Put yourself through this brief lifeboat drill, to prepare for things suddenly going wrong. Everything may be fine right now, in the eleventh year of the economic expansion. That's a sensible time to test your ability to muster the resources to respond to a range of emergency scenarios.
1. Cash. In case you lose your job, lose your health, or are befallen by life's myriad of mishaps, can you pay the bills for at least six months?
2. Investment policy. If the stock market were to fall by 40% over the next year or two, are you ready to ride out the storm — even if it takes a decade to come back? That's approximately what happened in the global financial crisis of 2008. Although this is not in the forecast, a written investment policy statement can eliminate any ambiguity about your investment risk preferences and plan to survive a terrible storm.
3. Family risk. Will your children be able to afford college, will your spouse be able to maintain your family's current lifestyle, and will your other loved ones have the financial wherewithal to carry on if you die? Insurance — specifically no-frills term insurance — is meant to manage the worst of all risks families face.
4. Beneficiary designations. Life changes families. Divorce, death, health, and family financial dynamics change over time, making it necessary to reexamine beneficiaries listed on your retirement and other accounts.
5. Retirement income plan. Retirement income planning is being transformed by U.S. demographic trends and changes to the U.S. Tax Code. A retirement income plan done before the 2018 tax law changes, or that is not in tune with the demographic trends affecting income investing, should be updated.
6. Medical proxy. If you are unable to make your own medical decisions, give the power to make medical decisions for you to someone you trust.
7. Final details. Specify preferences about your funeral, and leave a list of all your accounts, assets, loans, important legal documents and advisors delegated to carry out your final instructions. Include how you want certain personal possessions and family heirlooms treated. If you have social media accounts, you can let someone know what to do, or there are apps that write or make recordings of final thoughts for loved ones.
A financial lifeboat drill is a pithy concept, belying its seriousness, and it requires answering hard questions about your personal financial, tax, and family situation. It would be a privilege to help.
This article was written by a veteran financial journalist. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.
© 2024 Advisor Products Inc. All Rights Reserved.
1411 Broadway, 16th Floor
New York, NY 10018
Phone: 212-679-5700
jkerman@WealthPartnersAdvisors.com
Advisory Services offered through Premier Wealth Advisors, LLC (PWA) & Cetera Investment Advisors LLC., both are Registered Investment Advisors. Registered Representatives offer securities through Cetera Advisors, LLC., a Registered Broker/Dealer. Member: FINRA/ SIPC. Cetera firms are under separate ownership than any other named entity.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisors LLC nor any of its representatives may give legal or tax advice.
Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.
This site is published for residents of the United States only. Registered Representatives of Cetera Advisors LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, or visit the Cetera Advisors LLC site at www.ceteraadvisors.com