Too many people wait until they file their income-tax returns to evaluate the preceding year’s finances and plan for the next. You should really begin much sooner, though, perhaps before year-end. This will give you plenty of time to analyze what you have accomplished and to plan for what you hope to accomplish. A checklist of questions might help.

(1) What are your financial goals?
Before you do anything with your money, you should decide how you want to spend it. You should itemize what you have presently, what you need for the year ahead, and what you hope to have ten, twenty, or thirty years in the future.

(2) Over the past year, have you made progress toward achieving your goals?
You should probably compare the performance of your investments to the goals you’ve established with regard to those investments for the year. The results of this analysis will help you decide whether or not you should alter your investments.

(3) Are any changes about to occur that will affect either your immediate needs or your long-term goals?
A job change, for example, may drastically alter your income and your lifestyle. Other circumstances that may affect your finances might include buying a new house, financing an education, or paying for a wedding. Planning at least a year in advance will help you to adjust to these changes financially.

(4) What can you do to minimize your taxes?
A general rule for tax purposes is to defer income to the next year while accelerating deductions for the present year. To defer income, you might postpone selling assets [or collecting bonuses], and you might also purchase Treasury bills or other investments on which interest or dividends are not payable until the next year.

Quite often people will also make contributions to their Individual Retirement Accounts at the last minute for an additional deduction. However, it may be advantageous to make your IRA deposits early in the previous year rather than wait until you file your tax return the following year. Although past performance is not a guarantee of future results, generally speaking, the longer your money is within your retirement account, the more time and opportunity is available for potential account growth.

(5) Do you need any additional help to implement your plans for the future?
A lawyer, an accountant, a stockbroker, and a trust officer can be a tremendous help in your financial matters. If you’re not progressing as you would like, or if you find you don’t have the time to manage your money properly, you should consider hiring a professional.

Annuities have been around longer than the United States, but it wasn’t until the Great Depression that they started to become popular. In the 1930s, Americans who were concerned about the health of the financial markets turned to products offered by insurance companies because they were seen as more stable.

Since that time, an array of annuity products has been introduced, including the variable annuity in 1952.2 During the past half century, variable annuities have been both embraced and reviled. Their complexity is a common source of confusion, which means any decision to buy a variable annuity should be made carefully and with proper guidance.

Nonetheless, a variable annuity could play an important role in a retirement portfolio. These facts about variable annuities may help you understand them better.

A variable annuity is a long-term investment vehicle designed for retirement purposes. It is a contract in which one or more payments are made to an insurance company, which agrees to pay the contract holder an income in the future. The interval between when the contract is purchased and when it begins producing income is usually several years, which may make a variable annuity less appropriate for older investors. Withdrawals of annuity earnings are taxed as ordinary income and may be subject to a 10% federal income tax penalty if made prior to age 59½. Surrender charges may apply if the annuity is surrendered during the early years of the annuity contract.

A variable annuity can take advantage of the growth potential of the stock market, but it can also lose value. It is variable because the future value relates to the performance of underlying investment subaccounts that are selected by the contract holder, usually according to his or her risk tolerance. Because variable annuity subaccounts fluctuate with changes in market conditions, the principal may be worth more or less than the original amount invested when the annuity is surrendered.

For an additional cost, the contract holder may be able to purchase guarantees, such as a guarantee of minimum fixed income payments or a guarantee to withdraw a specific amount over a lifetime, regardless of the account value. Any guarantees are contingent on the claims-paying ability of the issuing company. The investment return and principal value of an investment option are not guaranteed.

There are contract limitations, fees, and charges associated with variable annuities. These can include mortality and expense risk charges, sales and surrender charges, administrative fees, investment management fees, and charges for optional benefits. Withdrawals reduce annuity contract benefits and values. Variable annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association.