Here are some life milestones and events that mark when you should make the call to a financial advisor.
When there’s a new baby in the family.
Parents, grandparents, siblings—everyone is affected when the new baby comes along. Now is the time to plan for what this tiny family member will grow to need in the future—especially college funds. And now is also the time to make sure that you have the right insurance and protections in place to see the child through to adulthood should something unexpectedly happen to you.
When you get married.
Two people joined together in holy matrimony are also going to need to bring their finances together, for better or worse. And if there are any children from a previous marriage involved, it’s doubly important to find and hire a financial advisor that you both like and respect.
A comprehensive financial plan—which includes your mutual goals, time horizon to retirement, and desires for wealth transfer to family members—is a very important way to get started on your life journey together.
When you win the lottery, or inherit.
We all dream of receiving a big financial windfall someday, but when you actually land a large amount of money at one time, studies show that many people squander it away. In fact, nearly a third of lottery winners actually end up declaring bankruptcy, becoming worse off than before they won.
If you receive money, call a financial advisor first, because no matter what the amount, it is actually less than it seems. You need qualified financial advice to ensure you don’t lose 30-90% to the IRS by not understanding tax laws. Financial advisors work as a team with your tax professionals to help you navigate inheritance, winnings, and gift taxes, as well as qualified money (like an inherited IRA account) tax rules so that you can actually end up ahead of the game.
When you start working.
Your first job is an exciting time in your life. Even if you’re trying to pay off student loan debt, don’t miss the chance to achieve your life goals by harnessing the power of compound interest. Putting away even a very small amount each month can snowball through the years. A financial advisor can help you lay a plan to get ahead and reach your goals over the long term.
When you start a new business, or want to sell one.
Small businesses offer many different options for retirement plans for their owners depending on the company structure. Call a financial advisor to help you set up a financial and retirement plan for your business in order to have the best chance of achieving your goals. And don’t forget about an exit strategy. Whether you want to leave your business to a family member or sell it, planning for your own departure from the company is essential to your ultimate financial success.
When you’re starting to get close to retirement.
You should start to save for retirement as early as possible, but as you get closer to your actual retirement day, having a written plan in place to guide you becomes critical. How will you transform that nest egg you’ve saved into monthly income after you’re no longer getting a paycheck—without running out of money? How much money will you need? How will you take money out? Which accounts should you withdraw from first? What kind of taxes will you have to pay? How does Social Security work? How will you live, what will you do? Should you pay off your house first?
There are so many issues and retirement risks to address that retirement planning is absolutely essential. Ideally, you should have a plan in place by age 50—55. If you don’t, call your advisor as soon as possible.
When you’re creating estate planning documents or establishing a trust.
Estate attorneys can create the documents you need, but they may not know about all the ins and outs of investments and insurance that can reduce taxation while helping ensure your final wishes are carried out. Call your financial advisor to get that important piece of the estate and tax planning equation.
If you lose your job midlife, or are getting divorced with a lot of assets.
An adverse life event can hit anyone. If you’ve lost a job or are getting divorced, your financial advisor can help determine your best options for putting an immediate action plan in place.
For instance, if you’ve lost your job, your financial advisor may be able help you position assets in order to be able retire early, or help you draw from certain accounts to get you through until you land your next job.
If you are getting divorced, be sure to get advice from a financial advisor as well as your divorce attorney. They can help you analyze the assets that will most benefit you based on your future goals in order to reach the best settlement split. They can help you see things you might not be able to see clearly, and that divorce attorneys may not know. Like what kind of burden versus advantage keeping the family home might be.
In the final quarter of every year.
Once you do have a financial or retirement plan in place, you should absolutely review it every year. (Most likely you’ll just need to answer the call, since most advisors will reach out to conduct annual reviews with you.) The annual review will allow your advisor adjust the plan as well as make changes to account beneficiaries as your family changes through time.
There are three different advisory disciplines you should seek out—tax professionals, legal professionals (like estate attorneys), and financial advisors. We can help you with the financial advice part of the equation. We can help you get set up with a tax professional and estate attorney from our network of contacts, or work as a team with yours.