Congratulations on your new job! New work opportunities begin a major chapter in your life. As you navigate this new territory, we are here to help ensure a prosperous transition. To protect the future you are creating, you need proper financial and estate planning.
As you move through this new phase of your life, there are several things you should review to set yourself up for success.
- A comprehensive budget. If this is your first job or you’re making more (or less) than before, you should review your income, expenses, and savings as a first step on the path to financial success. It is easy to see that first paycheck and imagine all of the things you can buy without taking the time to plan for existing expenses or setting aside money for future needs such as retirement. If you have landed a new job, changes in your income can impact your lifestyle immensely. If your income has increased, a financial professional can advise you on the best way to maximize the additional funds. If your income has decreased, a financial professional can also offer crucial guidance on how to make the most of what you have.
- Proper insurance coverage. A new job may bring the need for big-ticket items. If you have to relocate for the job or are moving out of your parents’ house, you may be purchasing a new house or condo. If you need to travel for work or will have a longer commute, you may need a new car. Items such as these are not only expensive to acquire, but they also have to be properly insured. In addition, if you have loved ones who need to be cared for in the event of your passing, it may be a good idea to purchase life insurance. If your income has increased, you may want to adjust any current life insurance coverage or supplement your employer-provided life insurance to fully protect your loved ones. You may also want to obtain disability insurance to help support you and your loved ones if you become disabled. A licensed insurance agent can help you assess your current insurance needs and craft a strategy that will cover all the important bases.
- An income tax strategy. With every job comes income taxes. If you have recently been hired for your first job, you may be seeing things such as withholding for federal and state income taxes, Medicare, and the like for the first time. After the end of the calendar year, you will be required to file your first federal and state income tax returns. An experienced tax advisor can walk you through the process and explain what is involved to help alleviate negative or apprehensive feelings associated with tax season. If you have secured a new job, you may be in a different tax bracket. It would be helpful to know if there are tax credits or deductions that you are now eligible for or if you should itemize your deductions instead of taking the standard deduction.
- Basic estate planning documents. A change in employment can affect your stream of income, purchasing habits, and employee benefit options such as life insurance, disability insurance, health insurance, or retirement plan. All these changes necessitate a plan to protect you and your loved ones during your lifetime, through any periods of incapacity, and at death. If you have not yet created an estate plan, now is the perfect time to craft one. You do not need to be wealthy to have an estate plan. If you have an existing plan, a change in employment is a significant stimulus to prompt a review of the plan.
- Beneficiary Designations. If your employer offers a retirement (401k) plan, life insurance, or similar benefits, you’ll need to complete beneficiary designation forms. These forms are an effective way for you to choose who should receive the death benefit from your employer-provided life insurance policy or the balance of your retirement account. You have several choices when naming beneficiaries. You can choose one person, two people to split the death benefit or account, a charity, or even a trust. Because the beneficiary designation will override anything written in a will or trust, it is important that you complete this form properly. If you don’t fill it out and subsequently die, the death benefit will be distributed according to default rules, which may give the balance to your spouse or heirs, as defined by the plan or applicable state law, or to your estate, which will require your loved ones to go through the costly, time-consuming, and public probate process and could result in adverse tax consequences because of a shorter payout period.
- Stock or Other Ownership Interests. If you are being offered company stock or other ownership interests as part of your employment benefits, it is important that you understand what that entails before you sign any forms. Experienced financial, tax, and estate planning professionals should be contacted so they can help you understand what you have received. To properly plan, you need to know
- the type of interest,
- when the interest vests,
- whether there any tax obligations or reporting requirements,
- what will happen if you leave your employment,
- what happens if you die while still employed, and
- how you can pass along your interest to your loved ones through your estate plan.
Joining a new company is an exciting adventure. In addition to the human resources representative at your new company, we are here to help you protect the legacy you are building. A foundational estate plan is key to tying everything together for a successful future. Working together with your financial, tax, or insurance professionals to provide a comprehensive financial and estate plan, Beaupre Law is dedicated to protecting the legacy you are creating.