By: María del Pilar Catoni, CFP®
Financial Planner / Assistant Vice President
Wealth Management Division, BPPR
Financial security embodies making the right decisions regarding the financial resources one might have. These goals might include purchasing a home, covering college costs for the children or accumulating sufficient assets for retirement.
Taking into consideration the present economic situation, it is important to set priorities and begin an action plan to maximize the available financial resources. Following are five recommendations that should be taken into account when establishing a financial long-term strategy:
1. Establish a solid financial future – Evaluate several circumstances that could affect your economic and family well being. What would happen if you lose your job, or have a reduction in your income or benefits? Do you have the financial resources in the event of an illness, a disability or your death or your spouse’s? We all need to plan for these uncertain events. It is very important to establish an emergency fund that covers at least three to six months of your monthly expenses. In addition, an adequate coverage for medical, disability and life insurance are essential to protect your assets and manage the risk of your financial future.
2. Review the benefits your employer offers – Many companies provide benefits for the employee, such as life, disability and health insurance. On occasions, they provide the option to increase the coverage of some of the benefits with the increase in cost being paid by the employee. Another benefit could be a qualified retirement plan in which the maximum contribution for 2016 is $15,000, an amount that can be deducted from the income tax return.1 On some instances, the employer matches the employee’s contribution as an incentive to maximize the savings. You should know the benefits your employer offers and how they work.
3. Implement a savings plan – Saving is the key to protect your family from adverse financial situations. The more you save the more flexibility you will have when confronting difficult financial events. Think about integrating a simple investment strategy that provides a rate of return that surpasses the estimate inflation rate. As the old saying goes, “don’t put all your eggs in one basket.” In other words, it is very important to diversify your savings into several products, taking into consideration your tolerance to risk and the time horizon before needing to withdraw from your funds.
4. Take advantage of tax benefits – Contributing to a qualified retirement plan (maximum contribution of $15,000 for 2016) allows you to reduce your tax responsibility when submitting your income tax return. In addition, you can increase your savings with tax advantages by opening an Individual Retirement Account (IRA) up to a maximum of $5,000 per taxpayer and an Education Savings Account (ESA) up to a maximum of $500 per beneficiary.2
5. Consult a financial planner – To help you develop strategies to attain your financial goals, your best move is to consult a financial planner.
1 Information obtained from the Puerto Rico Internal Revenue Code; 2011 edition. Section 1081.01, for qualified retirement plan.
2 Information obtained from the Puerto Rico Internal Revenue Code; 2011 edition. Section 1081.01, for qualified retirement plan and section 1033.15 (a) (8) for IRA contributions. For ESA contributions, section 1081.05 (a).
The suggestions and recommendations included in the financial plan are offered only as an advice, with no guarantee of the yields of any product that may have been acquired pursuant to such recommendations. Banco Popular de Puerto Rico, its subsidiaries and affiliates, do not engage in the offering of accounting, legal or tax advice. If you need accounting, legal or tax advice you should request the services of a competent professional in these areas. Certain restrictions may apply, for more information please contact one of our service centers. Banco Popular offers several Individual Retirement Account alternatives. You may get detailed information at our branches to determine which alternative is best suited to your particular need.