Tax Day is Quickly Approaching

As a reminder, Monday, April 15 is tax day! Whether you’re paying taxes or receiving a refund, we’re going to expand a bit on some of the content mentioned in last month’s newsletter. Specifically, the importance of budget planning and creating a net-worth statement.  

To add some color to this important topic, as of 2022, the Centers for Disease Control reported that life expectancy in the U.S. is 77.5 years. Specifically, life expectancy for women is 80.2 while for men, it is 74.8 years. As such, an individual retiring in their 60s may expect to live 20-30 years or more after retirement. While increases in life expectancy are generally viewed very favorably, this can also lead to an unexpected strain on retirement savings. Coupled with recently high inflation rates and rising costs for housing and healthcare, budgeting for retirement requires careful and proactive planning.

Budget Planning. Hopefully, budgeting is not a new concept and you’re already used to keeping a monthly or annual budget to account for income, savings, and expense changes. It’s also a good idea to prepare a retirement budget based on your projected retirement income and your expenses (known and estimated). Budget plans and projections can change for several reasons, so monitoring your income and expenses is important to avoid unpleasant surprises. For example, interest rate changes, inflation, and life changes can all significantly impact and require adjustments to your budget. Your retirement budget will also be impacted based on when you plan to retire. Your overall budget and financial plan should be reviewed on an at least annual basis to account for any significant changes.

Net-Worth Statement. Even if retirement is several years off, you should maintain an up-to-date net-worth statement that provides a current picture of your assets, debt, and cash reserves. This statement provides valuable information in evaluating your retirement plan. For example, maybe you own a home outright that you plan to live in throughout your retirement years. In this case, your financial plan will still need to account for the maintenance costs and taxes. Or maybe you own a home with a mortgage that you plan to sell to downsize in retirement. In this case, the equity might add to your cash reserves. Maintaining a net-worth statement will give you a clear picture of your current financial situation, and any changes you expect may occur in the future.

Your Multnomah Group planner can help you review and analyze this information in order to identify potential deficiencies as well as recommend adjustments to improve your overall budget and net-worth planning.

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