When a client receives a promotion or a raise at work, this event can come with a number of changes that might impact their financial situation.
In this checklist, we focus on reviewing the potential financial impact of a raise or a promotion on clients, including:
Cash Flow and Income
Will the cash flow change due to the raise or any additional compensation that comes with the promotion?
Will this change impact your ability to save for retirement and other goals? If so, work to increase your savings in areas like their retirement plan, HSA, and others.
In the case of a promotion, does the new job come with added benefits you need to consider?
These additional benefits might include stock-based compensation or deferred compensation.
Retirement Plans and Deferred Compensation
In the case of a promotion, will you now have added benefits, such as stock-based compensation, deferred compensation, and/or an equity position in your company? If so, there are a number of planning issues to consider.
Will the higher income affect your ability to make contributions to a Roth IRA or deduct contributions to a traditional IRA?
Be sure the client is fully funding their employer-sponsored retirement plan.
If the client will receive stock options or restricted stock as part of their promotion, there are a number of planning items to help them through.
Tax and Insurance Planning
The client’s higher compensation may present some additional tax planning issues. At the very least, they will want to ensure that their withholding is adjusted to ensure they don’t have a hefty tax payment due.
Their new income might merit increases in life insurance coverage and /or disability insurance coverage.
This is a comprehensive checklist of the types of issues that advisors should be discussing with their clients who receive a raise or a promotion at work. This change can have a great financial impact, and your planning can help the client make the most of this career advancement.