Planning Briefs

Put yourself through this brief lifeboat drill, to prepare for things suddenly going wrong. Everything may be fine right now, in the eleventh year of the economic expansion. That's a sensible time to test your ability to muster the resources to respond to a range of emergency scenarios.

1. Cash. In case you lose your job, lose your health, or are befallen by life's myriad of mishaps, can you pay the bills for at least six months?

2. Investment policy. If the stock market were to fall by 40% over the next year or two, are you ready to ride out the storm — even if it takes a decade to come back? That's approximately what happened in the global financial crisis of 2008. Although this is not in the forecast, a written investment policy statement can eliminate any ambiguity about your investment risk preferences and plan to survive a terrible storm.

3. Family risk. Will your children be able to afford college, will your spouse be able to maintain your family's current lifestyle, and will your other loved ones have the financial wherewithal to carry on if you die? Insurance — specifically no-frills term insurance — is meant to manage the worst of all risks families face.

4. Beneficiary designations. Life changes families. Divorce, death, health, and family financial dynamics change over time, making it necessary to reexamine beneficiaries listed on your retirement and other accounts.

5. Retirement income plan. Retirement income planning is being transformed by U.S. demographic trends and changes to the U.S. Tax Code. A retirement income plan done before the 2018 tax law changes, or that is not in tune with the demographic trends affecting income investing, should be updated.

6. Medical proxy. If you are unable to make your own medical decisions, give the power to make medical decisions for you to someone you trust.

7. Final details. Specify preferences about your funeral, and leave a list of all your accounts, assets, loans, important legal documents and advisors delegated to carry out your final instructions. Include how you want certain personal possessions and family heirlooms treated. If you have social media accounts, you can let someone know what to do, or there are apps that write or make recordings of final thoughts for loved ones.

A financial lifeboat drill is a pithy concept, belying its seriousness, and it requires answering hard questions about your personal financial, tax, and family situation. It would be a privilege to help.

This article was written by a veteran financial journalist. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.