How to Turn Your 2025 Tax Return Into a Retirement Planning Checkup

You have to do your taxes, or Uncle Sam will come calling. Which is basically what Benjamin Franklin was getting at when he said, "In this world nothing can be said to be certain, except death and taxes." The U.S. tax code is complicated, and filing your taxes is a heavy chore. But you have to do it. Hopefully, the outcome is a refund or at least no additional tax payments.

With tax season in the rearview mirror, many people may be glad to move on. Don't be so quick. All of that work you did can serve another purpose. The information you generated is what you need to perform a retirement plan checkup. Do that now, while the information is still fresh.

You have everything you need right now

Hate taxes all you want, but if you can get more out of them than just a headache, you'll be much happier about the effort you had to put in. That effort usually begins with collecting information about your financial situation. Your salary information is the starting point, of course. However, you also need all your bank statements and the statements from your investment accounts, including retirement plans and individual retirement accounts (IRAs). You may also have other information in the mix, such as interest payments on outstanding loans.

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The very first thing you can do with all of that is create a personal balance sheet. That is basically a list of your assets and liabilities. Your net worth is the difference between the two, which may be negative if you are just starting out in life and own a home. That's not a terrible thing, per se, since you are building equity in your home over time.

That said, having all of your financial information in one place will let you know if you actually have a strong enough safety net. The rule of thumb is three to six months of living expenses in cash. Your balance sheet is where you'll find that information, though if your net worth is negative, you may want to lean toward the six-month side of the equation.

What about your investments?

You should also take this time to review your investments by looking over all of your brokerage and mutual fund statements. Do all of your investments make sense for your current life situation? Maybe you have a child that you didn't have before, and all of that high-risk cryptocurrency you bought isn't appropriate anymore.

If you are comfortable with what you own, you still have to consider your diversification. If you owned a stock like Micron Technology (NASDAQ: MU), which is up more than 900% in a year, your portfolio may be more concentrated than you expect. Taking profits and spreading the money into other investments could make sense and help to reduce risk, noting that Micron's stock has historically had a bad habit of collapsing after massive price spikes.

You may also decide that you own some underperforming stocks that didn't live up to your expectations. If that's the case, you may want to move on. Harvesting those losses will help offset the hit from any capital gains you take. The big goal, however, is to ensure that the portfolio you own is the one you want to own. And tax time is the perfect moment to make the assessment.

Where do you stand in the long term?

With your personal balance sheet and a portfolio that suits your needs, you can step back and look at the long-term picture. There are a number of websites that will provide fairly up-to-date figures for average retirement savings by age and income. You have all of that information at your fingertips and can use it to see where you stand.

Hopefully, you are ahead of the averages. If not, that's not a reason to despair. It is a call to action. And, with all of your account information laid out before you, you can easily figure out what you need to do to get your long-term retirement plan back on track.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.