Kevin Ward – Advisor
Life is full of unknowns—simultaneously a source of tremendous potential joy and anxiety. But with thoughtful planning, you can mitigate some of the unknowns—or at least better position yourself to handle surprises when they arise. In this series, we explore some planning you can undertake, depending on your phase of life. People admittedly do things in their own order—everyone’s on their own journey—so rather than group considerations into age brackets, we’ve grouped it relative to where you are with respect to your (or your significant other’s) career. If you happen to tackle life in a different order, first, good for you. And second, these pieces should nevertheless offer some ideas for you to explore more either on your own or alongside a seasoned financial advisor, so you can still position yourself well to handle whatever the future throws in your direction. Among the considerations we consistently explore are those related to benefits management, insurance, your balance sheet (managing liabilities, debt, and assets), and saving for major life events or purchases.
In this series’ first two pieces, we’ve explored some of the financial options to consider as you begin and establish your career. As your career matures, your focus will likely shift from making decisions to evaluating your position and tweaking any plans to account for life’s inevitable twists and turns. For example, as your career matures, perhaps you receive new opportunities and consequently change companies—maybe even move to a new city or state to pursue those opportunities. Or maybe the causality runs in the reverse—you and your family want to relocate and consequently, you pursue new career opportunities in a new location. Or maybe you’ve climbed the corporate ladder and are on the cusp of making partner or taking a significant leadership position in your current organization. Perhaps you decide to leap from employment into the entrepreneurial realm, start your own business or work as a consultant.
Many such changes will likely entail higher compensation—with the possible exception of starting your own venture, presumably requiring capital and taking some time before it becomes fully profitable. As your income increases, so, too, could the sophistication and complexity of your investing strategy. Diversification is key to long-term investing success—not only because it can help dampen volatility over shorter time horizons, but also because it can help deliver higher long-term returns as some of your investments zig while others zag. A financial advisor can help you determine whether it might be worth broadening your portfolio to include alternative investments like private equity, private debt, real estate, commodities, or other possibilities.
Naturally, it’s important to balance potential risk with potential reward. If you reach this stage of your career later in life—and consequently, closer to your ideal retirement age—it will be important to evaluate your time horizon and ensure that if you add more volatile investment vehicles to your portfolio, you appropriately balance that exposure sufficiently with an appropriate level of exposure to less volatile investments. For example, perhaps you increase your fixed income or bond exposure during this period. Individual considerations are key and enlisting the advice of an experienced financial advisor can ensure you include the relevant factors.
As always, it’s worth reviewing the status of your employment benefits, insurance status, and estate during this phase of your career and life. Though a relatively simple estate may have sufficed earlier in your career when the value of your assets was lower, as your career progresses and your assets grow, it may be worth considering establishing a trust, which can help preserve your assets’ value and clearly delineate how those assets should be distributed among your heirs or charitable causes. Trusts come in many shapes and sizes and varying degrees of complexity—but among the important benefits are potential tax advantages, depending on how you choose to structure it. Speaking with an experienced estate attorney—or even starting with your financial advisor and going from there—can help you ascertain whether a trust might benefit your situation.
Similarly, there are a few ways to think about life insurance during this life phase, depending on your financial and personal situation. If you still have a relatively significant amount of debt—e.g., a mortgage or student loan debt—a life insurance policy could help pay off some or even all of your remaining debts after your passing, helping to potentially mitigate the risk of your family inheriting those burdens. If you have children—particularly young children—a life insurance policy could help ensure your surviving spouse and children are well provided for. A life insurance policy can also cover death-related expenses, such as funeral expenses. Though you may have some insurance through your employer, it’s worth considering whether you have enough insurance given your personal circumstances—particularly as insurance policies typically cost more as you get older, so it’s advisable to investigate earlier in your life rather than later. As we mentioned in our piece on life’s prior phase, it’s equally important to keep insurance in the appropriate perspective—which your financial advisor can help you maintain—and avoid over-insuring yourself or considering insurance as an investment replacement.
As we’ve noted, people will take different paths through their careers and personal lives—but one conversation worth having as your career matures and your financial situation solidifies is with your parents (and your in-laws, too, if you have them). A growing consideration for many as life expectancies extend is senior care—which is naturally intimately related to seniors’ health and personal preferences. It may be worth exploring if you and your family haven’t discussed how the prior generation is positioned concerning their finances. It’s also wise to ask where any important documents are kept—trusts, powers of attorney, wills, etc. Such topics can understandably be sensitive and are intensely personal and private—but it is far better to have a sense of whether aging parents are likely to require financial support in their advanced years sooner than later.
The goal of financial planning is ensuring you and your family are—to the extent possible—well-positioned to not only weather, but thrive, in a world of near-endless possibilities. Though undoubtedly a challenging exercise, it’s one eminently worthwhile—and definitely one better started sooner than later, when you still have time to adjust as necessary.
© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
