5 Times When You Should Recalculate Your Investment Game Plan

5 Times When You Should Recalculate Your Investment Game Plan

When your life changes, generally speaking, so should your investment plan.

Maybe it's a happy new stage, like joining your money when you marry, or having a baby and beginning to save for college. Then again, a curveball like divorce or needing to care for an elderly parent can mean you need to reboot your financial plan entirely.
The good news is, whatever life deals you, you can get back on track. Here are five times in life when you might want to reassess your investments, and a few things you might want to consider when you do.


You've had the big party. You sent the thank-you notes. Now it's time to get serious: A wedding doesn't just join two people, it also marries your money lives.

First, you'll likely want to change the beneficiaries on your or your spouse's investing accounts. This is crucial because if something happens to one of you, the assets would go to the person named as beneficiary. That includes company retirement plans, like 401(k)s, as well as individual retirement accounts.

"I once had a client who still had his ex-wife as the beneficiary on his IRA by mistake, and when he passed away, guess who got the IRA distribution? The stated beneficiary did," says Nancy L. Anderson, a certified financial planner™ with LearnVest Planning Services.

RELATED: Why You and Your Partner Need to Have the Money Talk Now

You may also want to discuss your risk tolerance with your spouse. If your spouse prefers high-flying stocks in emerging markets and you like the steady returns of bonds, you will have to compromise on the best way to invest together. This risk tolerance quiz from LearnVest can provide you with a good gauge of how much risk you're each comfortable with.

After you develop your investment strategy as a couple, make sure you're not leaving any free money on the table by maximizing the employer match—if one is available—in your and your spouse's employer-sponsored retirement plans. Generally speaking, if possible, you'll each want to invest enough in your respective plans to take advantage of a match.

"Don't leave any free dollars on the table and save up at least the company match for both, but start with the best one," Anderson says.

You can use research firm Morningstar to compare costs of fund options in your various retirement plans. Its free X-ray tool will tell you if you and your spouse have overlapping investments. That's helpful for creating a coordinated investing strategy. Joining your money can also be a good time to consult a financial planner.

RELATED: Retirement 101: Everything You Need to Know

Having a Baby

When you have a new member of your family, it's time to start thinking about saving for college. Why? Because college is expensive.

RELATED: Saving for College 101

You may want to consider a 529 college savings plan to invest enough to pay for sky-high education costs. These state-sponsored accounts let your investments grow free from federal income taxes. You can also take money out of the account tax-free if you spend it on qualified educational expenses, such as tuition, books, room and board.

Thirty-four states and the District of Columbia offer a state income tax deduction or credit for residents who contribute to their state’s 529 savings plan, but you needn't—and may not want to choose your own state's plan. (Here's more on mistakes you can make when choosing a 529 plan.) Another good place to compare your options is Savingforcollege.com.

While contributing to your kid's college fund is important, you may want to consider how much you have saved for retirement before you decide how much to contribute. That's because there are plenty of alternatives for paying for college, such as grants, loans and scholarships, but not for retirement.

You can also encourage grandparents or other relatives to give money to a 529 plan, instead of buying toys or gifts, to help plump up your fund faster as your children grow.


In divorce, retirement and investment accounts are typically split in one of two ways: Either the settlement involves buyouts based on the current values of future retirement benefits or the account balances are divided based on an agreement reached by the divorced couple.

But divorced couples tend to ignore long-term retirement planning when dealing with painful short-term financial issues immediately following a break-up, says Anderson.

There are a few common mistakes she often sees divorced couples make. For instance, they may not inquire about whether they're entitled to a portion of their spouse's defined benefit pension plan that could provide some future retirement income. Or they sometimes take a lump sum cash withdrawal from their spouse's 401(k) plan only to owe taxes and early withdrawal penalties on the funds.

A divorce typically means restructuring your investments because you have either received a large sum or given one to your spouse. You may need to rebalance your portfolio—meaning to sell or buy investments to stick to your desired asset allocation—and adjust your retirement goals based on the change in your assets.

RELATED: How to Prepare Your Finances for a Divorce

Sudden Illness

When a serious illness strikes, you may have some flexibility with your retirement accounts. For example, you can withdraw money from your IRA or 401(k) penalty-free to cover unreimbursed medical expenses that are more than 10% of your adjusted gross income if you are under age 65. But doing so could damage your retirement savings strategy.

A health savings account may be a better way to prepare for the expenses of a major illness without dipping into your retirement accounts. Money contributed to the account is tax-deductible, your investments grow tax-deferred and you can spend HSA money tax-free if you use it for qualified medical expenses. To qualify for an HSA, you must have a high-deductible health care plan, have no other health care coverage except what is permitted by the I.R.S., must not be enrolled in Medicare and cannot be claimed as a dependent on someone else’s tax return. For 2013, you can contribute $3,250 to an HSA for a single person and $6,450 for a family.

"An HSA is a rare bird in that you get a tax deduction on the funds going in and they are tax-free coming out if used for qualified medical expenses," Anderson says.

It's also important to have a living will and health care proxy in place in case your illness prevents you from managing your health. A living will outlines your preferences for medical treatment and a health care proxy is the person you pick to make medical decisions for you if you are incapacitated. Use this easy checklist from LearnVest to write your living will and designate a health care proxy.

RELATED: Living Will and Health Care Proxy 101

Elder Care

At some point you may want to have a comprehensive money talk with your aging parents. According to the AARP planning guide for families, you should address what types of bank accounts and passwords your parents have, what financial professionals they use, their current bills and how they pay them, any insurance policies, credit reports, medical records and doctor contact information along with wills and other estate planning documents.

"Having parents review and update the beneficiaries on all of their banking and investing accounts can save their adult children a ton of headaches later," Anderson says.

Your parents may also want to establish durable power of attorney for you or another trusted person to act on their behalf in financial matters. This simple legal document allows you to pay their bills, write checks on their behalf and manage their investments.

Power of attorney should be in place before your parents are unable to care for themselves. This may make things much easier if you have to step in and manage their investments.

RELATED: Taking Care of Your Elderly Parents' Finances

LearnVest Planning Services, a subsidiary of LearnVest, Inc., is a registered investment adviser that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment advice. Please consult a financial advisor for advice specific to your financial situation.


Financial planning made simple.

Get your free financial assessment.

Related Tags

Get the latest in your inbox.

Subscription failed!

You're Now Subscribed!