By Ryan Ovenden, Wealth Advisor
In many ways, 2020 may have been the “reset” we needed in order to become better stewards of our time, talents, resources and relationships. A pandemic, protests, a contentious election, the nearly full shutdown of the world economy, school and work from home, nearly all public activities and entertainment canceled – our norms were turned upside down.
We all were forced to push “pause” and re-evaluate how we prioritize our lives. We’ve had to get creative and more intentional about growing our relationships, both inside and outside of our immediate households. We’ve been forced to think of others before going to the store or school or work when we weren’t feeling well. Many of us lost jobs or loved ones unexpectedly.
As we begin a new chapter to this great adventure, I want to share these three tips for financial planning that can help you create a firm financial foundation to weather future storms with confidence.
Do you have a legal will in place?
It’s shocking how many people choose to allow a complete stranger to decide what happens to their assets and dependent children if they were to die unexpectedly. If you don’t have a will in place, that’s exactly what you are doing. You can go to an attorney to get a will, or there are free options online. Make it a priority, for the sake of everyone you love, to get a will in place in 2021.
Do you have the proper amount of life insurance?
Imagine having a client who is a young, healthy woman in her early 30s, and like many only has a small life insurance policy her parents bought her when she was born. In this example, it may be a reasonable determination that she should have more insurance coverage taking into consideration her current needs and future plans such as marriage, having children, adoption, etc.
Unfortunately, life can also come with unforeseen hardships, expenses, and outcomes such as a terminal illness in the family. For these reasons, taking a proactive approach toward planning that includes life insurance can have a big impact on life events planned and unplanned.
Do you have life insurance? Do you have the right kind and amount? Make it a priority to invest a few minutes using an online calculator to determine how much you need. Once you’ve determined how much, find an independent insurance agent who can get quotes from multiple companies and find you the best rates.
Are you investing in a Roth IRA?
Diversify! We’ve all heard it. Don’t put all your eggs in one basket.
Most Americans have a retirement plan offered through their work that offers mutual funds, a natural diversifier. This is a great way to grow assets, and hopefully, receive some kind of company match on your investment.
However, this asset will be fully taxable at retirement. Your pension and your social security income will also be fully taxable. This can put you in a precarious tax situation during retirement.
I would suggest you diversify the taxability of your investments, and the best way to do that is by opening a Roth IRA or considering a Roth conversion in 2021. Roth IRAs are far more flexible than Traditional IRAs or group retirement plans. They also allow the investor to grow the money without paying taxes, and to take the money out tax-free during retirement.
Implementing these tips for financial planning in 2021 won’t guarantee you avoid another year like 2020, but they will help you better prepare for whatever the future throws your way.
If you need help talking through or implementing any of these steps, give us a call. We are here to serve!
