What Did You Miss on Your Last Financial Review?

I was at at dinner party the other night where I met some new people. Who knows how the conversation got around to age, but, the gentleman we had just met announced that his wife would be turning 50 this year. Being the Financial Planner that I am, I leaned over to his wife and said, “You know, you can put $6,500 in your IRA this year.”

Clearly, I’m not a lot of fun at dinner parties, but, I did learn an important lesson that night. Up to this point in the evening, we had had some pretty interesting conversations around money. The husband (let’s call him Jeff), is the Chief Financial Officer of a national company, and together, he and his wife (we’ll call her Jenny) had saved to put their children though college and live an enjoyable life – imparting some important money lessons to the kids along the way. This man knew about spending and saving – he was a CFO, of course he did.

But, my epiphany came when I made my wonderfully meaningful comment – You can put $6,500 into your IRA this year. If you are not familiar with what I was getting at, I was referring to the IRS rule that at age 50 you can increase your contributions to an IRA from $5,500 per year to $6,500. At this point, Jeff stated that Jenny didn’t need to put money into an IRA.

Now, here was a family that went to great lengths to save for college and travel/family vacations. They spent money wisely and worked hard to model good financial behavior for their children, but, they just didn’t know all of the ways to help themselves – financially. What I took from that comment was that he was unfamiliar with that rule and/or wasn’t really using IRAs to reduce his taxes and save for his future.

My epiphany was that everyone can really use a financial check-up with a professional financial planner, if necessary. Jeff probably knows everything he needs to know about corporate finance, but, that doesn’t always translate down to the family. Wouldn’t you like to know that you are saving wisely and keeping as much money out of Uncle Sam’s hands as possible? Able to retire when you’d like or get a spot check on tax deductions, or even when to take social security?

A comprehensive financial review will provide you recommendations in the areas of investments, retirement, insurance, tax planning and estate planning (even budgeting and cash flow management, if you’d like). A full financial review should give you the tools and direction to build wealth and reach your goals. It should simplify your finances, help you build and protect the wealth you’ve earned, and put you on track to the future you desire. Here are 5 important areas to review.

1. Investments/Savings

The money that you put aside for goals other than retirement needs to be invested properly to be available when you need it. Outlining your short-, intermediate- and long-term goals will help you know how much to set-aside for each and how to invest for them. There are always tax implications with these types of investments, and owing taxes isn’t always bad – it means you made money. Your goal should be to keep taxes at a minimum.

2. Retirement Savings

It’s the day you dream of, but you sometimes wonder if you’ll ever get there. While you are still in the workforce, ensure that your retirement investments are working as hard as you are. Savings that you have with an employer need to be reviewed in conjunction with any assets you are holding as IRAs, old 401(k)s/403(b)s, or pensions and annuities. These all work together to provide for your retirement and need to be reviewed as a whole. Additionally, your plan at work should be reviewed for expenses and holdings to see if it is better for you to continue to add to the plan or open your own IRA.

3. Taxes

Whether you are bringing in income from multiple sources, or simply earning more, work to maximize your deductions, ensuring that you can keep more of the money you’ve earned. Are you taking all of the deductions that are available to you? Should you take the deduction or credit? Are you withholding properly? Have you invested your assets in a way that keeps your taxes at a minimum, while still reaching your goals?

4. Insurance

From selecting life insurance to protect your loved ones, to evaluating health insurance based on your growing family, prepare for the unexpected and even the unlikely, because you’ve worked hard to get here. How much life insurance do you need, and how often should this be reviewed? This changes with the natural evolution of your life. An unbiased opinion can help.

5. Estate Planning

Protect the wealth you’ve built by constructing a strategic and thoughtful estate plan. You’ve worked your entire life to build wealth, your goal is to preserve it for your future use and possibly the next generation. You need to start with the Big 4 Documents (Will, Living Will, Powers of Attorney for Health Care and Finances), but, do you also need a trust as part of your estate plan? You may assume that trusts are just for the ultra-wealthy, but there are additional reasons why setting up a trust is a smart financial strategy. How will you pass your assets on in the most tax-efficient manner? You may need to start today.

For hard working professionals, Financial Planning can simplify your finances, build and protect the wealth you’ve earned, and put you on track to the future you desire.

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