It’s time to update your financial plan

How your relationship changes, property changes and personal changes can affect your financial planning.

09 Jul 2019

Questions you can ask your UBS Financial Advisor

  • What milestone events require me to update my financial plan?
  • How do I want to live now and how do I want to live later?
  • How does being a homeowner or landlord affect my investments?

Milestone events for kids tend to involve candles and balloons. But for adults, milestone events are more likely to involve making financial decisions, whether you’re getting married, buying that second home you always dreamed of or starting your retirement.

As you move through various life events, you have to shift your finances accordingly. Sometimes it only requires a tweak or a quick update. Other times, you may need to take an in-depth look at your entire portfolio.

There are three types of milestone events that may require updating your financial plan.

1. Relationship changes

Any time you change your marital status, your financial plan should change accordingly. Not only should you update your accounts (such as updating beneficiaries) and your will and/or estate plan, it’s also a good time to revisit your retirement savings.

For example, if you’ve just been through a divorce, you most likely had to divide up the retirement savings with your ex-spouse. As a newly single person, you’ll want to adjust how much you’re saving—ideally, you’d try to save an even higher percentage. But if finances are tight as you adjust, you may have to reduce the amount you’re saving.

Similarly, if you are newly married and combining resources, it’s the perfect time to increase your 401(k) contributions (instead of merely increasing your spending). Research shows that among dual-income couples where only one of the people is contributing to a 401(k), the contributor often fails to increase the amount they’re putting in, which means they’re not really making up for the fact that their partner isn’t contributing.1

If you’re welcoming a new baby, you may want to think about opening a 529 plan or Coverdell Education Savings Account. Both are tax-advantaged savings plans that allow parents to save for future education costs for a child. (The birth of a child is also a time to think about updating beneficiaries and/or your will.)

2. Property changes

If you’re buying a home, whether it’s a primary residence or a second home, or buying rental or other income property, you'll need to think about how you title your property, and how the associated expenses and income affect your overall savings goals.

For example, will you hold your property individually, jointly or inside of a Limited Liability Company or trust? Does adding a piece of real estate to your portfolio mean you need additional asset protection? How does being a homeowner or landlord affect your investments? These are all key questions to ask your financial advisor.

3. Personal changes

A personal change can include everything from a health crisis (like getting a diagnosis that will require expensive treatment) to receiving an inheritance or settlement. Any time you have a personal situation that changes the flow of money into or out of your life in a significant way, it’s a good idea to seek counsel from an advisor. Your advisor can make sure that things like powers of attorney or proxies are in place, and help you re-allocate assets. In the case of a windfall, you may need to think about a new tax strategy, or you may want to adjust your giving (to charities or to your heirs). This can also be an excellent time to pay off debts, set new financial goals and think about tweaking the amount of risk in your portfolio.

Finally, one of the biggest personal changes you may face is phasing into retirement. You'll want to look closely at your portfolio (especially the balance between investing in stocks and bonds), and have a sense of any major expenditures you see in your future (like a second home). Depending on your age, you may also be factoring in Social Security income.

With each milestone event, let two questions guide you: How do I want to live now, and how do I want to live later? And then, update your financial plan accordingly to make sure you’re still on track to meet your goals. Balloons and candles are optional.

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