5 New Year's Wealth Management Resolutions

December 18, 2023
In new year, consider taking these steps to help keep your overall wealth management strategy on course.

As we head into the new year, the outlook for inflation, interest rates, and the U.S. economy remains uncertain—but don't let that deter you from working toward your overall long-term goals.

"Wealth management is all about the bigger picture," says Susan Hirshman, director of wealth management at Schwab Wealth Advisory, Inc. "While these market conditions could produce some anxiety, there's still a great deal you can do to maintain control over your financial future."

Here are five New Year's resolutions to consider for your wealth management strategy in 2024.

Review your investments and liquidity

"At the heart of wealth management is a well-designed investment plan that aligns with the timing, amount, and priority of your financial goals," Susan says. As you go into the new year, review any changes in your situation—such as employment and income, family dynamics, and health status. What do you need to realign your investment plan?

Furthermore, you'll want to think about any large expenses you can anticipate making within one to three years, such as a home improvement or a car purchase. If you think you'll need to raise cash to cover it, consider defining a liquidity strategy. "When will you need the funds, and what assets will you sell to create that cash?" Susan explains. "While some investors may prefer to wait until a goal is imminent, others may choose to create liquidity over time to smooth out any potential market volatility." The approach you choose depends on your individual tax situation and comfort. It's a good idea to consult with a qualified tax professional about your circumstance.

"Once you understand the cash you'll need, you can make appropriate choices for everything from IRA distributions to short-term investments," Susan says. "You may also find you have too much cash and can take a more strategic approach, such as laddering short-term bonds or CDs."

Confirm your risk tolerance

The new year is also an opportunity to reflect on how you responded to market shifts in the previous year. During periods of market turmoil, did you act with your head or with your heart? "Did your portfolio provide you with a good night's sleep?" Susan asks. Though investing involves risk, you can control how much of it you are comfortable with and adjust your exposure to high-risk, high-reward assets. "It's okay for you to accept lower returns in exchange for more stability and peace of mind. That may mean adjusting your objectives accordingly or compensating with a different investment strategy." 

Keep in mind, however, that risk tolerance does not always have to go down. "Upon review, you may find that you can withstand a bit more volatility than you thought if it can potentially lead to higher returns in the long run," she says. 

How your Schwab Wealth Advisor can help

Your Schwab Wealth Advisor can work with you on a comprehensive wealth management strategy and connect you with a team of specialists to help guide your decisions on investment, estate and tax planning, insurance and health care options, philanthropy, and more.

Your Schwab Wealth Advisor can work with you on a comprehensive wealth management strategy and connect you with a team of specialists to help guide your decisions on investment, estate and tax planning, insurance and health care options, philanthropy, and more.

Update and communicate your estate plan

An estate plan is much more than outlining the transfer of your assets after death. It can also help guide what you want to accomplish during life with your wealth, such as retirement goals, health care needs, charitable ambitions, and support for your family. "Having clear objectives and defined goals ensures that your estate plan works in tandem with your overall wealth management strategy," Susan says.

But once a plan is in place, it's important to review it often as your situation, market conditions, and tax laws change. In addition to updating documents and beneficiary designations, make sure to discuss your plan with those who will carry out your legacy. "Your beneficiaries and the executors of your estate should understand your values," Susan says. Some questions to think about that can help stimulate a discussion include:

  • Is your spouse or life partner engaged in your finances? Your estate plan likely includes a significant other—and the more aware they are of its intricacies, the better equipped they will be to handle matters concerning your estate in the future and possibly avoid family conflicts.
  • Do your heirs understand your wishes? "The best surprise in estate planning is no surprise," says Susan, "especially in areas that may cause family strife such as inherited assets." Having family conversations about your intentions—how you've decided to distribute your estate, for example—can help prevent resentment, anger, and the breakdown of relationships after your death. 
  • Have you introduced your wealth advisor to your family? If your spouse or adult children are agents under a power of attorney, connecting them to your advisor can go a long way toward streamlining decisions on your behalf that are consistent with your wishes. 
  • Do you have a trusted contact? A trusted contact can help your financial institution prevent potential fraudulent activity in your accounts. Though they cannot act on your behalf unless they are already an authorized party on your accounts, a trusted contact can help verify information such as your health status or whereabouts in case you're unavailable.

"Whether you're making large changes or simply fine-tuning your estate plan, consider the emotions of those you will leave behind," Susan says. "Open and honest communication is central to a successful plan."

Examine your long-term care options

Though many people plan for health care expenses as they grow older, they often overlook the possibility of needing long-term care (LTC)—assistance with the activities of daily living like bathing or eating—which can substantially deplete savings. "This is one of the biggest risks to a retirement portfolio," Susan says. According to the U.S. government's Administration for Community Living, a 65-year-old today has a roughly 70% chance of needing some type of long-term care in the future. "But you don't know when, how much, or for how long you might need it."

When thinking about LTC, ask yourself: Who will provide care when you need it? Where will care be provided? And how will you pay for it?

A traditional long-term care insurance policy can be an effective solution to manage these costs, though it's generally more advantageous to purchase one before age 65. "Premiums are lower the younger and healthier you are," Susan explains. These policies are generally "use it or lose it," however; you could end up paying for something you may never use. This often leads many high-net-worth individuals to self-insure and bear the cost of care if the need arises. "Unfortunately, going it alone or relying on family for your care can be an emotional, physical, and financial burden for you and your loved ones."

Still, other coverage options exist, such as hybrid policies that combine LTC benefits with life insurance. "There is no one formula that will work for everyone. It is dependent on your health, financial situation, and personal outlook," Susan says. No matter how you decide to plan for potential long-term care, it is essential that you inform your family of your overall LTC decisions. "Communication about your desires is crucial to receiving the care you plan for," she says.

Manage your tax brackets

"Retired investors can smooth their tax burden by managing tax brackets," says Susan. Applying tax-management strategies such as Roth IRA conversions and qualified distributions, investors can take advantage of a lower tax rate today instead of waiting to pay taxes on accumulated savings at a potentially higher rate in the future. 

The first step is to work with your wealth advisor or a tax professional who can help you understand your current-year income and determine your marginal tax brackets before the end of the year. "Everyone's situation is different, and tax-bracket management can be especially complex, so it's wise to work with your wealth advisor to take steps in 2024," says Susan.

"At the end of the day, you can't control the markets or the economy, but you don't have to let these factors control your financial wellbeing," she says. You also don't need to tackle all resolutions at once. "Take them one at a time, and talk to your wealth advisor to help prioritize your efforts for the year." 

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Investing involves risk, including loss of principal.

Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.

A bond ladder, depending on the types and amount of securities within the ladder, may not ensure adequate diversification of your investment portfolio. This potential lack of diversification may result in heightened volatility of the value of your portfolio.  As compared to other fixed income products and strategies, engaging in a bond ladder strategy may potentially result in future reinvestment at lower interest rates and may necessitate higher minimum investments to maintain cost-effectiveness. Evaluate whether a bond ladder and the securities held within it are consistent with your investment objective, risk tolerance and financial circumstances.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Lower rated securities are subject to greater credit risk, default risk, and liquidity risk.

Schwab Wealth Advisory™ ("SWA") is a non‐discretionary investment advisory program sponsored by Charles Schwab & Co., Inc. ("Schwab"). Schwab Wealth Advisory, Inc. ("SWAI") is a Registered Investment Adviser and provides portfolio management for the SWA program. Schwab and SWAI are affiliates and are subsidiaries of The Charles Schwab Corporation.

Roth IRA conversions require a 5-year holding period before earnings can be withdrawn tax free and subsequent conversions will require their own 5-year holding period. In addition, earnings distributions prior to age 59 1/2 are subject to an early withdrawal penalty.