Giving wealth management advice to recently promoted clients - Global Financial Distibutors

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After giving your client a hearty congratulations on their recent promotion, it’s up to you to explain how a raise in income will affect their long-term wealth management strategy. Showing them what they need to do with their new title and bigger paycheck is one of the critical ways you help them cultivate greater financial security today and in the future.

1. Reassess retirement contributions
A promotion and raise offer a great opportunity to beef up 401(k) or IRA contributions without  impacting personal spending. Even if your clients auto-escalate their contributions over time, they may want to up the ante further to take advantage of their increased income before lifestyle creep makes that difficult.

According to the IRS, the upper limit for total money set aside for nearly all defined-contribution plans – including elective deferrals, matches from employers and other special allocations – rose to $58,000 in 2022. That just goes to show there’s rarely such a thing as contributing too much to these retirement plans, provided the contributions are within the pre-retiree’s means.

2. Account for tax bracket changes
The next point your clients need to consider is whether their raise will push them into a new tax bracket. Post-promotion, certain portions of their new annual salary may be subject to higher tax rates, so your client should prepare their budget accordingly. They may also want to consider various tax-deductible expenses and contributions they can make to offset the increased income.

3. Reconsider estate planning
The next few decades will see over $30 trillion in assets passed down to younger generations. On a micro level, even a small raise can change the trajectory of your client’s financial future, and that of their heirs. After a raise, it’s important to review life insurance coverage, retirement account beneficiaries, and general estate plans to update financial objectives and changes to the dynamics of their family.

In many cases, a raise and promotion will subtly change a family’s lifestyle expectations, making it worthwhile to consider supplementing existing life insurance coverage. Rather than liquidate holdings to get this added coverage, show your clients the benefits of premium financing and insurance-backed lending solutions. These can help your clients cover the initial costs of buying a new life insurance package by deferring the amount to a third party. Even clients who received their current life insurance policy through their employer should consider how Leveraged Planning® solutions will make it easier to support their family and create a legacy.

For more information on Leveraged Planning solutions for individuals, visit here or call your Financial Services Manager today.