Set time aside for an annual review of your finances to make any needed adjustments and prepare for the next tax season. Here are some of the things to review in your annual financial, tax and estate planning.

Financial Planning

Financial planning includes managing your budget, savings and investments.


  • It's important to create and maintain a budget. Make sure to review your income and expenses at least once a year. This will be easier if you get in the habit of tracking your expenses on paper or with your computer. Remember to account for any debt expenses you may have, such as credit card and loan payments.
  • Project your income and expenses for the year. These may be the same as the previous year, or you may anticipate changes such as a pay raise or a new car payment.
  • Think about ways to maximize your income and minimize expenses. If you need more income, you may decide to work a few extra hours at a part-time job in addition to your current job. Look for ways both large and small to spend less throughout the year. For example, you may be able to save a significant amount of money by bringing your lunch to work instead of eating out.

Savings and Investment Goals

  • Make sure you have adequate savings or at least a plan to save during the year. Most experts say you should have at least three to six months' worth of living expenses in a safe, accessible account in case of an emergency.
  • Set specific investing goals, such as retirement or college education, and review how much money you'll need to reach each of your goals.
  • Adjust your investment plan or goals if needed to increase your likelihood of success. For example, you may decide to establish an automatic investment plan to invest toward your goals on a regular basis. Or maybe you planned to retire early but find you'll have a greater likelihood of retiring comfortably if you work a few years longer.

Asset Allocation

  • Review your risk tolerance and the time horizon for each of your investment goals. In other words, has your comfort level with the volatility of the market and your investments changed? And how much time is there before you'll need the money?
  • Determine an asset allocation mix based on these factors. Asset allocation is the process of dividing your money among different types of investments, such as stocks, bonds and money market securities. Try our Investment Planner tool today for help with your analysis.
  • Compare the results of your asset allocation analysis to the actual investments you own and make adjustments to your investments if needed.

Retirement Contributions

  • It's important to remain focused on building your retirement nest egg. One of the best ways to do so is to contribute at least up to the employer match in your employer's retirement plan, such as a 401(k) plan. For example, if your employer matches a portion of your contributions up to 4% of your income, you should contribute at least that amount to get the full employer match.
  • If possible, contribute the maximum allowed to your employer's retirement plan.
  • If possible, also contribute the full amount to traditional or Roth IRAs for yourself and, if married, your spouse.

Tax Planning

You'll deal with your tax situation when you prepare your income tax returns, but it's valuable to keep tax issues in mind throughout the year.

Estimated Tax Payments

  • Estimate your annual income tax liability. This can be calculated as part of your annual income tax preparation.
  • Make scheduled tax payments to cover additional taxes you may owe.

Withholding and Personal Exemptions

  • If you typically owe additional income tax each year or you get a big tax refund (which is essentially money you've loaned to the government throughout the year), you may want to consider adjusting your income tax withholding to have more or less withheld from your paycheck. You can adjust your tax withholding through your employer on IRS Form W-4.
  • Review the personal exemptions you claim for federal and state taxes to make sure they're accurate and up to date. For example, if you've had a major change in your life, such as a birth, adoption or divorce, you may need to adjust your exemptions. This also can be done through your employer on IRS Form W-4.

Capital Gains and Losses

  • If you sold investments you owned in a taxable account during the year, you may have a capital gain or loss. You will be taxed on any gain. If you have investments that have declined in value, you may want to consider whether selling those investments to offset other gains would be best for your tax situation. Consult your tax advisor for specific advice.

Opportunities to Minimize Taxes

  • Defer as much income as possible. For example, your contributions to tax-deferred retirement plans, such as a 401(k), generally are made before taxes are withheld from your paycheck so your current taxable income is reduced. You won't be taxed on your contributions or earnings until you withdraw them later, ideally after you retire.
  • Take advantage of deductions to reduce your taxable income. For example, make sure you maximize your state tax payments before year-end since state taxes generally are deductible from your taxable income. You can deduct interest on your mortgage payments and you also may be able to deduct charitable donations.

Estate Planning

If you've established an estate plan, it's a good idea to review your plan and the accompanying documents on an annual basis.

Beneficiary Designations

  • Review your beneficiary designations for insurance policies, investments and retirement plans to make sure they are accurate and up to date. If you've had any life or family changes, such as a birth, adoption or divorce, you may need to revise your beneficiary designations.
  • Make sure your beneficiary designations are consistent with your estate planning documents.

Will/Trust Review

  • Review your will and trust documents to make sure they're accurate and up to date.
  • Discuss these documents with an estate planning attorney if you need to make any changes.
  • Keep copies in a secure location, such as your attorney's vault or office or in a safe-deposit box, and let trusted family members or friends know of their location.

Estate Tax

  • Unless your estate currently is valued at more than $2 million, you probably won't have to worry about paying estate tax. However, your estate could be worth more than you think, so it's important to estimate your potential estate tax liability on a regular basis.
  • If it looks like your estate will be subject to estate tax, you may want to consider ways to reduce the value of your estate and minimize or potentially avoid estate tax. For example, under the "annual gift tax exclusion," you can make tax-free gifts of up to $12,000 per individual per year, with no limit on the number of individuals to whom you can give such estate-reducing gifts. Married couples can give combined annual tax-free gifts of $24,000 per individual. Other ways to reduce the value of your estate include directly paying another person's tuition or medical bills and contributing to an education savings plan, called a 529 Plan, for a child or other person.

Reviewing your financial plan at least once a year can help ensure you're on track to reach your short- and long-term financial goals.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.