April 12, 2023

Spring Cleaning Your Finances To Boost Your Retirement Savings

Written By: Daniel Gleich

Key Points 

  • The new season is a perfect opportunity to spring clean your finances.

  • To help build wealth, consider strategies such as organizing your retirement accounts, rebalancing your asset allocation, revisiting your estate plan, and reviewing your financial goals.

  • It is important to give your finances a checkup to stay on track to achieve your goals.

The weather is getting warmer. Flowers are starting to bloom. With spring in the air, you may feel inspired to freshen up your home and reorganize. While you’re in the cleaning mood, consider tidying your finances as well to boost stability and relieve financial stress. Consider the following strategies to initiate spring cleaning your finances.

Woman in her home office spring cleaning her finances by stapling financial documents together.

Organize Your Retirement Accounts

How much would you like to add to your retirement savings this year? Once you determine an amount, you can plan how you are going to hit your target. Whether you are seeking to max out your IRA or 401(k) contributions or just take advantage of your company’s match, it is important to set a realistic, achievable goal. To simplify the retirement savings process, you may elect to automate your savings. This will deduct some of your earnings from your paycheck and place them directly into your retirement account.

Desk with a calculator, increasing bar graph, and “Retirement Plan” stated to show the importance of spring cleaning your finances.

Where are your assets located? It is common for savers to have multiple retirement accounts. For example, you may have been fortunate to open a few employer-sponsored retirement plans if you worked for several companies. However, you do not want to have too many accounts that you lose track of where your savings are.

To make managing your accounts easier, consider consolidating. You can do so by rolling over your past employee-sponsored retirement accounts into your current 401(k) or IRA.

Would you benefit from deferring your taxes now (Traditional account) or paying up front and taking out your earnings tax-free in retirement (Roth account)? Depending on your financial situation, you may see more benefits in one account type or elect to have both to increase your flexibility when it comes time to take out your funds in retirement. Speak with a financial professional or Madison Trust Specialist to determine which account(s) best suit your financial situation.

Rebalance Your Asset Allocation

In addition to keeping tabs on your accounts, it is also important to rebalance the assets in your account. Throughout the year, your portfolio tends to change due to investments rising and falling at different rates. To get back on track to your original investment mix, you may choose to buy and sell part of your investments.  

When rebalancing your portfolio, consider how you can diversify to hedge against inflation and volatility. A truly diversified investment portfolio includes both standard assets (stocks, bonds, and mutual funds) and alternative assets (real estate, precious metals, promissory notes, startups, etc.).

A Diversified Investment Portfolio Infographic

Also, you may seek to reallocate your investments as time progresses. Those closer to retirement may seek to opt for more stable, income-oriented investments like real estate.

Revisit Your Estate Plan

Happy Grandfather and Grandson sitting on a couch, reading a book, and laughing - his estate planning is complete.

In addition to budgeting for health and life insurance, estate planning can be done by writing a will or setting up a trust. To take it a step further, you may want to consider a Directed Trust. This type of account secures the integrity of your assets with the greatest legal protection and avoids excessive tax burdens.

Review Your Financial Goals and Budget

From year to year, your income, expenses, and goals may change. Just as you may go through the clutter in your house and choose what to keep and discard, consider how you can do so within your finances as well. Consider asking yourself the following personal finance questions to give yourself a checkup on your financial situation:

  • Do you contribute to an emergency fund?
  • Do you have any debt?  
  • Are you putting as much in your retirement account as you’d like? 
  • Do you want to save up for any large purchases like travel, a wedding, or a house?  
  • Is there anywhere you can save, such as unsubscribing from unused gym or entertainment subscriptions?  

Conclusion: Let's Tie It All Up

Spring is a great time to take a step back and assess how far you have come, refresh your financial goals, realign anything that may have gotten off-track, and plan for the future. This year, let’s open the windows to financial opportunities that can help you achieve your retirement goals.

Young investor couple looking over their finances together as they refresh their financial goals, realign anything that may have gotten off track, and plan for their future.

Do you have any questions about spring cleaning your finances or self-directed investing?

Disclaimer: All of the information contained in our website is a general discussion for informational purposes only. Madison Trust Company does not provide legal, tax or investment advice. Nothing of the foregoing, or of any other written, electronic or oral statement or communication by Madison Trust Company or its representatives, is intended to be, or may be relied as, legal, tax, investment advice, statements, opinions or predictions. Prior to making any investment decisions, please consult with the appropriate legal, tax, and investment professionals for advice.

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