Financial Planning and its Role in Retirement

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Have you ever heard of a financial plan or considered one for yourself?

Today we will share with you what exactly a financial plan is and how it can help you as you age. Although financial plans are a great tool for all ages, they are particularly prudent as you approach retirement age. The average retiree relies on their investment accounts, social security, pensions, and other assets as a means to pay for their expenses. For this reason, it can be particularly comforting to know whether you have enough money to successfully retire in accordance with your lifestyle and goals.

What is a financial plan?

A financial plan may look slightly different depending on who you ask and how they approach the process. A generally accepted definition is that a financial plan is a comprehensive and holistic snapshot of your current finances in relation to your future goals. A strong financial plan should incorporate a budget based on cash flows, current savings, existing debt, investment accounts, insurance plans, valuable assets, and other components of your personal financial picture.

Think of a financial plan as a roadmap for your financial life, it should help to show you where you are, where you want to be, and provide direction for the path to your destination. While financial planning can be done on your own, a great financial plan can be very complex and the help of a financial professional can take off a lot of the stress associated with the process.

 

What is the goal of a financial plan?

The goal of a financial plan may be different for different people. Generally, people want to answer the questions, “When can I afford to retire?”, “Do I have enough money for the remainder of my life?”, “How much can I afford for our new property?”, and many others!

Regardless of what questions you have about your financial picture, a comprehensive financial plan can help address them. Remember, financial planning is an equally valuable and important exercise for all people and it is not exclusively for the wealthy.

 

What role does a financial plan play in retirement?

We cannot stress enough the importance of continued financial planning in retirement. With more and more people living healthily into their late seventies, eighties, and beyond, the need for financial planning has become even greater.  In addition, in the world at large women are outliving their male counterparts by as much as five years on average. Not only this, but for the most part retirees are no longer just relaxing at home, they’re traveling, spending on leisure activities, helping to pay for their grandchildren’s tuition, and much more.


While this is great, all of these things come at a cost. Similarly, many retirees who live into their late-eighties and early nineties are likely to need some type of long-term care, whether it is in-home or in a facility. These services can be extremely costly and can range from $50,000 to $100,000+ per year depending on the quality of care, in-home or facility, the number of hours needed, and much more. A financial plan can help to account for these costs as well as others including rising healthcare costs, inflation, recessions, tax increases, and much more. In addition to all of these factors, for most retirees, social security or their pension alone is no longer enough to comfortably live on.


All of these are just some of the many reasons why a financial plan is so important as approach retirement age as well as in retirement. A financial plan can help to account for and plan for all of these unique costs. As these costs arise you can reassess and adjust your plan to account for them. Even if you do one day realize that you may not have enough money for your retirement expenses, it is much better to know and plan for this then to suddenly realize it with no plan in place.

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Senior Independence

February is Senior Independence Month, amongst many other very important holidays. A financial plan is one very important, and often overlooked tool, to help retirees remain independent. A solid plan ensures that you will be able to adequately care for yourself for the duration of your life, meet any desired goals, provide for your family, be tax efficient, and much more. Having a plan in place will likely put your mind at ease knowing you have the resources to cover your expenses as well as protect against unplanned circumstances.

Additionally, when working with a financial professional you typically have access to a variety of other tools including investment management, planning for beneficiaries, giving strategically to charity, and more. Above all else, remember, the key to successful retirement planning is to start as soon as possible. The more time you have to be “in the market”, the more your money will be able to potentially grow and the better your likelihood is of a successful retirement.

 

Written by Kaitlyn Keeler

Kaitlyn is an enthusiastic client service intern that assists our advisors with your accounts. She is an attentive business student with a concentration in finance.

 
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