Advice for established professionals on reevaluating your needs for long-term financial success
Needless to say, life changes quickly. One minute, you’re graduating from college and starting your first job, and the next, you’re balancing work and family responsibilities.
As you navigate life’s big changes–getting a new job or promotion, buying a home, adding more family members–it’s important to step back and see if you’re still on track to achieve your financial goals. The benefits you chose when you first entered the workforce may need to be reevaluated and updated to reflect your new circumstances.
What Everyone Needs to Have in Place
Hopefully you’ve followed all the advice laid out in our last post, What Benefits Do I Need?, and by this point in your life and career you have:
- maxed out your short- and long-term disability
- a high-deductible health plan (HDHP), with either a Health Spending Account (HSA) or a Flexible Spending Account (FSA), so you can set aside pre-tax dollars to pay for future health care expenses
- any voluntary health coverage offered by your employer, such as accident insurance, critical illness insurance or hospital indemnity insurance, so you have a financial cushion in the case of an illness or accident
- a small amount of employer-paid life insurance
- a 401K that you’ve been contributing enough to in order to max out your employer match
Having all of these items in place is a great start. However, there are a few additional steps you should take at this point in your life, to ensure a healthy and successful future.
Plan Your Estate
I know it’s not a pleasant topic, but it’s now time to start thinking about what will happen to your assets and your family if you die–leaving it up to probate in whatever state you live in is never a good idea. Even if you’re still single, a simple will doesn’t cost a lot and ensures your wishes are carried out.
If you do have a will and it hasn’t been updated in a while, i.e. you’ve been divorced or had children, it’s time to update it. You may even want to consider setting up a trust, in case you and your spouse/partner both pass. A local estate planning advisor can guide you.
Prepare to Support Your Parents
It’s a fact of life, that as you get older so do mom and dad. At some point, you’re likely going to be faced with taking care of the people who once took care of you. Understanding what benefits you have through work, such as Paid Family and Medical Leave, and what supports you can tap into outside of work is going to be critically important for both your health and theirs. I recommend you start researching the available resources long before you need to access them.
Spend Your Extra Income Wisely
If your personal life hasn’t changed that much over the years and isn’t going to change for the near future–perhaps you’ve remained single, or you and your spouse/partner prefer to keep separate finances–your benefit selections may still be in good shape. In that case, you’re going to want to want to make the most of any extra income you may have at this point, by:
- increasing your 401k contribution
- adding dental and/or vision, if you don’t already have them
- contributing to a health spending account (HSA) or a Flexible Spending Account (FSA)
- purchasing voluntary coverage
Save on Daycare Costs
If you’ve added a spouse/partner, a child or children along with some property, your attention has likely shifted from “me” to “we.” Your benefit choices need to reflect that.As you likely already know, daycare is expensive. Unfortunately there’s no getting around it; however, a Dependent Care FSA offers a little help. For 2024, as in 2023, the limit is $5,000 for single filers and couples filing jointly, and $2,500 for married couples filing separately. Just remember that unlike other FSA contributions, Dependent Care FSA contributions are “use it or lose it.”
Purchase Life Insurance
Once you have other people relying on you, life insurance should be your number one priority.
As I mentioned in my previous post, the chances of you having enough employer-paid life insurance to cover your increased responsibilities are probably slim, so you should look into buying additional voluntary coverage through your employer if available. Be sure to check, however, if it includes portability, which means you can take it with you if you leave your job.
If you look at purchasing coverage outside of your employer, the question becomes what kind of coverage you should buy, term or permanent. Diving into this topic would require another whole blog post, so at a high level, term insurance, as the name suggests, is going to cover you for a certain period of time. Permanent insurance–whole life and universal life–will cover you for the duration of your life, which is especially important if you have a dependent that will require care if you live past the duration of term life policy.
Term life insurance is cheaper, but it doesn’t accumulate any internal monetary value for you to access, while whole life and universal life give you cash values to access. There are more differences, so I recommend working with an insurance professional to decide which option is best for you.
While getting older has its challenges, it also comes with many rewards. Just be sure to periodically assess your benefits and financial plan, to be sure all of your hard work will pay off down the road.
