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Financial Spring Cleaning - Part Two

This is the last part in a two-part series on tidying up your financial house.

After listing changes in your personal life that will take place in the next 12 months, you should consider the impact of these changes. These types of work and/or personal life changes sometimes signal the need to:
  • Change/add beneficiaries on your life insurance and/or other plans
  • Purchase additional life insurance
  • Investigate disability income* or long-term care insurance
  • Roll over an employer-sponsored savings plan account into another tax-advantaged plan
  • Begin a college savings program
  • Reevaluate your risk tolerance, and change the investment allocations on your retirement or other long-term savings plans to be more or less aggressive
  • Think about ways to cover any estate tax obligations your heirs may need to pay after your death

    Prepare questions about these changes and discuss them with the appropriate professional.

    Review your life insurance plans carefully. Most people think about life insurance only as way to protect the people who depend on them for financial support in the event they die prematurely. Although this is the primary purpose of life insurance can do a great deal more. Today's wide variety of policies – term, whole life, universal life, and a host of available riders – can also be used to fund education cost, business continuation plans, estate preservation, mortgage protection, and more.

    Conduct a careful and thorough review of your life insurance needs with your life insurance agent. Ask about the ways in which life insurance may be able to help you meet your long-term goals. Find out too about the advantages of converting your term policies to permanent life insurance coverage.

    Review your retirement plan savings and investments. Many financial experts say you may need from 70 to 80 percent of your pre-retirement income to maintain your standard of living after you stop working. This figure has increased in recent years for a variety of reasons, including inflation, increasing life spans, better medical care, and changing expectations during retirement. Today's retirees have redefined retirement as an active time to explore new interests. No longer the end of work life, it's become a new beginning, often the start of second career, world travel, continuing education, a new business, or volunteer work.

    In addition, while some expenses typically decrease during retirement (such as commuting, mortgage, and financial responsibilities for children) others, such as health care, travel, hobbies, continuing education, or a second home, can actually increase.

    Take a look at your total retirement savings picture, including any defined benefit pension plans, employer-sponsored savings plans (401(k)/403(b)), CDs, annuities, and IRAs you may have.

    Review each plan's statements. Be certain your retirement savings is growing at a rate that will support the retirement you're working so hard to earn. Talk to the appropriate professional about any issues and the possible need to make changes in order to meet your financial goals.

    Review the performance of any stocks, bonds, and mutual funds, you own. Once again, talk to the appropriate professional about any performance issues and discuss rebalancing your accounts to align with your investment objectives.

    Consider the impact taxes will have on your retirement savings and income goals. Tax laws change nearly every year: the limits on contributions to certain plans such as IRAs have increased. Some tax provisions have become permanent. Be certain you understand the tax changes that took place last year, as well as those on the horizon, and beware of the impact they are likely to have on your current income and your retirement and other long-term savings goals. Discuss these changes and their impact thoroughly with your accountant or tax advisor. Ask about how you might be able to maximize your tax-deferred savings through last-minute retirement plan contributions to your tax-advantaged accounts.

    If you own a business, review all your insurance and retirement programs. Together with your insurance agent, review your business owners policy and group health,* disability income,* retirement savings, and life insurance plans carefully to be certain that your business and your employees are adequately protected and that your policies continue to make economic sense for the business. Be certain also to review and buy-sell agreements, profit sharing plans, split dollar arrangements, and executive bonus plans. Again, as they are currently structured, do they make economic sense for the business? Are they protecting the business and enabling you to attract and retain top talent in your industry?

    Finally, be sure to find out about new policies, plans and products that are available. Financial companies introduce new products and enhance their existing products each year. Ask the appropriate professional about new life insurance policies, retirement savings plans, and investment programs that have become or will shortly become available and how you can take maximum advantage of them. Be certain you're fully aware of all the benefits available through your employer and that you're getting maximum value out of your employer-sponsored plans such as a 401(k) and 403(b).

    * Products available through one or more carriers not affiliated with New York Life, dependent on carrier authorization and product availability in your state or locality.
    * Neither New York Life nor its agents are in the business of providing tax, legal or accounting advice. Please consult your own professionals for tax, legal and accounting advice.

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Financial Spring Cleaning - Part Two

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