Whether you are just out of school or nearing retirement, a periodic review and update of all aspects of your short-term and long-term financial health is important.
When my mother was turning 90, her doctor noticed in an X-ray, a spot on her lungs. The cancer doctor said to do a biopsy and then they would determine the radiation regimen and the possibility of surgery. My mother said “Yeah, no!” The cancer doctor dealt only with his area of expertise and not the entirety of the situation. Therefore, she went back to her GP and her Gerontologist to devise an overall plan for her physical health. A good book to read for those dealing with aging parents is “Being Mortal – Medicine and What Matters in the End” by Dr. Atul Gawande.
The point of the story is that for your financial health, much like your physical health, there are many facets that change and evolve over time. What was a good decision at 30 years of age may not be the same at 60. How you invested before children and grandchildren isn’t the same after.
There are many consultants (like the cancer doctor) that can assist along your lifetime with your financial health. In many situations, they just deal with only one aspect. Understanding their perspectives and seeing how they fit into your plan are key to making sure that your finances are updated and the decisions you made are still relevant. I suggest that you periodically review the following financial health areas.
There are many types of insurances to choose from: whole life, universal life and term. Each has its benefits at distinct stages of your life. For example, term insurance can get expensive later in life and its purpose (estate taxes, funeral, kids’ college) may change. So, assess the type and amount on a periodic basis. Additionally, review the beneficiary of each policy regularly.
For your personal business or investments, deciding between an LLC, a partnership or an S corporation used to be an easy answer. In comparison, C corporations have double taxation and high tax rates. However, with the reduction of the top C corporation tax rate, the answer is not as obvious. Doing your research and seeking professional advice is important to determine the best structure for your situation.
Gifting and Estate Planning
Your gift and estate planning should be assessed often as life changes occur such as an increase in or shifting of wealth, addition of children and grandchildren or funding college for the next generation. The estate exemption amount changed dramatically but has a deadline (2026) which will reduce the exemption. With tax laws and family situation changes, your planning should continue to occur frequently.
IRA and 401k
How much should you put into these retirement plans? How much control do you have over the investment decisions? What happens to your 401k balance when you change jobs? When should you begin your withdrawal from these and your Social Security plan? These are all decisions to be thought about, discussed, made, and remade as you age and as your financial situation changes.
Wills, Medical Power of Attorneys and Trusts
As your family expands and your financial situation changes, the need to review a will is very important. This should include a review of the beneficiaries, executors and trustees. I have emailed many friends a skeleton medical power of attorney as their parent is being transported to the hospital. Try to stay current on these necessary documents.
Some of these conversations are easy and fun and some are exceedingly difficult and thus are often put off. Many people work daily on their physical, spiritual and mental health; keep your financial health in your thoughts also.
There are many consultants to assist including investment managers, accountants, attorneys, insurance agents, etc. Each play an important role in your financial health. I recommend that you decide on your short and long-term goals and how each consultant and their perspective fits in.
Weinstein Spira is here to assist in questions, thoughts and challenges related to your financial health.