It’s important to keep your financial plan updated to make sure you’re getting the best advice possible from me as your wealth manager. Financial plans are definitely garbage-in-garbage-out-type models. If something big comes up, of course, update your information or let me know immediately. But usually, a quick review and refresh of data near the end of the year is all you need to set me up to prepare for your Annual Check-Ins (usually held January 15 through March 15 each year). As we enter the last quarter of 2024, here’s what typically needs to get updated and how to do it:
Adding New Accounts
First off, any NEW accounts, employee benefits, credit cards, liabilities, insurance policies, property, or assets since the last time we updated your plan? Before visiting your digital financial plan, log in to your Capitect Client Portal and link anything linkable:
While you’re there, check to make sure there aren’t any existing links that have broken and need refreshing. Whenever an institution makes changes to their website or products, there’s a chance the links we set up need to be updated. This regular maintenance makes sure your planner has the absolute latest accurate balances and values before they begin any analysis.
Updating Your RightCapital Planning Software Profile Inputs
Tab 1: Net Worth
Most likely the only data points you need to update in the Net Worth tab are renter’s/home insurance in the Property section or other insurance premiums that change annually in the Insurance section (auto, renewable life/disability).
Tab 2: Goals
Everyone will at least want to glance at their Goals to make sure they are all still valid and reflect the latest version of their Dream Statement or Vision for Retirement.
For Retirees
Your budget is actually housed on the Goals tab under the “Retirement Expense” card. You’ll want to review and update it. See the discussion of “Living Expenses” below for instructions. We also model out-of-pocket health care costs separately for retirees. So make sure to compare the assumptions built into the “Annual Retirement Health Cost” card to what you expect to be your out-of-pocket health care costs next year.
Tab 3: Income
Workers will want to update their salary card(s) if they haven’t done so earlier in the year. (Keep in mind that the planning software does not really get down to the granular month-by-month level in its projections, nor is this necessary, even though many people receive their COLAs or raises in the middle of the year. Just use your current salary to be conservative.) You want to enter salaries before taxes and let the software model taxes for us. Let us know too about any new stock grants or bonuses.
For Those Approaching Retirement
You’ll want to work with us to update your Social Security and/or pension income assumptions. Public sector workers will want to provide their planner an updated retirement benefit estimate from their employer plan’s website.
Tab 5: Expenses
Updating the “Pre-retirement Living Expenses” card (or the “Retirement Expense” card under Goals for retirees) every year-end is hugely important. While the planning software takes the current year’s inputs and projects them forward in time for us using our inflation assumptions, it doesn’t automatically update the starting values each year because it (and your planner) does not know how your spending may have changed.
The best way to make this as accurate as possible is to track your expenses with a budget app and just drop in the numbers (I discuss my favorite budget app Tiller here.) And did you know you can customize the budget categories listed in the budget card to match how you think about money? Just let me know your preferred spending categories.
When updating living expenses, just remember to:
- EXCLUDE housing costs, most insurance premiums, and debt costs because they are handled by the Net Worth tab and you’ve already entered/reviewed them.
- EXCLUDE premiums paid for Medicare Part A, B & D. They are set in part by your Modified Adjusted Gross Income, so let the system model it over time automatically for you.
- INCLUDE any other health insurance premiums (including supplemental Medicare plans) and an estimate of your expected monthly out-of-pocket health care costs (before retirement).
- INCLUDE any expense taken out of your paycheck that isn’t covered elsewhere (one good example is union dues). These are easily forgotten because they won’t show up on budget apps as they are pulled directly out of your pay, but if they are material they will impact the accuracy of your planner’s cash flow projections.
For Public Sector/Unionized Workers
If you are required to make a contribution to a defined-benefit pension plan (contact me if you’re not sure), this should be handled through a separate expense card. Keep your planner up-to-date about changes in your employee classification or contractual benefits/responsibilities.
10 to 20 Minutes Very Well Spent
Unless a lot has changed for your household over the year, updating your Profile tabs in RightCapital should only take 10 to 20 minutes, if that. Once done, I’ll be ready to review your progress and come to the table with a new set of planning opportunities and ideas at our annual meeting next year.
If any of you need assistance in updating data or have questions about your plan inputs, give me a call or set up a meeting before the holidays kick into high gear. Happy fall everyone!
All content presented in this article is for informational purposes only. Materials presented should not be interpreted as a solicitation or offer to buy or sell a security or the rendering of personalized investment advice, which can only be provided through one-on-one communication with a financial advisor. The content reflects the opinions of Hesperian Wealth LLC (HW), except where cited, which are subject to change at any time without notice. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. All information or ideas provided should be discussed in detail with a financial, tax, or legal advisor prior to implementation.
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