Life is unpredictable. Financial planning is integral to preparing for significant celebrations—such as marriage and children—and challenges such as job loss or long-term illness.
However, according to Schwab’s recent Modern Wealth Survey, only 35% of Americans have outlined their goals and created a financial plan.1
This article offers tips on planning for significant life milestones to help you navigate them with ease when the time comes.
How to Prepare for Major Life Events
Saving is critical to any financial plan. By starting early, you can take advantage of compounding, create a robust emergency fund, and better prepare to meet your short and long-term goals. Below are five life-changing events that may inform your planning.
Marriage
Although it can be tempting to put them off, it is important to have honest conversations about your finances before you and your partner walk down the aisle. Failing to do so can impact your financial future (and can also potentially hurt your marriage). To get started, you and your fiancé can:
- Disclose any debt (including student loans), earnings, savings, credit scores, and assets. Although it’s a sensitive topic, it’s important to discuss whether a prenuptial agreement makes sense for your unique situation.
- Discuss how you want to merge your finances, file for taxes, address insurance coverage, and budget for significant expenses.
- Agree on joint long-term financial goals, such as purchasing a first or second home, investing money, and planning for retirement and long-term care.
Children
Children can add joy and meaning to your life. However, according to a 2022 Brooking Institute study, parents can expect to spend over $310,605 to raise children through age 17.2 It’s also important to budget for the medical costs of having a child, including out-of-pocket prenatal and maternity care expenses. You may want to:
- Purchase 20 to 30-year life insurance policies for you and your spouse to provide resources when you cannot.
- Set up a tax-advantaged 529 plan to start saving for your child’s higher education costs.
- Update your estate plan to include your children as beneficiaries (and name guardians) in your Last Will and Testament. Consider setting up trusts to help manage, protect, and transfer your wealth to future generations.
Career Changes
Your career will likely go through ebbs and flows throughout your lifetime, and it’s important to adjust your financial plan accordingly. For example, if you earn a promotion, you can earmark these funds for retirement or to save for other goals, such as starting your own company or purchasing a vacation home. If you or your partner is considering making a major career shift, it can be beneficial to:
- Negotiate for perks (in addition to salary), such as retirement or insurance benefits, remote or flexible work schedules, or additional paid time off.
- Adapt your investment strategy to align with changes to risk tolerance and financial goals.
- Decide what to do with funds in your previous employer’s 401(k)—such as rolling it over into a new plan or an IRA—and ensure you avoid a lapse in healthcare coverage.
Retirement
According to the Employee Benefits Security Administration (ABSA), the average American spends 20 years in retirement, yet only around 50% have calculated how much they need to save.3 The key is to start saving and investing early so your money has the chance to grow exponentially over the decades. Speak with your advisor about:
- Determining how much you need to save for the age and lifestyle you want to have in retirement. Recommendations vary, but Fidelity suggests aiming to save 1x your salary by age 30, 6x by 50, and 10x by 67.4
- Considering evolving tax laws, diversifying your investments, and contributing to tax-deferred accounts (like 401(k)plans and traditional IRAs) and after-tax accounts (such as Roth IRAs). Consider converting a traditional IRA into a Roth account if your income level prevents you from directly contributing to a Roth IRA.
- Taking advantage of annual catch-up contributions (once you’re 50 or older) to boost your retirement savings.
Long-Term Illness, Disability & Health Care
If you or your spouse are diagnosed with a long-term illness or disability, it can have a devastating financial impact. Additionally, it’s essential to plan for how you will fund healthcare expenses in retirement that are not covered by Medicare. We recommend that you:
- Purchase disability insurance to safeguard your family’s finances if injury or illness prevents you from working. Be sure to consider the policy’s waiting and benefit periods.
- Invest in long-term care insurance to bridge the gap and cover nursing, social, and rehabilitative services (including assistance with daily living needs as you age) that are not covered by regular health insurance.
- Contribute annually to a tax-advantaged Health Savings Account (HSA), which allows you to accumulate significant savings to pay for future medical expenses in retirement and beyond.
Ease Stress & Empower Dreams
By working with a qualified financial advisor to create a comprehensive plan, you and your loved ones will be ready to confidently face life’s changes and challenges.
Crescent Harbor can partner with you in every aspect of your financial life to help you solidify your vision, solve complex problems, and achieve peace of mind.
We’ll consider your wealth outlook, short and long-term objectives, and desired family legacy and create a personalized financial plan to help you achieve your goals.
Sources
4 https://www.fidelity.com/viewpoints/retirement/how-much-do-i-need-to-retire
This material is for informational purposes only and should not be construed as tax or legal advice.
Registered Representatives of Sanctuary Securities Inc. and Investment Advisor Representatives of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Crescent Harbor Private Wealth is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.