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Your 2021 Financial Checklist: 5 Questions to Ask Your Advisor

Discussing these topics can help you stay on track to meet your goals as the recovery begins to take shape

IF THERE’S ONE THING WE’VE LEARNED from 2020, it’s the importance of being prepared for just about anything. As you meet with your advisor to review your progress toward your financial goals, these five questions can help you identify areas of your financial life that may need some loving care, as well as others that are doing just fine but could potentially benefit from changes to align with changing economic and market conditions, as well as emerging opportunities.

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Should I consider adjusting my portfolio in 2021?

2020 saw dramatic spikes and drops in the market, and some level of volatility is likely to continue in 2021, says Marci McGregor, a senior investment strategist with the Chief Investment Office for Merrill and Bank of America Private Bank. She suggests doing a gut check with your advisor to make sure your asset allocation still lines up with your circumstances and risk tolerance.

“Every investor has a different time horizon, need for liquidity and willingness to take risk—and all those things may have changed this year,” McGregor says. Even if your asset allocation strategy doesn’t change, you’ll still want to check that your stock and bond mix remains in line with your target proportions.

“Every investor has a different time horizon, need for liquidity and willingness to take risk—and all those things may have changed this year.”—Marci McGregor, senior investment strategist, Chief Investment Office, Merrill and Bank of America Private Bank

With long-term interest rates likely to rise in 2021, and bond returns potentially under pressure as the level of income remains below average, "we expect long-term investors to raise their equity allocations to increase potential portfolio return," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, adding that investors should also look for tax efficiencies in light of potential changes in tax law.

As the markets and the economy continue their recovery in 2021, you can stay in touch with emerging opportunities and risks by regularly tuning in to the CIO Market Update Audiocast, suggests McGregor.

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Can I still have the retirement I want?

If you’re unsure whether the financial effects of the coronavirus have had an impact on your retirement plans, work with your advisor to estimate your expected expenses, comparing them with your assumptions about how much retirement income you’ll be able to draw upon, says David Koh, Managing Director and Senior Investment Strategist with the Chief Investment Office for Merrill and Bank of America Private Bank. If your expected income doesn’t match your estimated expenses, you’ll need to find ways to boost your savings. Try to increase your 401(k) contributions at least enough to take advantage of any company match, and consider making “catch-up” contributions to your 401(k) and IRA, if you’re 50 or older.

If you’re already retired, take the time to evaluate income streams from your retirement strategies and solutions, along with your investment portfolio and real asset holdings. “Look at how they have weathered recent market volatility, as well as how they are positioned going forward,” Koh says. “Consider a disciplined, goals-focused approach that involves a commitment to staying invested, properly diversified and thoughtfully rebalancing.”

You may also want to do some reprioritizing or make some tradeoffs, potentially even looking for ways to reduce spending or delay certain goals, both of which your advisor can help with. For more insights, read “Time for a Reality Check: Are You Still on Track to Meet Your Goals?

“Consider a disciplined, goals-focused approach that involves a commitment to staying invested, properly diversified and thoughtfully rebalancing.”—David Koh, Managing Director and Senior Investment Strategist, Chief Investment Office, Merrill and Bank of America Private Bank

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Are there any steps I can take to minimize 2020 taxes?

Amid all the past year’s challenges, here’s another: Doing your 2020 taxes could be trickier than usual, says tax accountant Vinay Navani of WilkinGuttenplan. One thing you won’t need to worry about is any stimulus money—referred to as Economic Impact Payments by the IRS— you might have received from the federal government this year. It will not be taxed or reduce any refund you may be due1. However, because the stimulus money is classified as an advance tax credit, you may be required to include it on your 2020 tax return for documentation purposes.

The government has also added some breaks for charitable giving. For their 2020 returns, taxpayers who do not itemize can still deduct up to $300 in cash donations to certain qualifying charities from their taxable income. If you do itemize, and you make cash contributions to qualifying charities, you can deduct those contributions up to 100% of your adjusted gross income, up from 60%. For more insights from Navani, read “10 Tax Tips That Could Save You Money Now.

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What are my options for managing rising health-care costs?

Tax-advantaged savings accounts such as flexible spending accounts (FSAs) and health savings accounts (HSAs) are options worth exploring, says Koh. Both are offered by employers and funded with pre-tax contributions. They are not taxed on withdrawal and can be used for a wide range of medical costs. To open an HSA, you need to enroll in a qualifying high-deductible health plan (HDHP). Other key differences between the two: an HSA permits you to roll over unused funds into future years—and even to another HSA, if you change jobs down the line. (Self-employed workers can also open an HSA to fund medical expenses now and in the future, as long as they enroll in a qualifying HDHP.) Post-retirement, your HSA can be used to pay for Medicare and long term care insurance premiums or other eligible expenses2.

To learn how much you can contribute to an HSA or FSA, see our Contribution Limits and Tax Reference Guide. And for more on HSAs read, “Health Savings Accounts Explained.

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How can I be better prepared financially for emergencies?

The coronavirus has shown us how quickly unexpected events can throw our plans off course. After you’ve reviewed your current plans to make sure they’re still on track, it’s a good idea to check your level of preparedness for future financial shocks—or unexpected personal expenses—with your advisor. Together, you can figure out how much you need to save up and discuss ways to invest the cash you’ve earmarked for emergencies.

“Your advisor can review with you how much liquidity there is in your portfolio and suggest strategies to help you fund future needs, scheduled as well as unanticipated, without potentially jeopardizing your investment assets,” says Koh. You might also want to make sure you have an updated will and documents that state who would be in charge of your finances if you become ill or incapacitated. For more insights, read “Do You Have a Plan for Your Emergency Cash.

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1Internal Revenue Service, “What people really want to know about Economic Impact Payments.” May 2020.

2For more detailed information on FSAs, HSAs and taxes, visit the Internal Revenue Service website at or talk with your tax advisor.

Information is as of 12/24/2020.

Opinions and hypothetical forecasts are those of the author(s) and subject to change.

Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.

Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions.

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation.

Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Bonds are subject to interest rate, inflation and credit risks.

Investments focused in a certain industry may pose additional risks due to lack of diversification, industry volatility, economic turmoil, susceptibility to economic, political or regulatory risks and other sector concentration risks


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