add another $400 a month to your mortgage that you just arbitrarily put in when you have that extra cash? I said, “Do you know how meaningful that is in terms of getting that mortgage paid off early?” It’s significant, and people that do those types of things, make those sacrifices, end up winning, and that’s a big part of it.

Dean Barber: Winning. There you go. Well, hey, you want to talk about winning? Why don’t we talk about free money? Would you be interested in some free money?

Bud Kasper: You can’t see it, but my hand’s up.

Free Money You Say?

Dean Barber: Well, let’s stay on that theme of mortgages, Bud. This will carry over into our final segment here on America’s Wealth Management Show. But I believe that where mortgage rates are today, it’s just like free money. You’re talking about mortgage rates under 2.5%. Free money. 

If you still owe money on your home, you’re not thinking about refinancing at the super low-interest rates. You’re going to miss the boat. I believe that these rates will start to creep up as our economy continues to reopen, and as the COVID-19 vaccine becomes more widespread, people begin to get back to their everyday lives. 

Refinancing Opportunity

You have a window of opportunity here to think about refinancing. And Bud, maybe, you refinance, you cut some years off that mortgage, you go at a lower rate, and you add a little bit of extra payment to it, and now you can accelerate the speed at which you become debt-free.

Bud Kasper: Right, exactly. And think of how the equity has built up in houses over the last year. It’s an incredible number when you go in and dissect it.

Dean Barber: It is enormous. We’re going to dive into the possibility of refinancing. We’re going to also talk more about shopping your property-casualty insurance policies and more of the things you need to do to get 2021 started on the right foot.

Leaving 2020 in the Rearview 

Dean Barber: We’re talking about five things you can do, their big retirement planning tasks for a better 2021. 2020 is in the rearview mirror, Bud, and we are ready to roll on and move forward and look for some positive things to happen. What do you think?

An Unbelievable Year in More Way Than One

Bud Kasper: Yeah, I am excited about the new year and the challenges that I think it will present. We had such an unbelievable 2020, didn’t we, Dean, when you look at what happened with COVID-19? I believe some dates will be stuck in my head for a long time. February 19, 2020, was the high watermark of the stock market at that particular time, followed by a decline of about 35% from that high and all occurring in just weeks. It was just incredible.

Then the recovery came about, which was also incredible—watching the market and the economy rebound in the face of one of the most historical and more dynamic, dramatic events that we’ve had in our history. I’m talking about, of course, COVID-19.

2020 GDP

Dean Barber: You know what’s interesting, Bud, as I was reading here just this last week where the economy overall is off only 3%, GDP is down only 3% from the prior year. So, when you think about everything that happened, and you think about the massive shutdowns, the massive layoffs, all the things that went on, I have to, as much as it pains me, to give credit to Congress and the President for the speed at which they acted, especially early on. 

Now lately, not so much, they dragged their feet a lot during the latter part of the year doing much more politicking than looking after the American people, but it is pretty amazing to see that we wound up just 3% below where we were a year ago in GDP. So, I think that’s pretty positive.

Operation Warp Speed

Bud Kasper: I do too. It is a statement of positivity and in the sense that we overcame. When the President came up with the concept of Operation Warp Speed, the response we got from our drug manufacturers and coming up in record time with a vaccine. It’s amazing. And it does speak about what America is about.

Dean Barber: No question about it. Let’s look forward here, Bud, and I want to encourage all of our listeners to get out to our website. We wrote some great articles like Finding the Good Things in 2020 about the positive things from 2020. 

Once again, while you’re out there, make sure to click on the button that says complimentary consultation. You can schedule your conversation by clicking right here. We can do a phone call, a virtual meeting, or an in-person meeting with one of a CFP® or CPA to talk about your situation.

Back to Refinancing

But, we talked a little bit before the break about refinancing your mortgage, and interest rates today are at all-time lows or very, very near there. They’re vacillating around all-time lows. Indications are that with the vaccine, with a projected GDP, 4-4.5% growth in GDP for 2021, those rates will climb back up. Don’t you think?

Bud Kasper: Yeah, I think they have to over time, but let’s look at it from the real sense of how to answer that question, Dean, and that is the Federal Reserve. And the Federal Reserve, boy, has had its challenges this year, no doubt about it. However, they are fixed on keeping these interest rates low. Now, I think that inflation will pick up a little bit, maybe to 2.5% something like that, but I know darned well, the Federal Reserve has our back, and they’re going to accommodate what this economy needs to secure where it was before COVID-19 hit us.

Still Some Areas in Recovery

Dean Barber: No, I get you. And that’s going to take some time. There’s still a lot of areas of the economy that still have a ways to go for recovery. One of the things that we started to see after the announcement of the vaccine was a bit of a rotation into some of the stocks and areas of the economy, and areas of the market that we’re still not recovered from COVID-19. We should see some of that continue into 2021. 

Looking at Refinancing is Critical Right Now

You and I talked in December about how we’re not going to discount technology because technology will go a long way in continuing to drive everything forward. 

But, looking at that is critical, but back to the whole refinancing thing, I think that people, if you’ve got rates that are above 3.5% on your 30-year mortgage, I think it’s worth considering, especially if you’re going to plan to stay in the home for an extended period, four or five years because you can definitely save some money there even taking into consideration the cost of refinancing. Put that money back in your pocket, and take advantage of what I call the free money out there in the way of mortgages. 

However, that has pushed housing prices up. It has pushed homeownership up, and we’re seeing sales of existing homes higher than any other time in history, except for one other 18 month period. That was back during the height of the real estate craze back in 2006 and seven.

Low Housing Inventory and Millennials

Bud Kasper: Exactly. Right. And the problem is, as you stated, is the low inventory. We have all the millennials now forming their families, and they’re tired of being in apartments. They’re trying to find houses, but we don’t have enough of them out there. Now, the good thing about that from a perspective of the economy is that it will put a lot of people back to work in trying to accommodate this new demand that we have.

We’ve talked about this before, and I think most people who listen to us know the power that the boomers have had on the economy itself. The millennials will be even more impactful, and as we start to see them mature and move into a higher status in terms of income, and things like that, all this should be beneficial to the economy, Dean.

Dean Barber: Well, and both of the articles written on that, The Power of the Consumer, as well as Finding the Good Things in 2020, are out on our website. Read about it in detail with charts and graphs, and you’ll be amazed at what you see. What we’re gleaning from this is, barring some crazy black swan event, this next decade could be as good as the decade of the 1920s for our economy and the capital markets. So, take advantage of that. 

Shop Your Property and Casualty Insurance

One other thing, before we wrap-up. Now is the time of year where you should be shopping around your property-casualty insurance policies. If you’re working with an insurance broker, this is a great time to step back and say, “All right, here’s the situation. Let’s take a look. Are there other insurance companies out there that can offer me as good or better coverage for less money?” You should be doing that at least every 12 to 18 months.

Check out this short 17 or 18-minute video that talks about why this is so critical and what you should be looking for in property and casualty insurance.

So Long 2020

I’m excited to kick off 2021 and to put 2020 in our rearview mirror truly. However, we need to do it with some joy, some zeal, and some positivity because I think many good things are coming around the corner. What do you think?

Bud Kasper: Yeah, absolutely. I like the positivity theme. It is up to us to make lemonade out of lemons, and I think we’re going to be able to do it once again. We’re a nation that wants to be winners.

Dean Barber: Of course, we saw that happen around the globe last year in the fight against the COVID-19 pandemic. Listen, we certainly enjoy every one of you every single week being with us on America’s Wealth Management Show. I’m Dean Barber, along with Bud Kasper. We’ll be back with you next week. Same time, same place.

2. Rebalance Your 401(k)

While we’re on the topic of your employer retirement plan, let’s take a look at how your investments have performed in 2020. If you have a large amount of stock market investments in your account, you may feel like you’ve been on a roller coaster ride this year. Suppose you aren’t using a target-date fund and not regularly rebalancing your investments. In that case, your current investment allocation could look a lot different than it did when you initially chose those investments.

Rebalancing Example

For example, let’s imagine you rebalanced your account on January 1, 2019, so you have a mix of 60% stocks (we’ll use the Vanguard Total Stock Market mutual fund as a proxy) and 40% bonds (using the Vanguard Total Bond Market mutual fund as a proxy) and have not rebalanced since. 

You’re making a monthly contribution of $1,500 over that time, with exactly 60% going to the stock fund and 40% to the bond fund. However, with the wild ride in stocks, you look at your statement today to find more than 64% of your account is invested in stocks! That’s a drift of more than 7% of your original allocation).

Retirement Planning 2021 - Portfolio Allocation Drift


This could become an issue the next time the stock market declines, as you may experience a sharper drop than you expected. It’s good practice to rebalance your 401(k) regularly. As your stock investments have greater long-term returns than your more conservative bond investments, consider shifting some of those gains over to the bonds. Conversely, if you find that it’s time to rebalance and the stock market is in a period of decline, you’d shift money from your more stable investments into the underperforming investments. This can be difficult to do in practice, as it’s mentally tough to sell something that’s doing well to buy something that isn’t. As long as your overall investment strategy aligns with the overall financial plan you have, rebalancing can be a useful technique.

3. Adjust Your Tax Withholding

Each year when you file your tax return, do you expect to get a large refund? Fox Business reported that more than 70% of tax filers get a refund from the IRS, with an average refund of $2,725. While it might seem like a pleasant surprise to get a check like that in the mail, these tax filers have been loaning the IRS their hard-earned money and not getting any interest on that loan! With a bit of planning done properly at the beginning of the year, you may be able to increase your monthly take-home pay. 

You could use that money throughout the year to save more for future expenses, pay down debt, or purchase things you’d find some enjoyment from. If you regularly receive a large refund from the IRS (or, if you usually write a large check when you file your tax return), you might consider making adjustments to your tax withholdings throughout the year. Or if you’re still working and are a W-2 employee (you get a W-2 form each January used to report your earnings from work), you can use the IRS Form W-4 to increase or decrease your withholdings from each pay period. 

And if you’re a single tax filer with a single job, the form is straight-forward enough. If you are a married tax filer or have multiple jobs, the IRS provides a tax withholding estimator, which will help you calculate the amount you should instruct your employer to withhold from your paycheck.

4. Consider Refinancing Your Mortgage

For the better part of a decade, we’ve heard that you should refinance your mortgage to take advantage of lower rates. After all, they are bound to go up one of these days. (Right?!) For now, though, rates have kept dropping.

In fact, banks have been inundated with homeowners looking to refinance their mortgages to lower rates. The amount of refinanced loans as a percentage of the total amount of new mortgages is as high as it has been since early 2013. If you haven’t looked into refinancing your home mortgage in a few years, it may be worth looking into. However, just because you may be able to lower your monthly payment by a couple hundred dollars, keep in mind, there will be closing costs associated with your new loan, which may push your break-even point out a few years.

5. Shop Your Property and Casualty Insurance Policies

Even if you won’t always need to make a change to your existing coverage, it’s a good idea to be comparing rates on your property and casualty insurance policies every two or three years. Darren Newell, an insurance advisor, suggests that if you are working with an insurance broker, they should be shopping for you every year if the rates on your current coverage jump by 8% or more. An independent insurance agent may be able to take a lot of the work off your shoulders. If you feel inclined to work without an agent, remember that you’ll need to not only be on the lookout for the best rate but make sure that the coverage you are paying for will be adequate to insure your property.

Set Up Your Retirement Plan for a Better 2021

2020 was quite the year with many ups and downs. Setting yourself and your retirement plan up for a better year in 2021 is a great way to begin the year. Taking small steps toward securing your financial future is never a bad idea. If you want to talk about the future of your financial life, schedule a complimentary consultation below or give us a call at (913) 393-1000. We’ll discuss your goals and help you find clarity in your financial future.

Jason Newcomer

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The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.