Yes, It’s Tax Time Again, But That Can Be A Good Thing.

Okay, I don’t mean that preparing your tax returns and paying taxes is the good thing, though as is often heard around tax time, the old chestnut from U.S. Supreme Court Justice Oliver Wendell Holmes, Jr., “Taxes are what we pay for civilized society” does ring true.

The good thing I am referring to really is only tangentially related to taxes. Since you have to pull all of your financial information together for tax return preparation this is a great time to review your investments, both retirement and non-retirement accounts, to assess not only how well they are performing but how they are doing with respect to your investment objectives and asset allocation plan. If that last part of the sentence leaves you scratching your head then you definitely need to undertake this review. Investing for retirement and other goals should not be a random process. Similar to a football team’s approach to a game or a season, your investment plan should have a goal, a playbook geared to reaching that goal, execution of that playbook, and a periodic review to assess how the playbook is working during the season and making adjustments as necessary.

Putting this in investment terms you should have an asset allocation plan, perhaps even an investment plan (often called an investment policy statement by financial advisors), that factors in your risk tolerance, investment timeline, and other resources such as a guaranteed pension or an expected inheritance, among other factors. Your investments should match up to this asset allocation plan to give you appropriate portfolio diversification.

But this is not a one-time proposition. Over time market factors will cause changes in the asset allocation percentages of the various investments in the portfolio due to differing levels of growth (or loss). While the overall value of your portfolio may have increased in the past 6 months or year, the original asset allocation percentages you selected for your personal goals and risk tolerance likely have changed, sometimes dramatically.

For example, let’s say your portfolio asset allocation originally was 25% each in U.S. stocks (or stock mutual funds or ETFs), international stocks, bonds, and money market (cash). [FYI–This is not necessarily a good mix!]. A year later the changes due to market forces results in an increase in the portfolio value (a good thing), but a new asset allocation percentage of 32% U.S. stocks, 20% international stocks, 30% bonds, and 18% money market cash (not such a good thing). If you don’t rebalance this portfolio it likely will continue this disparate growth and move further away from your investment game plan. As described by one financial services company, the “objective of rebalancing is to retain your preferred level of risk by maintaining your account’s original asset allocation over time.”

In addition to being a good time to review your investment portfolios and do your rebalancing, it is also a good time to ensure that your beneficiary designations on retirement accounts and insurance policies are up to date to avoid any unpleasant surprises if something unexpected should happen.

Reilly Law, PLC and our affiliated fee-only financial planning firm, Safe Harbor Financial Advisors, LLC ( can help you with these timely projects, oh, and your tax returns too!