Following our discussion of the five critical areas to assess during your mid-year financial review, many clients ask: How should I prepare for this conversation? What opportunities should I prioritize? And what mistakes should I avoid?
This follow-up provides actionable guidance to help you maximize your mid-year review while avoiding common pitfalls that can potentially derail your financial planning efforts.
Preparing for a Productive Mid-Year Review
Good preparation can transform your mid-year review from a routine check-in into a strategic planning session.
Gather Updated Information
“When preparing to meet with our clients, we send them a data request to gather any updated information that may have changed since we last spoke,” explains one of our advisors.
Consider organizing updates in these areas:
Identify Your Priority Topics
“We also ask if there is anything specific they would like to discuss during the meeting,” our advisor notes. “This way, we can prepare for anything that might not have been on our radar (like a surprise decision to relocate or to buy a boat, etc.), and it helps us to know what is our client’s current focus.”
This matters because “if we do not first address what is forefront in their minds, I find that they are distracted thinking about that one thing and not concentrating on the other topics.”
Before your review, identify what’s weighing on your mind financially. Market concerns? A major purchase? Retirement timing? These should drive your conversation.
Strategic Tax Planning Opportunities to Consider
Mid-year provides a strategic window for tax planning discussions with your advisor. With six months remaining in the tax year, there’s still time to evaluate meaningful strategies that align with your overall financial plan.
Roth Conversion Considerations
“Review year-to-date income and anticipated income through the rest of the year,” advises our team. “You might be able to start making some Roth conversions (or may wait until closer to year-end).”
Mid-year income assessment can help you and your tax advisor determine whether current year Roth conversions align with your situation, particularly if your income is lower than expected or if you anticipate different income levels in future years.
Charitable Giving Strategy
For charitably inclined clients, mid-year presents several areas for discussion:
“If a client will be able to itemize on their tax return this year, consider bunching charitable deductions,” our advisor suggests. This strategy involves concentrating multiple years of charitable giving into a single tax year to potentially maximize the deduction benefit.
For older clients, “if a client is charitably inclined and over age 70.5, utilize Qualified Charitable Distributions (QCDs) from IRAs for charitable gifts.”
One client example illustrates strategic planning considerations: “I have a retired client who has one year left prior to being required to start taking Required Minimum Distributions (RMDs). He has a substantial IRA so the distributions each year will also be substantial. The client is also very charitably inclined, so we devised a strategy to bunch two years’ worth of typical charitable contributions into the first RMD year when income skyrocketed. This prevented the client from entering a higher tax bracket and increasing his Medicare premiums.”
This example is for illustrative purposes only. Tax and charitable giving strategies should be evaluated based on individual circumstances and in consultation with qualified tax and legal professionals.
Areas for Income and Deduction Discussion
Mid-year income review can reveal opportunities to discuss with your advisory team:
These strategies may not be suitable for all investors and should be discussed with your financial advisor and tax professional based on your individual situation.
Common Mistakes That Undermine Financial Progress
Even sophisticated investors can encounter obstacles that hinder their financial planning success. Understanding these common challenges can help you work with your advisor to address them proactively.
Challenge #1: Implementation Gaps
“Neglecting to implement our recommendations by not signing forms to update beneficiary designations or procrastinating on meeting with an attorney regarding an estate plan” ranks among the most common obstacles our advisors observe.
A well-designed financial plan requires follow-through on implementation steps. Whether it’s updating beneficiary forms, retitling accounts, or scheduling meetings with other professionals, the gap between planning and implementation often determines outcomes.
Challenge #2: Estate Planning Follow-Through
One client situation illustrates this challenge: “A client has been working on updating estate documents since autumn of last year. They were finally signed recently. He created a living trust as well as a testamentary trust for his sons. Since the process of drafting and executing documents took so long, it would be easy to forget to now update his accounts to reflect these changes.”
Our team coordinated the follow-through by:
“Without our work, he would have had a shell of an estate plan, but nothing actually working to make it happen.”
Challenge #3: Emotional Decision-Making During Market Volatility
Market volatility can trigger emotional responses that may conflict with long-term investment strategies. Our advisors address this by revisiting risk tolerance assessments completed during calmer market periods.
“We review our clients’ Risk Profile Questionnaires (RPQ) with them every three years, however, at times like this, when there is a lot of market volatility, we will often revive their most recent RPQ to remind them of the answers they provided during a calmer time in the economy.”
This process helps clients “separate from their current emotional reactions in order to recognize that their investments are allocated properly.”
The educational component addresses common concerns: “Many of our clients are in their retirement years so they have voiced concerns over the current volatile market atmosphere, thinking that they will not have a long enough time horizon to make back any perceived losses to their portfolio. It has turned into a great opportunity for us to remind our clients that despite what they are hearing in the news, in reality, their portfolios are in positive territory for the year and are holding up very well in this environment due to our diversification of their investments.”
Challenge #4: Narrow Focus on Investment Performance
Some clients focus primarily on investment performance while overlooking other important financial planning areas. “We review both estate and risk management with our clients at least every three years. We’ll review it sooner than that if there is a life change to warrant a review.”
This comprehensive approach recently helped a client who “switched jobs so we assisted in reviewing all of his employee benefits, notably his retirement plans and group life and disability insurance policies to make sure he made the correct selections for his situation.”
Making Your Mid-Year Review Meaningful
Your mid-year financial review represents an opportunity to assess progress, discuss strategic adjustments, and ensure alignment between your financial plan and life goals. This timing allows for thoughtful evaluation of tax planning opportunities and preparation for year-end decisions while setting the foundation for the year ahead.
Success depends on thorough preparation, clear communication of priorities, and commitment to following through on recommendations that align with your individual circumstances and goals.
To schedule your mid-year review, please contact your advisor directly.
This article was prepared by the Wescott Financial Advisory Group team as part of our ongoing commitment to providing valuable insights and guidance to our clients. The information contained herein is for educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Individual circumstances vary, and strategies discussed may not be suitable for all investors. Please consult with qualified financial, tax, and legal professionals regarding your specific situation before implementing any financial strategies.
