The ceremony is over. mom and dad are paying off the tab for the wedding, you are back from the honeymoon, thank you notes are written. You are settling into a married routine midst the glow of newness. Time to think about financial planning? You bet!
When you are young, 10 years seems like an eternity. It isn't. The average age for a woman's first marriage in the U.S. is 27; for a man, almost 29. It wasn't that long ago that you were 17, or 19. That's how fast 10 years will get past you. In that same blink of an eye, 10 short years, our bride will be 37, our groom, 39. How old will you be 10 years from now?
Given that timeline, what challenges do you see in the next 10 years? Challenges can be positive, as in opportunities on which you wish to capitalize, birth of a child (children), purchase of a new home, etc. They may be negative or difficult, causing financial and marital strain—unexpected illness or injury, death or disability, a job or career reverse, need to care for aging parents, a child with special needs.
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Once you understand the challenges that you may confront, you then contemplate the best alternatives available to meet challenges, the resources needed to power the best alternative, and your expectations--the outcome that you want to see. This is the conversation that you should have with any financial advisor before you begin to make financial and estate planning decisions.
The first consideration is family security. What would happen if you died? First, you need a basic will. If you are like most newlyweds, you are not wealthy. A basic "I love you" will is sufficient--"I give to her or him; she or he gives to me." Language that contemplates the birth of children should be included. After the birth of a child, more complexity may need to be added to the will, including designation of guardians and trust provisions. A "special needs child" requires specialized planning.
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Just because you are married, if a spouse is sick or hurt in a healthcare facility, you cannot get status or health information unless you have a power of attorney for healthcare. The document must contain disclosures relative to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). If a spouse is to step in and manage financial affairs, you also need a power of attorney for assets.
What would be the economic consequences of your death on the surviving spouse? Would you want to replace the annual earnings of a breadwinner? If she gets pregnant, or if a child is on the way or already in the picture, substantial capital may be required. With a limited budget and the need for a high face amount, the answer is guaranteed renewable and convertible level term insurance. This is pure death protection, so it is cost efficient. You should maintain coverage to deal with illness, disability, and liability, including umbrella liability insurance on home and cars.
At this stage, do not use life insurance as a savings vehicle. Start putting money aside in a liquid account dubbed a "Laura and Charlie" (insert your names here) Financial Freedom Account. Resolve to accumulate one-years worth of living expenses so that in the event of a financial reverse, you can live for a year with no income. That's peace of mind, essential to a harmonious marriage. Your advisor can suggest investment strategies. Keep debt under control. If your outgo exceeds your income, your upkeep will be your downfall.
Beyond your freedom fund, maximize the match in any 401(k) or other retirement plan for which you are eligible. The next step, since you are relatively young and may be in a lower tax bracket, consider funding a Roth IRA. You make your contribution with after-tax money so you give up a tax-deduction. But the money grows tax free and it will not be taxed on withdrawal. Plus there is no mandatory distribution at age 70 1/2. Your financial advisor can help weigh the pros and cons of various retirement savings vehicles, for those self-employed also.
Our average married couple in 20 years will be ages 47 and 49. Odds are you will still have kids in the nest with educations and marriages to fund in the future--even as your retirement looms! Start saving early and often. Time flies when you are having fun! Congratulations!
Lewis Walker is President of Walker Capital Management LLC. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies. ▪ 3930 East Jones Bridge Road ▪ Suite 150 ▪ Peachtree Corners, GA 30092 ▪ 770-441-2603 ▪ lewisw@theinvestmentcoach.com
