Allie’s (Financial) Checklist for Baby #3
By: Allison Schmidt, Financial Advisor, CFP®, CPA
I am a person who thrives on a good list. I totally understand lists can feel restrictive to some, but not me, it’s how I stay sane. One of the lists I’m currently working on is what we (my wife, Stacy, and I) need to do in terms of financial planning when our 3rd little girl joins us in just a couple days. This, of course, is in addition to the “Hospital Bag” list, and the “Girls at Grandparents while we have the baby” list. (We also have a solid “Favorite Restaurants” list too…won’t be using that for a while…) Anyway! Here is the “Baby Financial Updates” list, just in case you or someone you know could benefit.
Add baby to health insurance plan:
It seems like this could be automatic, after all, the insurance company did see that you, in fact, had a baby, but it’s not. You need to give them a call to add your newest little one to your plan. You usually have 30 or 60 days to get it done post-delivery, but definitely something to remember.
529 account:
Once we receive her social security number, we’ll open her a Colorado 529 savings account. I talk to a lot of new parents about 529 plans and the amount to fund these plans. It is always important to make sure you have your retirement savings on track before funding a 529 plan. Once you feel comfortable in your retirement savings, a 529 plan can be a nice addition to your savings strategy. These accounts grow tax free, can provide a state tax deduction, and if withdrawn and used on qualifying education expenses, will remain tax free. With any account that allows for tax-free growth, the longer you can be invested, the better. If you’re able to do lump sum deposits into these accounts when kids are young, you’ll be able to keep those dollars invested longer and likely have more tax-free growth for future college expenses.
Estate Update:
- Will & Trust Update: We will reach out to our estate attorney to get our wills and trusts updated to include baby girl #3.
- Legal Guardian: We will also review our legal guardian appointment and touch base with the guardian to make sure it still makes sense for everyone. We will also do an update with the guardian to make sure everyone is still on the same page.
- Beneficiary Update: We have been very diligent in putting all of our assets into the name of our trusts when possible. This allows us to update one document that will control the majority of our assets. If you do not have a trust or have utilized individuals as beneficiaries for various reasons (such as retirement accounts) be sure to update each of these accounts to include all of your beneficiaries.
Bonus: Tax benefit!
A couple of things not on our list, but should maybe be on yours…
HSA contributions:
Since we have other children, this doesn’t apply to us, but for new families, remember you can increase those HSA contributions from $3600 for an individual in 2021 to $7,200 for a family.
Life Insurance Update:
Revisit your life insurance plan to make sure you have the appropriate amount to protect your loved ones. If you haven’t created a life insurance strategy to address income needs for your growing family, this is a very important step to take. Typically focusing on term insurance (as opposed to permanent) at this stage of life will get the job done in the most cost-effective way.
Prior to investing in a 529 plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
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