No fright here: how to deal with 3 of life’s great transitions

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I have always loved the start of a new school year. Even though I’ve been out of school a long time ago, it still seems like every September promises a fresh start with a new notebook in hand and an empty diary ready to record progress. Seeing school supply lists these days, the notebook has turned into a computer and the planner is likely to be an app, but the feeling of possibility is still the same.

Many times, students planned their big transitions, like going to high school or starting college, as an opportunity to recreate themselves in something new as they grew older, engaged in different activities, and made new friends. And these plans for change would bring both excitement and a certain sense of worry.

We believe that once we become adults, great transitions will be easier and not cause a lot of hassle because in many cases we can choose when and how these changes take place. But even long-awaited transitions – like getting married, taking a big promotion or a new job, or having a child – can be both joyful and stressful.

By having a strategy to address the key elements before embarking on major life transitions, you can be assured that you have all the “school supplies” needed for you to be successful in your new stage of life. So where do you start if you’re ready to make a big transition?

To marry

Going from being a single person who is primarily responsible only for yourself, planning a wedding with a fiancé, and then saying “yes” to becoming a husband or wife is a happy time, but it can also cause a lot. of financial stress. It’s best to talk about your finances long before you get engaged, but even if you’ve discussed money and agreed on general strategies before marriage, you’ll likely have some adjustments to make with your new spouse.

Steps to ease your transition:

  1. Consider a prenuptial agreement. if you have separate assets or debts that were created before marriage, a premarital marriage is probably a good idea. If you own a business or plan to receive an inheritance in the future, you may need to enter into a prenuptial agreement before you get married.
  2. If you are going to have a joint bank account, decide how you are going to handle the monthly bill payments and agree on a monthly budget. You may need to start with a preliminary budget that changes if you decide to relocate or plan to make a large purchase, such as a car or a house.
  3. Make a commitment to regular financial updates together. Having an agreement to meet with you monthly or quarterly to discuss your joint financial situation and the progress of your combined goals can reassure you that you are on the same page as your partner when it comes to money. In fact, some of my clients say they don’t fight over money anymore because having a regular meeting scheduled means they aren’t constantly worried about their finances and know that they will instead have an outlet for a job. positive discussion.
  4. Review your tax return status. After you get married, your filing status will change to joint filing or separate filing, and often your combined income will put you in a new, possibly higher tax bracket. Talk to your financial advisor about making an income tax projection to see if you need to adjust your tax withholding or make estimated tax payments so you don’t get surprised with a tax bill when you file your first income tax return as a married couple.

Big promotion or new job

Getting recognized for a great job with a promotion or accepting a new job with increased responsibilities is very exciting. You may also be faced with many new challenges in the new position. It helps to be on top of your personal finances before starting a new role so that you can focus on making your new endeavors successful instead of worrying if you’ve missed something important with your money.

Steps to ease your transition:

  1. Take a look at your withholding tax. if your new position comes with a pay rise, consider whether you need to change your withholding tax so that you have contributed enough during the calendar year to qualify for the “sphere of tax payment rules”. security “. Safe Harbor tax rules require that you make a certain amount of tax payments so that you don’t have underpayment penalties or interest when you file your annual tax returns. Currently, federal safe harbor rules require you to pay the lesser of 90% of last year’s tax payable or 110% of this year’s tax payable. Ask your financial advisor to help you determine if you need to make any adjustments to your situation, including state rules.
  2. Review your company’s benefit plans. With a new role, you may now be eligible for stock options, deferred compensation plans, or be allowed or permitted to purchase company stock. Your company’s HR department will give you all the details, and it’s a good idea to review them with your financial advisor to determine what is the best strategy for your financial plan and goals.

Welcoming a child

A new family member is a great joy, but can also be a source of financial anxiety, made worse by a lack of sleep in the early years. For someone this small, babies seem to need a lot of things, and the cost of all of those things can add up. Before you’re amazed at the cost of a pack of diapers and how quickly a baby goes through them, it’s good to have a discussion with your financial advisor about what to expect with your new arrival.

Steps to ease your transition:

  1. Update your budget. You will want to add new expenses, such as baby supplies. But also consider things like childcare costs or potentially reduced income if one of the parents decides to work part-time or stay home with the child.
  2. Consider the changes in benefits. You will want to explore your health insurance options to cover the child. If both parents are working and have health insurance, review the benefits, deductibles, and out-of-pocket expenses to determine which policy is appropriate to cover the child. If you are responsible for some or all of the cost of the employer’s policy premium, inquire to see if there are different costs with more than one dependent covered (sometimes this is called family coverage) and whether it makes sense for your entire family to be covered by one policy, even if both parents are in jobs that provide health benefits. You usually have 30 to 60 days to add a child to your health insurance benefits after birth depending on the laws in your state. If your employer offers a flexible dependents’ expense account, you may want to consider making contributions so that you can use tax-efficient funds to pay for eligible child care expenses.
  3. Be aware of possible tax updates. Finally, good news on the tax impact! Depending on your income, you may be eligible for a child tax credit, a child care and dependents tax credit, or an adoption tax credit for federal purposes. Some states also offer state-level child tax credits or deductions for contributions to 529 plans, which can be used to pay for eligible education expenses for K-12 education expenses and university expenses. Your financial advisor will help you determine how your tax strategy will change based on your family’s unique circumstances and recommend any necessary updates for new withholding amounts.

Whether the new character you look forward to becoming is a husband or wife, the big boss or a parent, recognizing that there may be times of anxiety mixed with your excitement for these changes is a good place to start. . Your advisor can make sure you’ve covered the financial changes needed for the next step in your life – and help you get ready to reach your goals and enjoy the next step with peace of mind.

The CDFA® trademark is the property of the Institute for Divorce Financial Analysts, which reserves the exclusive rights to its use, and is used with permission.
Certified Financial Planner Board of Standards Inc. (CFP Board) holds the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER ™ certification mark and the CFP® certification mark logo (with plaque) in the United States, which it authorizes use by those who meet the initial and continuing certification requirements of the CFP Board.
Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved in investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The content, research, tools, and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell any particular security or to engage in any particular investment strategy. Past performance may not be indicative of future results. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and evaluation presented in this presentation comes from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate, but is not guaranteed or guaranteed by Mercer Advisors.

Managing Director of Customer Experience, Mercer Advisors

Kara Duckworth is the Managing Director of Customer Experience at Mercer Advisors and also leads the company’s InvestHERs program, which focuses on financial planning to meet the specific needs of women. She is a Certified Financial Planner and Certified Divorce Financial Analyst®. She frequently lectures on topics related to financial planning and has been cited in numerous industry publications.


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