Life is a series of transitions, each with its own financial implications. From embarking on a new career to retiring after years of hard work, and from the excitement of marriage to the complexities of divorce, every milestone requires careful financial planning. Here are some considerations for each step of the way.
1. Starting a New Job:
Salary Negotiation: Negotiate your salary based on industry standards and your qualifications. Beyond industry standards, research the specific company’s salary ranges for the position you’re applying for. Websites like Glassdoor, Payscale, or Salary.com can provide valuable insights. Additionally, consider non-monetary benefits like flexible working hours or professional development opportunities.
Employee Benefits: Assess the benefits package, including health insurance, retirement plans, and stock options. Understand the nuances of each benefit offered. For health insurance, compare coverage options, premiums, deductibles, and copayments. With retirement plans, assess contribution matching, investment options, and vesting schedules. Websites like Benefitfocus or SHRM (Society for Human Resource Management) offer resources on understanding employee benefits.
Budgeting: Adjust your budget to accommodate changes in income and expenses, including taxes. If you would like help with developing a budget, please contact our office and speak with one of our CERTIFIED FINANCIAL PLANNER™ professionals.
2. Getting Married:
Financial Transparency: Discuss your financial situations openly and honestly and talk about short-term and long-term financial goals to align your visions for the future. As a Certified Divorce Financial Analyst, I recommend that you obtain statements for your investment and retirement accounts detailing your assets as of the date of marriage and file them away. 20 years from now your investment institutions will likely not be able to provide you with this information.
In California and eight other U.S. states, all income earned during the marriage is community property – meaning that contributions to retirement funds, savings, assets purchases, etc. during marriage will all be split 50/50 in the event of divorce. If you begin combining accounts or adding post-marital income into your pre-marital accounts, consider that those entire accounts could be split 50/50 in a divorce situation because the original funds may be impossible to trace. I recommend that you open new savings and investment accounts after marriage so it is easy to identify which funds are separate and which are marital. Do not continue to contribute to your pre-marital accounts as this will comingle your separate and marital funds.
Income earned during the marriage should flow into new accounts. Assume that any funds you move from your pre-marital personal accounts into the new joint accounts are marital. Going back to try to trace the funds in the event of divorce can be very costly, and sometimes impossible.
Joint Finances: Decide how to manage finances together, whether through joint accounts, separate accounts, or a combination. For more information about how you may want to set up your finances as a couple, read our article https://www.amminvest.com/is-money-killing-your-romance/
Estate Planning: Consult with an estate planning attorney to update your wills and establish trusts if needed. Ensure beneficiaries on all investment and retirement accounts are correctly designated.
3. Having Children:
Welcoming a child is a joyous occasion that requires financial preparation.
Childcare Costs: Research childcare options in your area and consider the trade-offs between daycare centers, in-home care, and nanny services. Look into potential tax benefits like the Child and Dependent Care Credit.
Education Savings: Start saving for your child’s education with accounts like 529 plans.
Insurance Needs: Review your life insurance coverage to ensure it adequately protects your growing family – in the event that you or your spouse passes unexpectedly, would the surviving spouse be able to afford the mortgage? Or college expense for your children? Consider disability insurance to safeguard against potential loss of income.
Read and download our New Parent Checklist here: https://www.amminvest.com/new-parent-checklist/
4. Retirement:
Retirement Savings: Save consistently in retirement accounts and take advantage of employer contributions. The industry rule of thumb is to save 10%-15% of your income for retirement. Everyone’s situation is unique so contact us for an analysis of your retirement savings.
Social Security: Use the Social Security Administration’s website to access your personalized Social Security statement and give our office a call to explore different claiming strategies.
Healthcare Costs: Plan for healthcare expenses in retirement, including insurance premiums and long-term care. Research Medicare options well in advance of retirement age. Consider supplemental insurance plans like Medigap policies or Medicare Advantage plans. Websites like Medicare.gov provide resources for comparing Medicare plans.
Retirement Planning: A well-thought-out plan ensures you have enough savings to sustain your desired lifestyle in retirement. Reach out to one our CERTIFIED FINANCIAL PLANNER™ professionals to get started creating a financial plan for your future.
5. Getting Divorced:
While no one plans for divorce, it happens. And when it does, it can be one of the most financially significant decisions of your life.
Asset Division: Gather documentation of all assets and debts acquired during the marriage. Consider consulting with a financial advisor or a Certified Divorce Financial Analyst (CDFA) to assess the financial implications of various settlement options.
Debt Management: After the divorce, close joint accounts and refinance or transfer shared debts wherever possible. Monitor credit reports to ensure all joint debts are handled appropriately post-divorce.
Divorce Financial Planning: Proper planning can help protect your financial well-being and ensure a smoother transition to life post-divorce.
6. Death of a spouse:
Immediate Financial Assessment: Upon the death of a spouse, take stock of your immediate financial situation. This includes accessing funds for immediate expenses, such as funeral costs and ongoing bills. Locate important documents such as wills, life insurance policies, and account information.
Life Insurance Proceeds: If your spouse had life insurance, contact the insurance company to file a claim. Understand the terms of the policy, including the payout amount and any beneficiaries designated.
Social Security Survivor Benefits: You may be eligible for survivor benefits. Contact the Social Security Administration to understand your options and apply for benefits.
Estate Settlement: If your spouse had an estate plan, work with an attorney to navigate the probate process and settle the estate. This may involve transferring assets, paying off debts, and updating beneficiaries.
Financial Planning for the Future: Assess your long-term financial needs as a surviving spouse. This includes evaluating your income sources, revising your budget, and considering your own retirement planning. If you would like help with this, please give our office a call.
In conclusion, financial planning is essential at every stage of life. By addressing financial considerations during major transitions, you can navigate these changes with confidence and security. Whether you’re starting a new job, getting married, having children, retiring, going through a divorce, or navigating life as a widow, a sound financial plan is your roadmap to a brighter financial future. Contact our office to learn more about our financial planning offerings and how we can help support you through each of life’s transitions.
