Is It Time to Spring Clean Your Financial House?

Spring is the perfect time for a refresh, and it doesn’t stop at closets and garages. It’s also the prime season for fine-tuning your financial portfolio. Accounts like 401(k)s, individual retirement accounts (IRAs), brokerage portfolios, and old employer plans can drift over time. A focused financial check-in provides the time and maintenance your portfolio needs to continue working in your favor. Here are some key action points for your financial sprucing.

Rebalance Assets

Reevaluating and redistributing holdings can prevent a portfolio from becoming too aggressive or conservative. Many financial experts identify a drift in excess of 5% as a time to rebalance. For example, market swings over the past few years have been significant, and after strong equity performance in 2023–2025, many portfolios have become stock-heavy. While stocks can yield greater returns in the long term, in the short term, they can carry greater risk. If a portfolio is designed to hold 60% stocks but has grown to 65% or more, it may be time to realign. An investor can manage risk by restoring their portfolio to its original asset allocation, or one that better suits their current risk profile and tolerance. Ideally, the mix should reflect investor age, income needs, time horizon, and comfort with risk.

Consolidate and Simplify Accounts 

With job changes throughout a career, many Americans juggle multiple retirement accounts. Combining similar accounts with the same investment goals can reduce fees and ease investment management. Individuals with a 401(k) from a previous employer should consider:

• Rolling those funds into the current employer’s 401(k)
• Transferring the money to a traditional IRA
• Converting to a Roth IRA (depending on tax strategy)

Age-based withdrawal rules can influence whether it makes sense to roll funds into an IRA or leave assets in an employer plan. Before consolidating accounts, investors should understand how certain milestones may affect access, penalties, and required distributions.

• Rule of 55: Individuals who leave a job in or after the same year they turn 55 may be able to withdraw from that employer’s 401(k) without incurring the early withdrawal penalty (ordinary income taxes will still apply). This exception applies only to the employer plan from which the individual separates. Rolling those funds into an IRA would eliminate this provision.
• Age 59 ½: Beginning at this age, withdrawals from retirement accounts are generally penalty-free. For those near 59 ½, consolidation decisions may be less influenced by early withdrawal restrictions and more by investment and fee considerations.
• Required minimum distributions (RMDs): Individuals must begin taking RMDs from traditional retirement accounts at age 73, increasing to age 75 beginning in 2033 under current law. However, those still working may be able to delay RMDs from their current employer’s 401(k), if the plan allows. Consolidating accounts could affect distribution timing and tax planning strategy.

Review Investment Management Costs

Investments like mutual funds and 401(k) accounts often carry management fees. While small annual charges may seem insignificant, over time, they can substantially reduce returns. Industry data from 2024 cites that the average expense ratio for equity mutual funds is about 0.40%. The asset-weighted average for index funds is between 0.05% and 0.07%. Employer-sponsored plans range from 0.5% to 2% annually, depending on fund selection and administrative expenses.

Consider a $100,000 portfolio earning 8% annually over 30 years:

• With 2% in annual fees, the account grows to approximately $574,000.
• With 1% in annual fees, it grows to approximately $761,000.

That 1% difference results in nearly $187,000 less over time. Fees compound just like returns—except they drain portfolio value rather than add to it.

When reviewing costs:

• Compare expense ratios between active and index funds.
• Look for overlapping holdings that may duplicate fees.
• Review advisory or management fees in taxable and retirement accounts.

Lower-cost investments don’t guarantee higher returns, but reducing unnecessary expenses improves net financial outcomes.

Cull Underperforming Investments

Markets rotate, and what led last year may lag this year. It’s important to review individual holdings. Investors should reallocate stocks that consistently underperform or no longer fit their strategy. While selling at a loss is never ideal, tax-loss harvesting can offset capital gains and up to $3,000 of ordinary income annually, with additional losses carried forward. If the money goes toward a better investment, it’s still a win. The goal is to give every holding a clear purpose within a portfolio.

Reexamine Your Estate Plan  

An individual’s estate plan should always reflect their intentions in the present. Circumstances change throughout life, including marriage, divorce, births, deaths, business ownership, and updates to domicile. These factors, as well as new legislation, can also impact tax exposure. Regular reviews should check the following:

• Beneficiary designations on retirement accounts and life insurance
• Powers of attorney and healthcare directives
• Trust structures and distribution plans

Beneficiary designations override instructions within a will or trust. If an individual’s 401(k) lists an ex-spouse or an outdated beneficiary, that designation stands, regardless of other documentation. For instance, if an individual fails to update their beneficiaries on a retirement account after subsequent children, only the first child named will be the beneficiary of that asset.

Schedule a Financial Checkup

Meeting with a financial advisor to monitor portfolio health and upkeep is as important as a regular exam with a doctor for physical well-being. An advisor can help manage retirement accounts, tax strategy, estate planning, and investment risk, and navigate changing legislation and fluctuating markets.

Spring is the optimal time to sit with a financial professional and tidy your affairs. A second set of eyes can help identify gaps, reduce costs, and align your strategy with current laws and opportunities. Consistent asset checks and adjustments as needed can pay dividends in the future.

If you would like to spring clean your wealth management strategy, SHP Financial will evaluate your accounts, review your allocations and fees, and present customized options for your goals. Contact an SHP Financial advisor today for a complimentary review and clarity about your next steps.