Wealth Management Strategies for Dual-Income Families
7 Steps to Financial Freedom and Less Stress
Being a dual income couple (especially if you have kids!) can feel like an overwhelming load of responsibilities and a constant time-crunch. However, on the flip side, the two incomes can provide you plenty of opportunity to create significant wealth and establish financial freedom for your family, beyond what most single-earner families are able.
Here are 7 wealth management strategies every dual-income couple should consider:
1) Max out your 401k: You can contribute up to $18,000 per year if you are under age 50 and up to $24,000 if you are over 50. Additionally, many companies offer a company match. It’s a triple win – you can save for retirement, get matching contributions from your employer, and enjoy the tax savings. If you don’t have access to your 401k, you may be able to contribute to an IRA and deduct the contribution on your taxes.
2) Use deferred compensation: The majority of people are in the highest tax bracket during their working years, and then their tax bracket lowers considerably in retirement. If your company has a deferred compensation program, it’s a great way to manage your income while you are working and delay taxes until you are in a lower tax bracket. This strategy typically allows higher limits for putting money aside than a 401k, and you don’t need to wait until age 59-½ to access your monies.
3) Know how your benefits work: Many large companies offer robust employee benefits that employees simply don’t understand or don’t take time to learn about and access. Make sure you are contributing to your Health Savings Account, Flexible Savings Accounts or other flexible benefits program. Doing so can provide you access to certain benefits at a pre-tax rate, which can save you anywhere from 15%-50%, depending on your tax rate. Who needs coupons? J
4) Have a safety net in place: In today’s economy, it’s likely you will change job 10 to 20 times during your lifetime. Make sure you have an emergency cash fund in place (6 to 12 months of after-tax expenses) to give you a cushion for when you need to make a change. Also, make sure you have disability and life insurance in place for the unexpected.
5) Don’t forget about college! College expenses have increased on average twelve-fold over the last 30 years. A great way to save for college and have the savings grow tax-free is a 529 Plan. Parents and grandparents can, individually or as a couple, open and contribute to a 529 Plan for each child. Depending on where you live, you may also get a deduction on your state taxes. In Ohio, contributing to a 529 can get you a tax deduction of $2,000 per child.
6) Outsource what you can: Cleaning help? Grass cutter? Chauffeur for the kids? Meals delivered to your door? Yes, please. When you look at how much you earn, it’s often less expensive to outsource the work you don’t love to do (both financially and emotionally) than to use your time to try to do it all yourself.
7) Treat yourself: It’s easy to get stressed out day-to-day with the endless things to do, both at home and in your career. Block a day at least once a quarter to take a day trip, get a massage, have a date with your spouse, meet friends for lunch, or read a book, relax and not worry about what else gets done.
In addition to the above seven, there are other wealth management strategies well suited to dual-income families. The earlier in your careers that you put such strategies in place, the even greater your potential for building wealth as you allow the time-value of money to work to your advantage. We’d love to tell you more.
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Important Disclosure: This material presented by Lenox Wealth is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Investments in securities and other investment products entail risk, including the risk of loss.