Five Things to Review Annually

When are you most likely to do a reality check on your investments—when they’re doing well or when the markets are down and you’re nervous?

Chances are, it is the latter, which may not be the optimal time to make investment decisions. That’s why it makes sense to do an annual review of your investments and any other financial matters.

You can do your annual financial checkup at any time during the year. Think about your family’s financial goals, such as saving for retirement, a house, or a child’s education, and then check to ensure you are investing appropriately to reach them. While you are looking at your accounts and holdings, you can take care of “housekeeping” items, too, like checking beneficiaries and completing a health care proxy.

Here are five questions to ask yourself when doing your financial review:

1. Is my investment strategy on track?

Your annual financial review should revisit each of your financial goals and your strategy for reaching them. At least once a year, check your target asset mix to ensure it continues to meet your time frame, risk tolerance, needs, and preferences, and perform any rebalancing that might be necessary. Take some time to look at specific investments, too, and evaluate whether they continue to have a role in your portfolio.

  • TIP: Match your investments to certain time frames or goals.

2. Am I saving tax efficiently?

The impact of taxes on performance can be significant: On average, over the 88-year period ending in 2014, investors gave up from one to two percentage points of their annual returns to taxes. A hypothetical stock return of 10% that fell to 8% after taxes would, in effect, have left the investor with 2% less investment income in his or her pocket.1

While you can’t control market returns or tax law, you can control how you use accounts that offer certain tax advantages. This type of approach is referred to as "active asset allocation" and allows you to choose which assets to keep in your tax-advantaged accounts—such as your UC 403(b), 457(b), or DC Plan—and which to leave in your taxable accounts—such as a personal savings or investment account. Different asset classes, such as stocks and bonds, are taxed differently.

Simply put, tax efficiency is a measure of how much of an investment's return is left over after taxes are paid.

In general, the more tax efficient an investment, the less tax you pay on it. Stocks generally tend to be more tax efficient, while bonds tend to be less tax efficient.

No matter what kind of account you have, it’s always a good idea to match your investments to your risk tolerance and goals. But if you have a taxable account, it also may make sense to consider more tax efficient investments for that account.

  • TIP: A tax-savvy investment strategy might be able to make a difference in your bottom line.

3. Am I protecting my income?

You’ve worked hard and want to protect your income. So it’s wise to evaluate your family’s total insurance needs annually to make sure you have the right amount and type of insurance to cover unforeseen circumstances that can derail a financial plan.

If your family is expanding, consider increasing the amount of your life insurance to protect your loved ones. As your net worth climbs and children reach adulthood, you may choose to reduce your life insurance. In that case, think about applying the savings toward health insurance, which becomes more critical as you age. You might also benefit from looking into long-term care insurance, which can offer a variety of features and options.

  • TIP: Check your insurance beneficiary designations to confirm they are up-to-date.

4. Am I preserving my assets?

Use your annual review to make sure you have an estate plan that reflects your family status and financial situation.

  • TIP: Ensure key individuals know where to find relevant documents and information.

5. How does my plan affect my family?

In addition to your own financial future, you are likely planning to provide financial assistance to other people you care for, including parents, children, or even grandchildren. An annual review can help you prioritize the financial decisions you need to make to support your family’s goals across generations—and tee up family money conversations.

  • TIP: Bring your family together to sort through vital matters such as college savings, caregiving responsibilities, health care decisions, estate planning, and the tax implications of an inheritance.


While all this might sound like a lot of ground to cover, an annual review is well worth the effort when you consider the hard work you have invested in building and protecting your wealth.


1Taxes Can Significantly Reduce Returns data, Morningstar, Inc., 2015. Federal income tax is calculated using the historical marginal and capital gain tax rates for a single taxpayer earning $110,000 in 2010 dollars every year. This annual income is adjusted using the Consumer Price Index in order to obtain the corresponding income level for each year. Income is taxed at the appropriate federal income tax rate as it occurs. When realized, capital gains are calculated assuming the appropriate capital gain rates. The holding period for capital gain tax calculation is assumed to be five years for stocks, while government bonds are held until replaced in the index. No state income taxes are included. Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Generally, among asset classes, stocks are more volatile than bonds or short-term instruments. Government bonds and corporate bonds have more moderate short-term price fluctuation than stocks but provide lower potential long-term returns. U.S. Treasury bills maintain a stable value if held to maturity, but returns are generally only slightly above the inflation rate. Although bonds generally present less short-term risk and volatility than stocks, bonds do entail interest rate risk (as interest rates rise, bond prices usually fall, and vice versa), issuer credit risk, and the risk of default, or the risk that an issuer will be unable to make income or principal payments. The effect of interest rate changes is usually more pronounced for longer-term securities. Additionally, bonds and short-term investments entail greater inflation risk, or the risk that the return of an investment will not keep up with increases in the prices of goods and services, than stocks.

Diversification/asset allocation does not ensure a profit or guarantee against loss.

The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity and UC do not provide legal or tax advice. Fidelity and UC cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity and UC makes no warranties with regard to such information or results obtained by its use. Fidelity and UC disclaim any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.

This information is intended to be educational and is not tailored to the investment needs of any specific investor

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