The Long-Term Value of a Financial Plan
You’ve probably heard this before – having a financial plan is necessary to achieve financial goals. Unfortunately, only 29 percent of Americans have a financial plan in place. So, the vast majority are muddling along and hoping for the best.
Without a sound financial plan, your retirement might be quite a shock. It’s not enough to “put a bit away” and expect it to magically grow to fund your later years. The past six months have shown that to be quite dangerous. As retirement funds are usually invested in the stock market, if that loses value your retirement fund can be adversely affected. The S&P 500 Index lost 20 percent in the first six months of 2022.
As with any activity, to achieve something you need to set a realistic goal. Without that, you have no direction. But the goal alone is not going to get you to the end you had in mind. You must have a plan that lays out the steps to reach that goal. Financial success is no different.
Setting retirement goals
There are quite a few moving parts to deciding how much should be in your nest egg when you retire. You’ll need to consider where you’ll live, what kind of lifestyle you want to enjoy, cost of living, everyday expenses, healthcare costs, and discretionary income to pursue leisure activities. Use this retirement calculator to help you set your goal.
Creating the plan
Once you know the goal, you can put a plan in place to achieve that retirement income. This is where learning as much as possible about savings, compound interest, and investments comes into play. Educate yourself as much as possible, so that you know exactly where and how your money is invested and how it will perform over time. Work backward from the goal and lay out a path that will get you to the retirement you have in mind. For example, if your end ga is $1 million, and you have 20,000 saved now you can figure out how many years you have to retirement and put a plan in place for getting that goal.
Constantly re-evaluate the plan
A financial plan is not something you can set and forget There are many moving parts, and you need to constantly keep a finger on the pulse of the external factors that could be affecting your goal. “It’s vital to stay on top of changes in the market and your personal circumstances,” says Michael Norton, Senior Vice President investments for David Lerner Associates. “A retirement plan is a marathon, not a sprint. Stay the course and work with an advisor who can help you navigate the ups and downs of the market.”
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC