6 Life Events that Require Financial Planning
Most people understand the importance of planning for retirement. Generally, it is a good idea to have a long-term financial plan in place from the day you begin working. However, realistically, most people do not start planning for retirement until they are well into their 40s or even later. If you are facing your 50th birthday and have not begun planning, the time to begin planning for retirement has arrived. Keep in mind, there are other life events which should make you consider how your financial plan is working for your current needs. Some of these include:
New Job Opportunity
Before accepting a new job opportunity, make sure you understand the potential tax consequences. For example, relocating to another state could mean paying higher income taxes, property taxes, sales taxes and fuel taxes. When combined, the increased taxes could eliminate any financial benefit you may get from a better paying job.
Changing Family Structure
Whether you are considering marriage, a new baby, or you were recently widowed or divorced, you should review your financial plan. These changes in your life could mean different tax filing status, opportunities for tax credits you were not previously entitled to as well as other tax changes.
If you have recently learned you will receive an inheritance, or you have recently received an inheritance, it is a good idea to speak with someone who understands the changes you may need to make to your financial plan. This is particularly true if you receive any type of retirement funds as part of an inheritance as there are specific rules that govern how inherited retirement accounts must be handled.
Offered Severance Package
Many companies take the opportunity to offer employees a severance package to reduce their workforce. Initially, a severance package may seem like a great offer, particularly if it seems very generous. Make sure you fully understand the tax liability associated with these packages before you accept them. The agreement you sign with your company could wind up costing thousands of dollars in taxes immediately.
Graduating from College
One of the most important times of your life to begin a financial plan is immediately after graduating from college. You will need to start planning for how to manage your household expenses, repay student debt, and set long-term financial goals. These steps should be taken even before you start looking for your first job.
Disability or Major Illness
Should you be diagnosed with an illness or you are in an accident which results in disability, immediate financial planning becomes a necessity, particularly if you are the family breadwinner. You may need to consider your tax options, determine if it is worthwhile to begin drawing down funds from your retirement plans, and make other long-term care decisions which will have an impact on your finances.
It is important to keep in mind, you should review your overall financial plan on a regular basis. This is particularly true if you have recently been married or had a child. As your children begin nearing college age, it is a necessity to review your overall plan and make the necessary adjustments.
Nearly every life event will have some impact on your taxes. At Rue & Associates we can help you make sure your financial plan is on track for the future. While we cannot fully anticipate what the future will bring, a sound financial plan will help ensure you are ready to face it head on. Once you have a financial plan in place, it is important to review it and adjust accordingly.