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5 life moments that need a financial plan

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While you can’t prepare for everything, planning as much as you can for key moments in life can ease financial anxiety — and help you feel confident about the future.

Here’s how to tackle some of life’s big changes.  

1. An empty nest

There comes a time in many parents’ lives when their children move out of the house permanently — and it can be emotional. But it’s also an opportunity to reassess financial priorities. Some ways to do this may be to examine your monthly budget and eliminate items no longer needed, such as additional car insurance premiums or underutilized cable channels. 

Once this new budget is in place, consider long-term financial goals and make changes accordingly, such as increasing the amount of savings as retirement approaches. For IRA owners older than 50, the IRS allows catch-up contributions to retirement savings accounts, up to an annual maximum of $24,000 to a 401(k), and $6,500 to an IRA.

2. An unexpected medical event

Medical expenses top Americans’ list of financial worries. According to a 2017 Gallup survey, 54% of people are concerned that they won’t be able to pay their medical costs if they have an accident or develop a serious illness.

The first line of defense against a large medical bill is, of course, a comprehensive health insurance plan. But since most plans have additional out-of-pocket costs, one option to discuss with your advisor is saving for health expenses in a health savings account or flexible savings account. These accounts, set up through an employer, allow a pre-tax deduction of money from an employee’s paycheck for medical and dental costs.

Consider other types of insurance, like short-term disability or critical-illness insurance, which can be financial lifelines in the case of a serious medical event.

Remember to also factor healthcare costs into overall retirement planning. A 65-year-old couple could need as much as $349,000 to pay health expenses in retirement, according to a January 2017 report from Employee Benefits Research Institute.

3. Approaching retirement

Retiring comfortably is a common goal, but making that dream a reality requires careful planning. Consider funneling as much money as possible toward retirement savings while you’re still working, especially during those final years when earnings are likely higher.

This is also the time to think about additional protection for money already set aside. The closer retirement gets, the more vulnerable assets may be to a market downturn.

Review your portfolio with your financial advisor to make sure you’re not taking unnecessary risks with your retirement savings. Discuss your risk profile with your advisor to ensure it aligns with your retirement goals. You may consider discussing how a guaranteed source of income, such as an annuity, may fit into your plan. Some annuities offer a degree of protection if markets decline, while still letting you take advantage of market growth.

4. Losing a loved one

It’s impossible to prepare emotionally for the loss of a spouse or parent, but you can take steps to be ready financially. A well-crafted estate plan can ease some of the stress during a difficult time.

Update your estate plan periodically so it accurately reflects you and your spouse’s wishes, and encourage your parents to do the same. A life insurance policy can provide financial security and help to replace lost income.

Don’t hesitate to ask for help from people such as financial advisors, attorneys, and tax accountants. These professionals can offer advice and support.

It’s not always easy to talk to loved ones about death, but bringing the family together for a frank discussion about everyone’s wishes can go a long way toward minimizing future stress and anxiety.

5. A growing family

There are few moments more joyful than welcoming a new grandchild, niece, or nephew to the family.

And for many people, this moment means helping extended family members financially. With the cost of college increasing, contributing to their education might be a great way to support them over the long term. Talk to your advisor about education savings options such as a 529 plan with your grandchild, niece, or nephew as the beneficiary. These plans allow investments to grow tax free, without a tax on withdrawals, as long as the money is put toward educational expenses. Different states offer different plans, so compare options. Just remember that contributions to a 529 plan are subject to IRS gift tax rules.

Think of every new life event as an opportunity to review your financial and estate plan, assess your priorities, and be sure that you are making the best decisions for you and your family.

This post is sponsored by Brighthouse Life Insurance Company, Charlotte, NC. 28277.

 


 

Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. You should confer with their qualified legal, tax, and accounting advisors as appropriate.

Diversification cannot eliminate the risk of investment losses. 

In applying the information provided on this website, you should consider your other assets, income and investments. Talk to your advisor.

The material on this website should not be interpreted as a recommendation or as fiduciary investment advice by Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of New York or Brighthouse Securities, LLC. Brighthouse Financial and its design are service marks of Brighthouse Financial, Inc. or its affiliates.

 

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