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Investors' to-do list for 2020

What to do, and when, for a financially rewarding year.

After a blockbuster year for stocks, it’s likely time to rebalance your portfolio.

By Elliot Raphaelson, Tribune Content Agency

You can expect that markets will be volatile in 2020 because of the threats of war, the presidential election and the impeachment trial. It is also likely that the excellent stock returns of 2019 will not be repeated. Here are some actions to consider.

Review your stock to bond allocation. As you approach retirement, you may want to reduce the percentage of equities in your portfolio. A major pitfall in retirement is not having enough assets to maintain your standard of living. If your portfolio takes a major fall at the beginning of retirement because a significant drop in stock market prices, it could jeopardize your retirement. Accordingly, as you approach retirement, consider changing your allocation to reduce the percentage of stocks in your portfolio. Although you should continue a significant holding in stocks throughout retirement (at least 30%), you should consider a more conservative allocation when you enter retirement.


Rebalance your portfolio. It is very important to do this at least once a year, if not more often. Most stock market indexes increased more than 20% in 2019. It is not likely that there will be similar results in 2020. If you have a significant stock market holding in your portfolio and did not re-balance at the end of 2019, it is likely that your portfolio is overweight in stocks, and you should consider rebalancing. For example, if your financial plan calls for maintaining a 60-40 ratio of stocks to bonds, and stocks now represent 65% of the value of your portfolio, you should take some profits and restore the 60-40 allocation.


Maintain a diversified stock portfolio. It is impossible to predict which market sectors will perform best from one year to the next. It makes sense to invest in several index funds or exchange-traded funds (ETFs) that encompass both domestic and international funds, large cap, mid-cap, and small cap, growth and value equities. In this way, regardless of which market segments perform well, your portfolio should do well in the long run. Naturally, you should select funds that have performed well historically and that have the lowest annual fees. It is much safer for you to hold a diversified portfolio maintained by a reputable financial organization than it is to personally select individual stocks for your portfolio.


Fund your retirement plans to the greatest extent possible. Make sure you take advantage of matching contributions from your employer in your 401(k) plan. Contribute at least the minimum amount to obtain your employer's match. After age 50, you can increase your annual contributions for many types of retirement plans. Take advantage of the increased contribution levels if you can afford to.


Be aware of the recent changes introduced under the SECURE Act. You don't have to take required minimum distributions (RMDs) until age 72. If you have reached 70 1/2, you can still make contributions to your traditional IRA if you have earned income. If you established a trust in your estate plan for your IRA, you should review with your attorney whether you must modify your estate plan; many trusts will no longer work. If you named non-spouse beneficiaries for your IRA, you should consider other options, such as life insurance for these beneficiaries. Your non-spouse beneficiaries will be restricted to a 10-year stretch to withdraw the funds. Consider converting a traditional IRA to a Roth over time to minimize the income tax impact for your non-spouse beneficiaries. Determine your new eligibility for a retirement plan as a part-time employee. Determine whether your retirement plan now offers you an annuity option. Consider withdrawing up to $10,000 tax-free from your 529 plan for repayment of student loans.

(Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.)

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Finance Magazine: Investors' to-do list for 2020
Investors' to-do list for 2020
What to do, and when, for a financially rewarding year.
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Finance Magazine
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