What does financial independence mean to you? It’s a question we ask successful executives, professionals, and business owners who are seeking retirement planning services.
Success doesn’t happen by accident. It results from well-thought-out goals and a realistic plan for pursuing those goals. Whether you are a W2 employee, a business owner, or a 1099 independent contractor; setting clear, realistic financial goals and priorities should be at the top of your list of financial to-dos. This is particularly important close to retirement (five years or less).
In an era when persistent inflation and chronic market volatility are genuine concerns— the need for effective planning and disciplined execution has never been greater. Use a McLean, VA, CERTIFIED FINANCIAL PLANNER™ Professional who can assist you with aligning your finances with your life goals and the legacy you want to leave behind.
Defining Your Financial Goals
Setting financial goals is like plotting a cross-country trip by car. You know where you want to go, but what is the best way to get there? Planning is like the cross-country compass that guides your financial decisions and actions. You get to plan your future by plotting the best course for you.
We all know our ideal lifestyle, but what constitutes the right plan for you? We already know that all 60-year-olds are not the same. There can be major differences. Such as, determining a sustainable level of spending that is personal to you and aligns with your long-term financial goals. With this understanding, financial freedom might be more attainable than you thought.
Beyond financial freedom, there are other priorities to consider.
- Do you aspire to own a second home, perhaps in a warm winter climate?
- How will you provide for your children’s or grandchildren’s education?
- Do you want to travel the world with your spouse when fully retired?
These priorities should play a significant role in shaping your immediate financial future and plan for retirement. As Benjamin Franklin said, “Failing to plan is planning to fail.”
The Significance of Prioritized Goals
Once you have defined your financial goals, the next step is prioritizing them. Think of this exercise as putting together a complex puzzle. Each piece represents a financial element – savings, investments, insurance, budgeted expenses, and more.
It’s important to consider that retirement can last 20, 30, or more years, and expenses near the end of life can be mind-boggling.
Another consideration can be the timing of your retirement. The decision between early retirement and maximizing retirement income hinges on your health, interests, and what is important. Early retirement may sound like a desirable option, but working a few additional years allows you to continue building your nest egg to have a larger cushion when you finally retire.
An Honest Assessment of Your Current Financial Situation
The next step is defining where you currently stand financially and what you will need to retire. This can include:
- Examining your current and future income sources, including salary, personal accounts, 401k, IRAs, Social Security, and other income streams. Compare this to your monthly expenses, including utilities, mortgage or rent, insurance, transportation, and other month-to-month living expenses. Don’t forget to factor in the impact of inflation over longer periods.
- Carefully scrutinize your investment holdings. Consider your asset allocation, risk exposure, and current holdings to ensure they align with your goals and tolerance for risk during your retirement years.
- Debt Analysis: Examine your outstanding debts, including credit card balances, loans, and mortgages. Determine the interest rates and terms associated with each type of debt and develop a plan for paying them off.
- Emergency Fund Evaluation: Ensure an adequate emergency fund, typically covering six to twelve months of living expenses. This provides a safety net in case of any unexpected setbacks (illness, job loss, etc.).
- In many cases, the easiest way to improve your performance is to reduce the taxes you pay. This means you should always be looking for ways to be more tax-efficient.
- Insurance Coverage: Evaluate your insurance policies, including life, health, disability, and long-term care, to make sure you have adequate coverage for all of the unexpected risks in life.
- Retirement Accounts: For the remainder of your working years, are you taking full advantage of contributions to tax-advantaged accounts (401k, IRA), including any opportunity for catch-up contributions?
Crafting Your Financial Plan
Now that you have identified and prioritized your retirement goals and assessed your current financial situation, it’s time to craft a retirement plan. Think of your plan as a roadmap for achieving your financial goals during retirement. Perhaps there are some compromises between your dreams and the financial realities that impact you.
A comprehensive retirement plan will be based on a lifestyle that ensures you do not run out of money late in life. The plan should include items such as
- Create a detailed budget describing your income, cost of living, and savings goals. This will give you a clear picture of how much you can spend during your early retirement years.
- A well-thought-out investment strategy can help your assets increase in value. Whether you choose stocks, bonds, real estate, or a combination, it should align with your risk tolerance and expected time horizon.
- If you haven’t already, consider creating or updating your estate plan, including wills, trusts, and powers of attorney, to ensure your assets are protected and distributed according to your wishes.
- If giving back to the community (church, hospital, university) is important, there are many ways to benefit the causes you care about and provide additional tax benefits for you.
- A financial plan isn’t a static solution; it should evolve with your life’s experiences and be updated regularly. End-of-year reviews and updates are a very common practice.
Get to Know Brown|Miller Wealth Management
Retirement isn’t a destination; it’s part of your life’s journey that requires not just any plan but YOUR personalized plan. That’s where the team at Brown|Miller can help you develop a plan that will last for decades.
We don’t believe in one-size-fits-all financial plans. Our team of McLean, VA, CERTIFIED FINANCIAL PLANNER™ Professionals crafts a retirement strategy tailored just for you that pursues your financial goals and leaves the legacy you wish to create for your loved ones.
We get it; life does not come with a predictable script. It is more like a ride on a roller coaster. Our strategies are designed to meet the ups and downs of an unpredictable ride. So when life throws you curveballs or the securities markets experience volatility, your plan can shift along with them.
Our goal for you? Produce a dynamic retirement strategy that stays on point as life throws you curveballs during your golden years.
Trust is at the core of what we do. As a Brown|Miller client you are partnering with an experienced fiduciary advisor, only working in your best interest. We’re here to guide you through every phase of your working life and into a retirement filled with the possibilities you have worked so hard to achieve.
Are you ready to build a retirement plan that reflects your vision, goals, and values? Let’s make it happen together.
Disclaimer: This article is intended for informational purposes only, and not to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs, and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector, or the markets generally. The information provided in this article represents the opinions of Brown Miller Wealth Management (“BMWM”) and is expressed as of the date hereof and is subject to change. BMWM assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by BMWM at any time without notice. The information may be based on third-party information, which is deemed reliable, but its accuracy and completeness cannot be guaranteed.
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