All the trends that have emerged during the coronavirus have implications for the way households—and the advisors who assist them—manage their finances.
Here are eight things to consider if you're looking to reevaluate yours.
1. Set a savings goal for emergency funds based on your own situation.
- Employment status (contract or permanent). Gig economy and contract workers are naturally at risk for more frequent interruptions than permanent workers.
- Variability of earnings. Workers with uneven cash flows from their jobs, such as commissioned salespeople or those who are heavily reliant on bonuses, need to hold more in emergency reserves than those with stable incomes from work.
- Number of earners in the family. Dual-income households arguably need less of an emergency reserve than single-earner households, because the probability of both earners facing job loss at once is smaller.
2. Determine where to hold your emergency funds.
A nonretirement brokerage account is the simplest holding place for short-term cash needs, but other vehicles can also fit the bill.
- A Roth IRA can be an effective multitasking vehicle for younger investors.
- Health savings account assets can also be used in the emergency fund context.
3. Assess options for healthcare if your employer offers more than one type of coverage.
Factors to consider when determining the best coverage:
- Account premiums
- Healthcare usage and preferences
- Out-of-pocket expenditures like copayments
- Your financial wherewithal to cover unanticipated healthcare outlays
4. Choose the best HSA for your situation and identify how you can invest those HSA assets most sensibly.
5. Craft a budget for healthcare expenditures in retirement.
This should be based on:
- Your health history
- If you have supplemental coverage
- If you are subject to extra premiums for Medicare Part B and D coverage
6. Determine where you can access funds for healthcare outlays.
7. Understand the trade-offs associated with early retirement and the stresses that may impact the viability of early retirement as a financial plan.
8. Map out a plan for how you will source in-retirement cash flows.
- Explore delayed Social Security filing so you can enlarge eventual benefits, especially if you have longer-than-average life expectancy.
- Make a decision about a pension, especially if your employer has offered a lump-sum pension buyout.