Life Events – Review Financial Strategies

If nothing ever changed in your life, you could probably chart your financial and investment strategies and then forget about them. But your life is full of changes — and many of them will require you to take a new look at how you save, invest and protect your family.

Let’s run through some of the most common milestones in life and see what sort of moves you might make in response:

Marriage – It sounds obvious, but once you’re married,
you have to stop thinking in terms of “one” and start thinking
of “two” in most aspects of your life — including your
finances. For example, if you are an aggressive investor but
your spouse is more conservative, you both may need to
compromise and choose an investment strategy that’s
“down the middle.” At the same time, you’ll want to set
some common goals, such as saving enough for a down
payment on a home.

Children – When you have children, you have to protect
them today — and invest for their future. Your first step,
then, might be to purchase life insurance. You can typically
buy a term life policy at very reasonable rates. The exact
amount of coverage you need depends on your individual
situation, but you’ll probably want at least enough to pay
off your mortgage and send your children to college should
anything happen to you. And to protect your income, you
might want to consider disability insurance. Finally, it’s
never too soon to start saving for college. You might want to
consider opening a tax-advantaged account, such as a Section
529 college savings plan.

Job changes – When you leave a job, you may well
have an important decision to make about your 401(k) or
other employer-sponsored retirement plan. If you don’t need
the money right away, you might want to avoid cashing out
your plan, because you’ll likely face an immediate tax bill —
and you’ll have fewer resources for retirement. Consequently,
you may want to roll your 401(k) to an IRA or your new
employer’s plan, if it allows such transfers. Before taking
action, consult with your tax advisor.

Remarriage – If you ever remarry; you may need to
change the beneficiary designations on your 401(k), IRA
and other investment accounts. You also may need to work
with your attorney to revise your will, living trust and other
documents related to your estate plans.

Retirement – For many decades, you saved and invested
for your retirement. Once you retire, however, you should
move away somewhat from the “accumulation” phase and
start thinking instead of how best to manage the money you
have accumulated. That means you’ll need to decide when
to start taking Social Security and how much to withdraw
each year from your various retirement accounts, such as
your 401(k) and IRA. A professional financial advisor can
help you develop a withdrawal rate that’s suitable for your
individual situation.

You’ll encounter many important events on the road of life. By making the right financial moves along the way, you can help make the journey more pleasant.

— Written by Bob Irish, an Edward Jones representative based in Ennis.