Congress finally voted for a tax solution to the fiscal cliff crisis, but the battle is set for the spending side – the deadline is March 2013.
This is a perfect time to set some planning goals for 2013. Here a few things I encourage you think about as you kick the year off.
First, look at your paycheck. The payroll tax holiday – the 2 percent break on Social Security and Medicare taxes – we have enjoyed for the past two years has been discontinued. This means more money will be withheld from your check. In addition, January is usually when medical benefits cost increases begin. It is really important that you make sure that your tax withholding and benefits costs are being calculated properly.
Set some savings goals for your retirement accounts, education, vacation and holiday funds. Many people set their savings rates in place years ago, but have not updated the amounts since. This may be fine if you are saving a significant amount, but if you are saving a lot less than you can afford, then this is the time to make some changes.
If you got a raise, then commit to increase your saving in any of these areas by at least the amount of the raise. People sometimes ask me how much they should be saving for retirement. I encourage them to save 10 percent of their pay or more in order to help ensure that they will accumulate enough money to retire on. Please note this does not include matching funds from your employer. For emergency funds, it is highly suggested that you put away six months worth of living expenses. For education funds you should put away what you can reasonably afford. Some 529 plans allow you to invest as little as $25 per month.
Check how much life insurance you have. I have written about this several times before, but many people who live in Northeast Philadelphia are underinsured. Many have only small policies held through their employers. These policies are often inadequate based on the size of the person’s family and their current and future income needs. If you are in this situation, it is important that you find a competent professional to help you analyze your situation and determine how much coverage you need
Check your beneficiary designations. This is especially important if you are in a second marriage. It is highly encouraged that you make sure you have the right beneficiaries on all your investment accounts and insurance policies. Over the years I have heard a number of stories where the first spouse is still listed as the primary beneficiary and the second spouse wound up with nothing when this was clearly not the intention.
Finally, if you do not have your legal documents in place – will, power of attorney and living will – it is critical that you make this a priority for 2013. You can save your family a tremendous amount of trouble by having these documents in place. There are many attorneys in NE Philadelphia who will do this for a reasonable price.
Good luck with your planning!
The views expressed are not necessarily those of Cambridge and should not be construed as an offer to buy or sell any security.
Jim Heisler, CFP®, CDFA™, CASL™ Family Wealth Services, LLC 8725 Frankford Avenue Philadelphia, PA 19136 email@example.com 215-332-4968