The new hire makes life-changing decisions on their first day of work. They "Set the Direction" of their financial future. Overwhelmed with the new environment, they select their 401(k) savings rate, type of 401(k) (Roth or Traditional) and their portfolio. Many employees won't revisit these crucial choices for many years.
They also decide on life insurance and other coverages with little more than a quick glance at the options. It is during these times that we can help with basic financial modeling that can show the employee the life-changing impact of these decisions.
The mid-life employee has increasing spending demands. Their investment portfolio has reached a size that demands attention. Portfolio design and investment selection becomes more meaningful, and the potential advantages of rebalancing* becomes even more important. Their choice of housing, auto, lifestyle and family size have a significant impact on their financial planning needs.
Their salary is beginning to reach the level at which they may be considered wealthy. While this can significantly impact their taxes, it can also bring the opportunity to make important long-term tax planning decisions. There are certain items the tax system supports: the basics of home ownership (mortgage deduction), educating children (529 college savings plans), protecting dependents (life insurance), and retirement savings (tax free or tax deferred accounts).
As their tax bracket rises, it becomes ever more important to take advantage of these potential opportunities as circumstances warrant.
The Senior employee has little free time to plan their financial life. Asking themselves the simple question: Would you ever run your business the way you are currently running your financial life?
Deferred compensation plans, stock options and "golden handcuffs"are potentially valuable benefits that demand attention. Carefully managed, they can be very rewarding. Pension plans and the potential to take a lump sum also presents opportunities to create great wealth. Employment decisions regarding international assignments or job changes should only be undertaken with a clear eye on the potential impact on retirement benefits and taxes.
As you become what may be considered "wealthy," it is increasingly important to make taxes an important part of any decision.
Making sure that you make good decisions with regard to estate planning and long term care are important at this stage in life.
Shutting off income for life and turning down a paycheck that you have worked a lifetime to create is one of the toughest decisions you will ever face. Do you take a staged retirement with consulting income or make it a single day? Either way, emotions can cloud decisions. Creating a strategy to weather the ups and downs in the market, while ensuring that you don't run out of money, is important.
Managing your income so that you maximize your spendable income while minimizing your taxable income can have a very positive impact on your quality of life in retirement. Creating the "Living Documents": a Durable Power of Attorney, Medical Power of Attorney and Directive to Physician are important to help you while you are living.
Estate planning is your opportunity to create a legacy. How do you want to be remembered? Whom do you want to take care of? Who is depending on you? These important questions can be answered with financial planning.
The basics are to create a Will that leaves your beneficiaries your assets with minimal impact of probate or other costs.
Careful planning can minimize estate taxes and ensure that the assets go to your intended beneficiaries.