Spring Financial Cleaning

Expert Series: Tips for a Financial Spring Cleaning

Updated on Mar 27 2018


Interview with Andy Smith, Senior VP of Financial Planning at Financial Engines and host of call-in radio program, “Financial Engines’ Investing Sense”, airing in over 70 markets across the U.S. Andy works daily to help clients plan for retirement and respond to changing financial needs as they age.

“People are just not saving enough.”

Financial expert Andy Smith’s message is clear. The sentiment is simply stated, and the reality resonates with seniors across America. While an estimated 79% of Americans work for an employer that provides a retirement plan, new research suggests that only 41% of those employees contribute to their retirement plans, as discovered by the U.S. Census Bureau when they examined W-2 tax records in 2012.1

People need to do their due-diligence and prepare for their retirement. Smith comments:

“You need to save as much as you can for as long as you can. We live in a one-size-fits-nobody world, so take time this spring to work with an advisor who’s a fiduciary – someone who is legally- and ethically-obligated to always put you first. You need a tailor, that fiduciary advisor, to make your plan fit your life.”

Start Fresh to Reach Your Financial Goals:
Assess and Forecast Your Finances

Spring marks an excellent time to get your finances in order. The air is crisp, the birds start chirping and green growth is on the horizon. The same is true for your finances.

How can I optimize my finances this spring?

This spring you can start fresh and assess whether your budget and retirement contributions need some revamping. “You’ve seen that show about hoarders – don’t do the same thing with your investments,” Andy warns. “Only use and hold what you need. Pare-down… But first: You must know what you need to reach your goals. It’s not just what [investments] you own, but where you hold it and how you use it.”

You go through your wardrobe and try-on old clothes in the spring. Smith suggests that you should also “‘try-on’ your current allocation to check that it still fits,” as what made financial sense for you in 2017 may not make sense for you in 2018. This approach is something to consider this spring:

“Only take the least amount of risk necessary to reach your goals. Spring is when things are new again – so how about a new savings number for 2018? Try to max-out your 401k savings rate – or, try to save at least one percent more than last year. The bottom line is that, as always, you should save as much as you can for as long as you can.”

Spring is also a great time to assess whether your finances and retirement savings are working in your favor as you’re doing taxes and coming out of winter hibernation. As a general rule, Smith recommends saving at least 10% of your gross income. Then, each year, he says you should try to save 1% more until you reach the maximum contribution limit for your employer-sponsored plans ($18,500 for people under the age of 50 and $24K for people over the age of 50).

Rarely do people save more than this, but if they do, that’s when it’s time to start looking at Roth IRAs or some sort of taxable brokerage account for overflow dollars.

What financial papers do I need to keep?

We accumulate a lot of financial papers and it is often difficult to know what we need to keep and what we can toss, especially when it comes to old tax documents. Smith notes that you should discuss your particular situation and retention needs with your accountant, first and foremost. If you’re working with an advisor, he or she should be able to produce electronic copies of nearly everything you’d ever need. In this sense, you probably don’t need to worry about throwing away too much.

Here are some rough guidelines Andy suggests following to keep your financial hard copies organized this spring:

  • Keep monthly statements until you receive quarterly statements
  • Keep quarterly statements until you receive year-end statements
  • Keep the most recent 1099 document and year-end statement for taxable accounts.

“There’s no magic-bullet tool or financial app or secret method to keep your finances organized,” Andy notes. “Do whatever works for you and keep with it. One great way to keep your finances organized, though, is to work with professionals who can either do it for you entirely, or help you with 75-80% of the job.”

Again, a fiduciary advisor is the recommendation in this situation as they are legally-bound to put their clients’ best interests first – be it what to keep, documents-wise, or what to do inside your long-term financial plan.

Are there other financial tips to consider this spring?

Take time this spring to get your finances in order. If you haven’t already, your future self with thank you if you get started with the following today:

  1. Sign up for your company’s retirement plan and take full advantage of your company’s match program.
  2. Ramp up your retirement plan contributions – redirect any extra income into plan contributions.
  3. Maxed-out your retirement plan at work? Contribute to a Roth IRA (if you qualify) or a taxable brokerage account.
  4. Spend less money and make a commitment to save as much as you can for as long as you can.
  5. Enlist the help of a professional fiduciary advisor.

Many Americans have never tried to calculate how much money they will need to live a comfortable retirement lifestyle. Whether you’re 32 or 52, there’s no time like the present to forecast your future spend. Smith urges to begin as soon as possible:

“The average American is time-bankrupt and unless you plan on dying the day after you retire, you could have decades of life after you retire. Retirement costs are often much higher than people anticipate and can drastically affect the quality of your retirement years. Consider investing with a professional who can make your retirement plan fit your life so you can enjoy the same things you enjoy today when you’re retired – when you have more time to actually enjoy them.”

About Andy Smith

Andy knows first-hand what’s on the mind of investors. As an advisor and CFP® practitioner with Financial Engines, Andy has forged an understanding of what investors need and want – not just from their accounts but from their relationships with an advisor.

Beyond his daily client interactions, Andy has spent more than 15 years on the airwaves guiding listeners towards their investment and retirement goals… all the while offering sensible, actionable perspectives on finance, investing, and the national and global economies.

Andy has the background, experience and insight to help listeners with their financial questions each week as the host of “Financial Engines’ Investing Sense” radio show. For more information, visit www.investingsense.com.

About Financial Engines

With roots in Silicon Valley, Financial Engines is the nation’s largest independent investment advisor. We believe that all Americans – not just the wealthy – should have access to high-quality, unbiased financial help and our client’s best interests should always come first.

Today, more than 700 of the nation’s most respected employers trust Financial Engines to offer professional financial help to more than nine million employees nationwide. For more information, visit www.financialengines.com.

Financial Engines Advisors L.L.C., is a federally registered investment advisor and wholly owned subsidiary of Financial Engines, Inc. Financial Engines does not guarantee future results.

1Steverman, B. (21 Feb. 2017). Two-Thirds of Americans Aren’t Putting Money in Their 401(k). Bloomberg News. Retrieved March 20, 2017, from https://www.bloomberg.com/news/articles/2017-02-21/two-thirds-of-americans-aren-t-putting-money-in-their-401-k

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