We are in the heart of college football season, and some teams have separated themselves as elite programs in their respective conferences this year. What does it take for these top football teams to perform at high levels during the game and all season long? They have the discipline to do the fundamentals well and repeatedly. The same thing applies to your financial journey and planning for your financial future. Planning for your financial future involves five key areas: retirement planning, tax planning, investment management, risk management and life issues, and estate planning. Following are some attainable and meaningful financial objectives to consider as you embark on your financial journey.
Retirement planning should be about replacing your standard of living and producing income rather than focusing on accumulated assets. If properly managed – and “properly managed” is the key phrase – you can withdraw about 3.2%- 3.8% of your asset base in today’s economy. In our professional opinion, every $100,000 properly managed can generate roughly $3200- $3,800 in annual income.
Annual tax planning needs to be completed before December 31 of the current year. Please don’t wait another year and forfeit tremendous opportunities to maximize the effectiveness of your marginal tax rate. We see countless retirees in tax scenarios that never should have occurred if they had appropriately planned during their working years.
The retirement process is challenging, and different phases of the journey will necessitate different objectives. For example, during the accumulation phase, what you are currently saving matters more than what you’ve already saved. During the preservation phase, protecting and growing your assets matters more than new additions. And finally comes the distribution phase, where you begin to live off your savings. Each step has different objectives, and thus different strategies should be understood and applied throughout the retirement journey.
Life will bring about one-off situations that aren’t part of your routine financial decision-making. There are good things like weddings, buying homes and sending your child to college. And then there are the tough things like taking care of a parent’s declining health or dealing with a child’s divorce. Though these “life bumps” are not frequent events for individuals, they are routine occurrences for financial professionals. Who will you call for perspective?
Naturally, the estate plan or legacy plan matters more to those you leave behind rather than yourself. Ensure that your estate documents are up to date, review your beneficiaries often and that your loved ones know your wishes.
For retirement, figure out what your income stream needs to be based on the formula discussed above. For tax planning, make sure you use the Roth option whenever possible at work or within your IRA, and don’t forget to maximize your itemized deductions. Make sure your investment policy matches your current investments, as things do indeed begin to drift over time. Involve your spouse and make sure they know who to see if there is a problem and you are not there to help. Enjoy your financial journey!
The Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.