Planning > Plan > Winging It

“In preparing for battle I have always found that plans are useless, but planning is indispensable” - Dwight Eisenhower

“Everyone has a plan until they get punched in the face” – Mike Tyson

Planning

I believe ongoing planning is the best way to build a robust financial future. Unfortunately, the cost of the financial planning and the fact that some situations just aren’t that complicated make it hard to justify in some situations. Ongoing planning makes inherent sense in several cases:

Changing situations – Life transitions happen. Whether that’s military transition, switching jobs, or moving into ultimate retirement, these situations often bring with them decisions that will impact your financial situation.

Larger amounts of money or complicated situations – Once you’ve accumulated a nest egg or have significant income, complications and the cost of mistakes go up. The cost of ongoing financial planning is often dwarfed by the things you may not be considering or the tax strategies you haven’t implemented.

This can even be true if you’re a DIYer and love this stuff. I work with several classic DIYers, who are in or a few years from retirement, worth between 2 and 4 million dollars. My fee for planning (they continue to manage their own accounts) is budget dust to them compared to the daily fluctuation in their net worth in the stock market or the tax savings we generate through well-designed withdrawals and timely conversions.

Too busy or no interest in doing it yourself – I find it hard to believe, but not everyone loves this stuff as much as I do. If you don’t have time to do the things you know you should or you just don’t want to deal with the day-to-day, finding someone to do it for you makes sense.

Having “A” Plan

If those situations don’t apply, or if you don’t think you can justify the cost or you just like doing it yourself, it can still make sense to find a financial professional who has a project-based, or what is often referred to as a 1-time plan service offering every few years. Although these can cost several thousand dollars, they can provide you with a blueprint for several years if your financial situation is stable. Again, implementing the recommendations usually results in value much beyond the plan costs especially when stretched over a 2-3 year period.

Typical insights

What are the types of things that might get identified in a one-time or ongoing planning? Here are just a few of the more common things I see that can typically generate an quick and often ongoing return on investment.

Reducing investing expenses – I’ve worked with 2 clients recently to reduce their investment costs. One held an S&P 500 fund that charges 0.15%. That’s pretty low, but the Vanguard version only costs 0.03% and it’s tracking the same index. Switching a $200,000 investment will save $2,400 every year in embedded fees.

Asset location planning – Another new client came in with some bonds funds in their taxable account. Bond fund payouts are taxed as ordinary income. Their combined income is significant so they’re in a higher tax bracket. Moving the bonds funds to their traditional retirement account allows them to put a stock ETF in their taxable account which will pay lower and tax-advantaged dividends and be subject to lower long-term capital gains when they sell. The bond funds also may not grow as much over the next few years versus stocks. This means they’ll have lower amount to convert to Roth accounts in retirement saving them even more in taxes.

Cash – When first meet with people, they often have sizeable cash positions in a standard bank savings account. Right now, those banks are typically paying maybe 1% and often less. Some high yield savings accounts (as of 12/02/2024) are still paying about 4% or a little more. Moving that money to gain an extra 3% of say $100,000 will generate $3,000 per year. Rates have been coming down so it’s hard to know if or for how long this will stay so this isn’t guaranteed. But making that change could pay for or nearly pay for a one-time plan.

Taxes – Having a multi-year tax plan is often the most financially impactful service I provide. That’s because you’re typically talking about 15-30% or more of your income every year. The overall goal is to drive lifetime taxes as low as possible. Understanding your projected income, remaining working years, pensions, and Social Security claiming strategy allow you to broadly plan when it will make sense to defer taxes versus when you should consider paying them. For high earners and savers this could easily save hundreds of thousands of dollars over their lifetime and often extending to their heirs.

Peace of Mind – This one is harder to put a dollar figure on, but many people I work with just like that fact they have a partner and don’t have to do it all themselves. They’re busy living their lives and know they have someone they can call if they’ve got a question or are considering changing their plans and wonder how it might impact their situation.

Winging It

Based on the demographics of my subscribers, you're probably going to to be OK even if you don't have a plan. There aren't many military retirees that are living in a van down by the river. But, what if you could achieve your goals faster, live your true best life, and leave or give more to family or charity. A solid plan can help you do that.

Did you achieve your financial goals in 2024 or did making a plan and taking action never make it to the top of the To Do list? If it’s the latter, don’t wait another year. Set up a meeting so you don’t let 2025 slip away.

About Mike Hunsberger, ChFC?, CFP?, CCFC

Mike Hunsberger is the owner and lead planner at Next Mission Financial Planning. Next Mission Financial Planning provides comprehensive financial planning and investment management for military and veteran clients. Mike started the firm after spending 25 years in the Air Force.

Schedule a call with Mike