Last Week’s Question of the Week: Can I complete a Roth IRA conversion when I am 75 years old? ANSWER: Yes, there is no age limit for doing a Roth conversion. So yes, you could complete one at age 70 or 75.
HOST: I know it is starting to feel like Spring, and it looks like today’s first topic revolves around how to do some spring cleaning for your finances? How and where do we start with this?
KLAAS FINANCIAL: Purge your piles of statements, and only save essentials such as Tax returns and year end investment statements. Statements on non-qualified investments should be kept until they are sold for basis.
Years and years ago, perhaps you purchased some stocks as an after-tax investment, and now you’re selling them for your child’s fall semester of college. It happens all the time. But next April you’ll have to figure the profit and pay long-term capital gains tax. To do that, you need to know the “cost basis,” or what the shares had cost. Cost basis is what you paid to purchase an investment.
Scan the items that you wish to keep on to a secured hard drive, and shred the rest.
Save only the essentials:
- Tax Returns, your accountant may recommend that you save them for 6-7 years.
- Active deeds and policies (home and car insurance policies, deeds and titles to property)
- Receipts and photos of big-ticket items to support insurance claims.
- Keep important documents (marriage license, will, passport) in a locked, fireproof and waterproof box. Scan these also on to a hard drive.
HOST: What about the idea of being almost paperless at home with my personal financial items? Is this a good idea? What about safety of using internet?
KLAAS FINANCIAL: This is a great idea. If you have regular access to a computer, set up online pay for your bills. Set up automatic monthly deductions or go ahead and set up manual initiated payments.
Use only a password-protected secure network (not free WI-FI hot spots) when logging in to pay bills.
Back up your computer files regularly. You can download your monthly financial statements if you wish and then have them available whenever you decide.
Get a password vault for protection of your many passwords. Do not leave your passwords written on a list next to the home computer, or in your purse!
Scan important documents and save files to a secure cloud-based service or again on a hard drive. Download electronic copies of bank and insurance records and other important documents to your computer and back them up onto a separate hard drive or cloud storage. Do this annually (a good time to do it is when you are preparing your tax return), as banks, credit card companies and other businesses tend to cut off electronic access after a year or 18 months.
HOST: I know one of the things you discuss regularly on the show is to consolidate, and simplify?
KLAAS FINANCIAL: Yes, that is one of our standard phrases, consolidate, diversify and simplify!
It usually makes sense to take stock of all of your different financial accounts and close ones you rarely use, rollover old retirement accounts that aren’t getting the attention they deserve.
Consolidating credit cards is a really good idea. Of course, having no debt is the best, but for those that want to have credit cards you should be looking for the ones with the lowest interest rates and best loyalty benefits.
Update beneficiaries on your retirement accounts and insurance policies on a regular basis.
Get your estate planning documents completed! A Will, Trust and POA documents should be either created or updated every 5 years.
HOST: Any other areas that we should be cleaning up?
KLAAS FINANCIAL: Definitely. Perhaps it is time to look at getting new quotes for your car, home and life insurance and adjust coverage levels if needed. Recommend on looking at independent insurance agents who can offer the most competitive coverages.
Check your current mortgage rate, is it time to re-fi with the still very low mortgage rates out there? Check on fees on your phone, cable and other bills to make sure that you aren’t paying for services that you no longer use.
Check your credit at www.annualcreditreport.com. It is free and should be checked every year.
Set up an account if you haven’t already on www.ssa.gov to check on your social security benefits to help you with your future retirement numbers.
HOST: What about looking at your budget?
KLAAS FINANCIAL: Yes, now that you are clutter free from a financial standpoint, you can now look closer at major life changes and re-adjust.
- Look at your budget. Did you get a raise? Should you be adding more to your savings account or your retirement account?
- Do you need to aggressively pay down your existing debt?
- How about a rebalance of investments? Have you looked at your strategy relative to your risk tolerance, the economy and the number of years till retirement?
- Discuss some of the potential benefits of working with someone who focuses on your entire financial plan and goals.
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.
