By: Reed C. Fraasa, CFP®, AIF®, RLP®
The start of a new year is the ideal time to reassess your investment strategy. Much like reviewing your fitness goals or updating your household budget, your portfolio deserves a thoughtful check-up. Changes in tax laws, market conditions, and personal circumstances can all impact whether your investments remain aligned with your goals.
In this guide, we’ll cover practical steps to help you evaluate your portfolio, manage taxes efficiently, and make strategic adjustments to keep your long-term plan on track.
1. Review Your Goals and Financial Circumstances
Before diving into performance metrics or rebalancing, take a step back and reassess your personal goals. Have your priorities shifted? Did you experience a significant life change—such as a job transition, marriage, the birth of a child, or business sale? Even subtle changes in income or expenses can influence your investment needs and risk tolerance.
Ask yourself:
Are my short-term and long-term goals still realistic?
Has my time horizon changed?
Do I need to adjust my risk exposure?
Your answers serve as the foundation for all portfolio decisions moving forward.
Pro Tip: Schedule an annual “financial review day” each January to realign your goals and ensure your investment plan still fits your life.
2. Evaluate Market Conditions and Economic Trends
Market conditions evolve quickly. Interest rates, inflation expectations, and earnings forecasts all influence asset performance. For instance, higher interest rates in recent years have changed the risk-reward dynamics between stocks and bonds, prompting many investors to revisit the traditional 60/40 portfolio.
Key factors to consider:
Do higher yields make fixed income more appealing now?
How might inflation impact your purchasing power and returns?
Does your portfolio have sufficient global diversification?
While no one can predict the market, being informed and adaptable helps your portfolio stay resilient across economic cycles.
3. Rebalance Your Portfolio
After a year of market movement, some positions likely drifted from your target allocation. Rebalancing brings your portfolio back in line with your desired mix of stocks, bonds, and alternative investments, helping to maintain the right level of risk for your goals.
Rebalancing doesn’t mean overhauling your entire portfolio. Minor, systematic adjustments—such as trimming overweight positions and reinvesting proceeds in underrepresented areas—maintain discipline and reduce emotional decision-making.
If you’re working with taxable accounts, remember to consider capital gains implications before selling appreciated assets.
Suggested internal link: “Is Your Portfolio Quietly Drifting Off Course?” — HIGHLAND Learning Center article on portfolio drift.
4. Review Opportunities for Tax-Loss Harvesting
Tax-loss harvesting is a valuable year-end and early-year strategy that can enhance after-tax returns. If you have investments that declined in value, you can sell them to realize a loss, which can offset realized gains elsewhere in your portfolio.
Remember:
Losses offset capital gains dollar-for-dollar.
Up to $3,000 in net losses can offset ordinary income annually.
Unused losses carry forward to future tax years.
Avoid triggering the wash-sale rule, which invalidates a loss if you buy a “substantially identical” investment within 30 days before or after the sale. Instead, choose a similar—but not identical—replacement to maintain market exposure.
Suggested internal link: “Keep More of What You Earn: 5 Tax-Efficient Investment Strategies” — article on tax-efficient investing.
5. Consider Roth Conversions
A new calendar year is also a great time to evaluate whether a Roth IRA conversion makes sense for your long-term plan. Converting pre-tax retirement assets into a Roth can offer tax-free growth and greater flexibility in retirement withdrawals.
However, the conversion amount is considered taxable income, so timing is crucial. Consider how a conversion impacts:
Your marginal tax bracket
Medicare IRMAA thresholds
Your overall retirement income plan
Strategic partial conversions over several years can help you manage taxes efficiently while gradually building a Roth balance.
Suggested internal link: “Roth IRA Conversions Under the One Big Beautiful Bill Act for 2025 and 2026” — article on Roth conversion strategy under new law.
6. Assess Your Marginal Tax Bracket and IRMAA Exposure
Tax planning is a crucial component of your investment strategy. Many investors unintentionally push themselves into higher marginal tax or IRMAA (Income-Related Monthly Adjustment Amount) brackets through poorly timed distributions or gains.
To avoid unpleasant surprises:
Estimate your taxable income and adjusted gross income (AGI) for the year.
Coordinate income events and deductions strategically.
Monitor IRMAA thresholds, as exceeding them even slightly can increase Medicare premiums by hundreds of dollars per month.
Working with a financial advisor and CPA can help balance short-term tax efficiency with long-term wealth growth.
7. Revisit Your Capital Gains Budget
A capital gains budget is a proactive framework for deciding how much in gains to realize each year without triggering higher tax costs. It allows for more intentional asset sales rather than reactive decisions.
When setting your capital gains plan:
Forecast potential sales of appreciated assets.
Offset gains with harvested losses or charitable giving.
Space out significant transactions across multiple years.
This approach can smooth out your tax liability and maintain portfolio stability.
8. Update Your Cash Flow and Savings Plan
New year, new cash flow realities. Inflation, income changes, and evolving family needs can all affect how much you’re saving and investing. Use this time to ensure:
Your emergency fund covers at least 3–6 months of expenses.
You’re maximizing retirement plan contributions, including 401(k) and HSA matches.
You’re taking advantage of higher IRA contribution limits (and catch-up contributions if eligible).
Automating contributions helps you stay consistent and benefit from the dollar-cost averaging effect.
Suggested internal link: “The Mid-Year Reset: 5 Strategic Moves to Transform Your Financial Future” — article on financial check-ins.
9. Review Risk Management and Estate Planning
An investment plan is only as strong as the protection surrounding it. The new year is an excellent reminder to review your insurance coverage and estate planning documents:
Update beneficiaries on retirement accounts and insurance policies as needed.
Revisit wills, trusts, and powers of attorney.
Reassess life, disability, and long-term care coverage to match your current situation.
Protecting your assets ensures unforeseen events don’t undo your investment efforts.
Suggested internal link: “Avoid Costly Mistakes: Why Updating Your Beneficiaries Is Critical for Your Estate Plan” — article on estate plan beneficiary updates.
10. Partner With a Financial Advisor
Between tax laws, IRMAA brackets, and Roth conversion strategies, it’s easy for the pieces to get complex. A financial advisor can help integrate everything—from portfolio management and tax efficiency to income planning and charitable strategies—into one cohesive plan.
Partnering with an advisor ensures your investment strategy remains intentional, adaptive, and tax-smart throughout the year.
Suggested internal link: “Essential Financial Planning for Newly Independent Women: Updating Beneficiaries” — example of tailored advisor-led content.
Final Thoughts
The New Year offers a valuable opportunity—not just to set resolutions, but to make your money work smarter. By reviewing your portfolio, managing taxes intentionally, and aligning your investments with your life goals, you’ll position yourself for a stronger, more resilient, and tax-efficient year ahead.
Reed C. Fraasa is a CERTIFIED FINANCIAL PLANNER™ and founder of HIGHLAND Financial Advisors, a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, and investment management. Reed has 30 years of experience as a fiduciary advisor and is the author of The Person is the Plan®, a unique financial planning process. Reed was a frequent guest contributor on PBS Nightly Business Report and has been featured in the New York Times, Wall Street Journal, and Star Ledger newspapers.
The foregoing content reflects the opinions of Highland Financial Advisors, LLC, and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct.
Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns.
Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful or that markets will act as they have in the past.
The above article was written with the assistance of artificial intelligence (AI).