Welcome to Day Thirteen of the 30 Day Financial Transition Challenge. Today’s article focuses on your after-tax investments, and the accounts where they’re located.
Bottom Line Up Front (BLUF)
Fully understanding your investment philosophy is only possible when you have a handle on all your investments. Today, we’ll review your after-tax accounts so you’ve got a complete picture. Later in the series, we’ll focus on putting it all together.
In Day 11, we reviewed your retirement accounts. For some people, it’s easier to break their entire investment picture into smaller ‘bites.’ This way, it doesn’t seem as daunting. Once we’ve collected this information, we’ll be able to use it to help draw a picture of your investment philosophy.
Today’s goal will look very similar to the goal from Day 11. However, we’re only going to look at the non-retirement accounts today. Specifically, we want to know:
- How much you’re currently contributing, and into what types of retirement accounts
- Your current account balances
If you don’t have a whole lot in after-tax accounts, or if you’ve already done this, then you might want to use today as a day to go through the other part of your ‘to-do’ list. Use this time to jot down any questions, schedule appointments, or just think about some of the considerations that have been mentioned previously.
Later in the series, we’ll focus on putting it all together:
- What does your investment philosophy look like?
- How your investments might change when you leave active duty.
- What you need to do to properly balance your retirement goals with your financial needs over the first couple years after your transition.
- Whether you need to talk to a financial planner to make sure you’re on track.
Today, we’re only going to capture this information, like we did in Day 11.
What you need
Your after-tax account statements. This could be inherited stocks, mutual funds, dividend-reinvestment plans (DRIPs), savings bonds, CDs, or any other investments that aren’t tax-sheltered.
In a similar fashion as Day 11, this exercise consists of a simple checklist of questions to help you collect the data
1. Have you been saving to an after-tax account for any particular reason (i.e. we’re already maxing out our TSP & IRAs, so we decided to open an after tax account)? Examples include:
- DRIPs (these were big in the 1990s and early mid-2000s…some folks might have started them and never stopped).
- Savings bonds
- “Play money” investment accounts…for those folks who might have taken some money and tried their hand at stock-picking
- After-tax mutual funds
2. Do we have any neglected accounts out there (i.e. inherited stocks, CDs, savings bonds, etc.)?
3. Let’s record all of this information in the same way we did with the pre-tax accounts.
Remember: Our goal isn’t to change course today. It’s simply to get a snapshot of the ‘big picture’ as it pertains to our investments. We’ll focus on your investment management on another day.
To wrap up, today you’re going to:
- Figure out how much you’re saving in after-tax investments
- Get a handle on your account balances
- Record them in a system that works for you
Tomorrow, we’ll discuss your tax planning situation, and look at whether you have an opportunity to file an amended tax return for previous years. Making tax-efficient decisions is an important enabler in being able to accumulate long-term wealth.