If you’re trying to figure out how much money you need to retire, that’s a pretty common reason to seek professional financial advice. But there are several other life situations where seeking financial advice may not be so obvious—yet could be the best call you make.
Here are five not so obvious times when it makes sense to call a financial professional.
1. You’ve already retired but are thinking about rejoining the workforce.
For many people, retirement can’t come soon enough. The thought of being free to do what you want, when you want, with no boss to boss you around sounds quite appealing. Yet, I often see people going back to work at some point after they retired from their career job.
Now, I’m not talking a new full-time career job. Instead, I see people becoming part-time consultants or working a part-time job that may not pay career-level income.
But here’s the thing you have to watch out for. If you are taking Social Security payments prior to reaching full retirement age and receiving earned income, Social Security will reduce your benefits by $1 for every $2 you earn over a certain limit. In 2016, this limit is $15,720. In other words, if your earned income during retirement is greater than $15,720, then your Social Security benefits will be reduced by $1 for every $2 above $15,720. Once you reach full retirement age, this penalty ends.
The details can get tricky so if you’re in this situation, you may want to seek professional financial advice to learn the nuances.
2. You’re changing jobs.
There are financial ramifications both on the job you’re leaving and the job you’re taking. From the job you’re leaving, you need to decide what to do with your 401(k) or other retirement benefits. And if you have stock options, the complications multiply. The decisions you make here have significant tax ramifications so you have to choose wisely.
For your new job, a financial professional can be a good sounding board as you review the compensation offer. While a financial professional typically does not offer negotiation advice, they can help you analyze the financial and tax implications of your offer and help you weigh the pros and cons and perhaps offer suggestions that may be more advantageous to you.
3. You’re having health concerns.
Ideally, you’re working with a financial professional before bad health strikes. Either way, you’ll want to make sure you have appropriate medical coverage, have a healthcare power of attorney, and you’ve adjusted your financial plan as appropriate to account for you or your loved one’s health situation.
4. You’re contemplating making a large purchase such as buying a new home or a second home or you’re selling a large asset.
When people make a large purchase, often times they’ll default to placing the asset in joint tenancy. That may not always be the best answer. Joint tenancy could be problematic if you are in an unstable relationship because neither of you can sell the asset without the other’s consent. Also, when one of the joint tenants dies, the asset passes in full to the other owner. This means the surviving owner fully controls the asset and they can sell it, bequeath it, or dispose of it in any way they want—even if it’s contrary to what the deceased prior owner would have wanted. Your financial professional can help you determine the best way to title your assets for your particular situation.
When you’re selling an asset, there may be significant tax ramifications. By obtaining professional financial advice, you may be able to avoid or reduce those taxes using various strategies allowed by law.
5. You’re thinking about making charitable contributions or helping friends or family members who need some financial support.
There are some major tax and emotional implications here. The good news is, the government encourages charitable giving by offering numerous tax breaks—but the rules are complicated.
For example, “In general, contributions to charitable organizations may be deducted up to 50 percent of adjusted gross income computed without regard to net operating loss carrybacks. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30 percent adjusted gross income (computed without regard to net operating loss carrybacks),” according to the IRS. Note, this is just the tip of the iceberg when it comes to charitable strategies.
If you want to financially support family members, my advice is, be very thoughtful about how you do it. I’ve seen situations where parents have jeopardized their retirement savings to support children who were fully capable of earning a living on their own. These are very delicate situations and you may benefit from the unbiased, third-party professional financial advice of an advisor who can lay out the pros and cons of helping kids who are healthy enough to help themselves.
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Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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