By Jonathan Harner, CFP®
There’s no way to sugarcoat it: 2022 was a tough financial year for nearly every part of the economy. Inflation and gas prices have been high while the stock and bond markets have been lower. To make matters worse, many people are worried about slower economic growth in the near future.
In response, some businesses have been cutting back on their workforce in efforts to cut costs and maintain business operations. Spirit AeroSystems and Textron Aviation (both here in Wichita, Kansas) are two companies frequently in the news for layoffs during economic uncertainty.
If you’ve been affected by layoffs from these two companies, I want you to know that we’re here to help. Despite the pain and uncertainty of leaving your company, these types of severance packages are also good opportunities to evaluate your financial situation and chart a path forward for yourself and your family.
Here are five ways we can help you moving forward:
1. Evaluate Your Retirement Options
Far too many people neglect to ask themselves some key questions surrounding their retirement. When would you like to retire? What does your ideal retirement look like? These types of questions, and more, are essential to properly evaluate what’s feasible and what’s a stretch.
If you haven’t been able to determine your retirement goals, as well as run the numbers on what is possible, now is a great time to start. You might discover that you can retire sooner than expected, or you might realize you need to save a little more or spend a little less. Either way, you won’t know until you evaluate your options.
2. Determine How Long This Money Will Last
Depending on the structure of your severance package, as well as the number of years you spent at your company, you could receive a significant amount. Yet once received, how long can you reasonably expect this money to last? And how long will you need it to last?
For instance, while running the numbers on your retirement plan, you might discover that you need this severance package to last for 30-plus years. However, you could also discover that you simply need it to last for a few years until you can start claiming Social Security or some other retirement benefit.
3. Lower Your Lifetime Tax Liability
While a number of employees at Textron and Spirit have done a wonderful job of saving and investing throughout their career, I often encounter people who haven’t planned enough to lower their lifetime tax liability.
Lowering your lifetime tax liability is a core component of our work, as every dollar that doesn’t go to Uncle Sam gets to stay in your accounts and provide for your retirement. If you’ve been laid off and you don’t resume working right away, there’s a good chance that your taxable income will fall, which will present tax-planning opportunities for you.
One key strategy you should consider is a Roth conversion, which could be especially beneficial during a market downturn. While we won’t cover all the details here, the general strategy is to pay taxes now, while your income is lower, so you won’t have to worry about your tax liability later on in your retirement.
4. Set Up Your Portfolio for Retirement
As you build wealth throughout your career, you are rightfully focused on accumulating assets and picking the right investments to grow over time. Yet when you approach retirement, you should consider a different strategy that focuses less on accumulation and more on generating an income from your investments.
We can help you review your current investment choices and whether they are suitable for your retirement goals
5. Put the Right Investments in the Right Accounts
Yet it’s not simply enough to have the right investment choices. You also need to make sure you have the right investments in the right types of accounts.
For instance, it might be better to have one type of investment in a tax-deferred account (like a traditional IRA) and a different type of investment in your Roth IRA.
Make the Most of This Uncertainty
While leaving your company certainly isn’t easy, one way to cushion the blow is to evaluate your financial situation and chart the best path forward. When done properly, you can have more clarity about when you can retire, how much income you’ll have in retirement, a better investment strategy, and the ability to lower your lifetime taxes.
If you’re ready to work with a trusted financial partner who has experience in helping people plan for their ideal retirement, our Wichita Wealth Management team would love to work with you. Schedule an introductory phone call by contacting me at 316-722-1010 or firstname.lastname@example.org or click here to get started!
Jonathan Harner is a CERTIFIED FINANCIAL PLANNER™ practitioner at Wichita Wealth Management, a fee-only, fiduciary financial advisory firm dedicated to helping its clients thoroughly prepare for retirement. Jonathan’s goal is to simplify the complex so his clients can experience confidence and peace of mind as they work toward and live out their retirement dreams. He specializes in developing and implementing tax strategies that maximize his clients’ money and builds a tax-efficient withdrawal plan for retirement. Jonathan loves finding opportunities for his clients to save money and is dedicated to continual learning and growing in his profession so he can provide solutions for his client’s financial needs. When he’s not working, you can find Jonathan spending time with his wife, Annie, and their daughter, staying active in his church community, and participating in his two favorite (but vastly different) hobbies: CrossFit and Dungeons & Dragons. To learn more about Jonathan and how he can help you, connect with him on LinkedIn.