Congratulations on having a baby – this for sure represents one of the most consequential and life-changing events you may ever experience. There are many emotions to navigate … and then there are also some financial considerations to keep in mind. After all, according to the US Department of Agriculture, the average American family spends about $286,000 on raising a child to age 18, and of course these expenses can be even higher given your choices for example around childcare, education, and standard of living. So, as you are having a child, here are 8 wealth management bases for you to cover: - Essential Paperwork: File for key documents, including a birth certificate and Social Security number for your newborn
- Beneficiaries: Update your beneficiary designations in key accounts (e.g., insurance, retirement, investments), so that these assets can quickly reach their intended recipients when needed
- Insurance: Make sure to enroll your child in your healthcare plan (often, you need to do so within 30 days of birth), refine or consider starting Life and Disability Insurance
- College Savings: Higher education may play an important role in your child’s future, and already the costs are rising fast -- as soon as possible, start saving and investing, leveraging one of several of the many tax-advantaged programs available to you
- Retirement Savings: Do not forget about yourself, continue to plan and invest for your own retirement, maximizing all tax-advantaged and employer-assisted opportunities available to you
- Trust & Estate: Create or refine your Will, and name a legal guardian for your child(ren), establish Medical and Financial Powers of Attorney, and explore potential Trust & Estate wealth protection and transfer strategies
- Taxes: Work with your tax advisor to maximize potential child-related tax breaks that may be available to you
- HSA / FSA: Maximize potentially “triple tax advantaged” contributions to HSAs (Health Spending Accounts), when available; fully fund and leverage potentially available DCFSAs (Dependent Care Flexible Savings Accounts)
There is a lot to consider and take care of during this exciting time — please do not hesitate to contact me in case you need help with any of these topics, I am always here to support you and your family. |
Once you start Medicare, you can no longer contribute pretax dollars to your health savings account (HSA). If you were to withdraw money from your HSA for a nonmedical reason, that money would become taxable income, and you would face an additional 20% penalty. After age 65, you can take money out without the 20% penalty, but it would still become taxable income. |
