5 Life Events When You Should Review your Investments

Every time your life changes (ie. birth, divorce, marriage, etc.) many things follow – including your investment plan.

Sometimes those life changes are happy (birth of a baby) and sometimes they can be really emotional times (divorce).  No matter what experience you are working with, it’s incredibly important to reanalyze your investments so that you can ensure you are on the right track.

It really doesn’t take considerable time – but finding the time to do it can be a problem for some. Time can fly by quite fast…. and by taking a few minutes you can make sure you are on the right track or, if you need to make changes.

Last year we had baby #5, and with each, we always take the opportunity to revise ours – I tend to do that quicker than he does, but only because I have more of an interest in the financial aspect of things. It gives me an opportunity to re-look at the investments for the kids and determine if we want to keep their funds in the same age based portfolios, make the same or increase our contributions or if we want to add a larger, one-time contribution.

We also use the opportunity to revise our will, add the newest to our life insurance as a rider and add the newest to our medical insurance.

The entire process doesn’t happen in minutes.. more like days, if not a week of phone time and paper pushing – but it’s worth every minute, and helps me rest better knowing that they are taken care of.

There are 5 times when you should reanalyze your retirement and investments.

#1 — Illness

If you are faced with an unexpected illness… and you ar looking at your investments as part of a solution to the cost of that medical care, then you might need to reanalyze your retirement game plan.

But why? If you have an IRA or 401K you can take out money penalty free to cover unreimbursed medical expenses that are more than 10% of your adjusted gross income if you are under 65.

But…. doing that will also jeopardize your retirement plan too — depending in how much you are take out.

OR what might work better (and has worked well for us) is  having a Health Savings Account ( HSA).  The money contributed is tax deductible and your investments grow tax deferred. You can then spend it tax free if you use it for qualified medical expenses. 

To see if you qualify for an HSA head HERE.

#2 – A Recent Divorce

If you happen to go through a divorce, your retirement/investment accounts usually get split…  and sadly, long term planning tends to go on the backburner so that other things can be taken care of. 

Many couples that go through a divorce take a lump withdrawal from their spouse’s 401K and are faced with taxes and early withdrawal penalties. In some cases, the couple may be entitled to a portion of their spouse’s defined benefit pension plan (that could mean income down the road).

It’s a great idea to reanalyze your investments & retirement soon after a divorce instead of putting it on the backburner, so you can adjust your retirement goals based on any change in assets.

#3 – Getting Married

Oh the joys of marriage! :)  A wedding is the union of two lives, but it’s also the marriage of your money, too. Not only do you need to change the beneficiary on your accounts, you will want to set up an investment strategy as a new couple.

Examining your 401K is a great place to start – if you haven’t yet taken advantage of your employer match, this is a great time to determine a strategy to meet the employer match, not just for you but also your new spouse.

#4 – Caring for your Elderly Parents

This isn’t probably the first one that comes to mind… unless of course you are at the age when you start thinking about care for your parents. Hopefully at some point you think about this subject – it’s something we have been thinking about quite a bit lately.

At some point, you might want to have a talk with your parents – they are aging, and you are too. You should discuss their plans with them – gather information about their finances, bills, bank accounts, medical and estate planning, and determine if their insurance policy is up to date.

You’ll want to make sure that they have updated their life insurance beneficiaries… and that they have a Power of Attorney in place (and perhaps even a Durable Power of Attorney that you can use to act in their behalf if something was to happen).

#5 – When you Have a Baby

Having a baby is a major time to think about your investments. Whether you aren’t yet investing or… if you are, but want to save for the baby.  

You might want to consider a 529 College Savings Plan to invest enough for the expense of college – even if your kids don’t attend college you can transfer or use the 529 plan yourself.  The 529 plan will allow you to grow free from federal income taxes and use the money tax free if you spend it on qualified eduaction expenses.

It’s smart to start saving for your child’s college early, but having a baby should also prompt you to check your own retirement accounts too – determine if you want to raise your contribution or, if you want to forego your child’s college fund in order to pay down debt first.

Read more: 5 Ways to Save for your Children