The Importance of a Written Financial Plan

Part of my job in meeting with any new or prospective client is to ask really good questions about what they have in place today financially. I do this to get a sense of their current plan and gather more information on what they're trying to accomplish.

Asking these questions helps allow me to begin to build a framework for how I can add value to their plan.

The conversation typically goes something like this:

Me:?Tell me more about what you're currently doing today to plan for your retirement?

Them:?Well, me and my spouse have saved up "X" so far and are planning on working until probably age "X". Then, once we retire, we want to move to "X", travel more, and spend time near our kids and grandkids.

Me:?Those are wonderful goals! And I would love to learn more about the specific steps you have in place today to ensure you meet those goals.

What are the current and future tax strategies you're utilizing to ensure you are not overpaying the IRS?

Them:?That's a good question. We put away money each month into our 401k which I think will lower our taxes and help us save enough for retirement.

Me:?Great! And do you know if you are on track to reach your goals?

Them:?I think, but I'm not really sure.

Me:?Would it be helpful to know how much, based off your lifestyle, that you'll need to save? Or to have a plan that accounts for knowing how to safely and most efficiently take your assets out to ensure you don't run out of money or overpay in taxes?

I think you may be able to see where I'm going here ...

Many people have a plan but it's often times one-dimensional and only focuses on trying to save enough before retirement.

In fact, I see this so often, that I decided to tweet about it:

The Power of the Financial Plan

Your financial plan should be a living, breathing document that updates as your life does.

This plan will include all of the important details of your current finances and will spell out the specific short and long term goals you're trying to accomplish.

??IMPORTANT TIP!?The power of the financial plan occurs when you actively create strategies to achieve those goals.

A financial plan can help you to establish and plan for fundamental needs, such as managing life's risks (e.g., those involving health or disability), income needs, and retirement timelines, etc.

Your financial plan is the centerpiece that can provide financial guidance so that you're prepared to meet your obligations and objectives. It can also help you track your progress throughout the years toward financial well-being.

What Should A Financial Plan Include

For Those Nearing Retirement?

1. Asset Allocation: A detailed Investment Strategy tailored to you & your risk.

2. Asset Location:?A breakdown of where all of your money is located and the tax treatment of each account (Roth - Tax Free, IRA - Tax Deferred, etc).

3. Detailed Withdrawal Strategy?Part I -?How and which account you take your money from matters and can significantly impact your taxes.

4.?Detailed Withdrawal Strategy Part II -?Understanding how much you can afford to spend each year in retirement is crucial for longevity and plan success.

5. Tax Rates and Brackets:?Knowing where you fall within respective tax brackets is important both today and in-retirement to see if special windows are available for more tax-efficient and opportunistic planning.

6. Timing of Social Security & Pensions:?Know the ideal way to maximize your retirement income, with respect to other sources of income and taxes.

7. Estate Planning:?Are your beneficiaries still accurate or your assets titled correctly?

8. Medicare and Healthcare Coverage:?Which Plan are you going to select and is best for you? And how does IRMAA play a role too?

9. Insurance:?Are you appropriately insured and have the correct coverage amounts in place to protect you and your family in the event of an accident?

10. Changes:?As your life changes, so too should your financial plan.

Want to See an Actual Financial Plan?

This is the very financial plan we use for all of our clients to ensure they are on track, informed, and ready for retirement. Most importantly, this document is proactively updated every six months to ensure it is still accurate.

???Click Here!

After all, your life isn't static, so neither should your financial plan!

On Deck and Up Next Week:

Does Your Portfolio Include a Retirement Warchest?