Insight

Key Takeaways:

• Financial planning is critical to financial success in all stages of adult life.
  • Accumulation
  • Transition
  • Decumulation
• Know what you control and know what you cannot control.
• Work with a true advisor that always acts in your best interest and builds a long-term relationship with you.

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Intro:

Whatever stage of life you are in or however old you are, if you want to be financially independent and enjoy one of the greatest phases of modern life, “Retirement”, you need to plan and invest to meet your personal objectives.

It is my belief that financial planning is not a book, document or a one-time activity people engage in.  It is alive. The planning and recommendations are on-going. The planning needs to adapt with you and the changes going on around us.

This is not a day-to-day, week-to-week or even month-to-month process, however when the changes do happen in your life, your job or the economy, your plan needs to change along with them and recalibrated.

When you were 30 or if your 30 now, did you or do you know exactly what you want to do when you become financially independent, and a working life is optional? Most likely not.

Over the years of working with my clients, I found that the more you think about and work towards a goal, the clearer that goal becomes and the better decisions you can make along the way. It just takes time.

But you do need to start the process.  In my opinion, it is best to have a living financial plan with a knowledgeable, trusted and competent advisor to help you on the journey to financial success.

Know What You Control & Know What You Cannot Control

Certain parts of your plan are in your control.

• You decide what you want for yourself and your family’s financial future. The goals are your own.
• You can manage your cash flow, lifestyle, amount you spend versus the amount you save.
• You can decide what to invest in and which type of investment account, from a tax perspective, to hold your investments.
• You can decide how much of the risks of modern life you choose to take on for yourself/family and you can decide to transfer some of that risk to insurance companies offering healthcare, life, disability, liability insurance, etc.
• You can choose to have a financial plan to bring everything together towards your personal objectives or you can “wing it” and hope for the best.
• You can choose to work with a true “advisor” that only works in your best interest and has the business model and legal responsibility to prove it. Alternatively, you can choose to be sold promises, products, and potentially out right lies. In my opinion, a true “advisor” will never sell you anything.  A true advisor’s best interest is your success. Their best interest is you and the likeminded people that you know for them to help also.

Certain parts of your plan are out of your control, and you may have little influence on certain aspects of your plan that will impact your long-term success.

• The taxes we pay are decided by federal, state and local governments whose officials we collectively elect.
• Interest rates are determined by the current state of the overall economy, our monetary/market system and the Federal Reserve working towards their stated dual mandate of full employment and price stability.
• Crises like the recent global pandemic or financial crisis of the not-so-distant past create fear and uncertainty about the future (I hope you did not have any control over that!?!?)
• Geopolitical conflicts and wars, as many American generations have lived/fought through, can, at the very least, dynamically change our views of the future.
• These outside influences can then lead to other issues that have an impact on your plan. Namely, inflation, deflation or “stagflation” will have an impact on your long-term purchasing power, investment results, and portfolio management decisions.

These are just a few examples of things that can impact your plan overtime. Of course, not all changes are bad.  If you are focused on your job, career or business, you can certainly impact a raise, promotion, or business success.

The 3 High Level Stages of Retirement Planning:

The early stages of retirement planning or “The Accumulation Phase” may most likely be focused on planning to replicate a generalized lifestyle based on the current lifestyle you have created for yourself and your family or an idealized view of what you want.  In addition, most people have competing financial goals like buying a home, saving for education, paying down debt, etc. In general, this phase typically happens between ages 30-50.

As you get into your 50s you are entering your peak earning years and your lifestyle has likely become much more “defined”.  This is a great time to tighten up your vision for retirement and become more specific in your goals/objectives. A more accurate picture of your retirement finances can begin to form.

An understanding of the target return and portfolio risk level you need to take to retire when you want are much more important. Depending on your personal financial situation, you can start thinking about making work optional or “The Transition Phase”.  As human beings, this phase means more than just the financial readiness. It also means the emotional readiness to enjoy your financial independence. For most, this phase happens between ages 50-70.

I want to interject what I mean by emotional readiness. What I mean by this is that you have a clearer understanding of how your money can provide you happiness and enjoyment in your financially independent life. After taking the step to stop working, it is not the time of your life to have personal or interpersonal issues arise. I believe investing and financial planning strategies are a means to an end. The way you choose to enjoy your financial freedom and who you decide to enjoy it with are up to decide.  In the end, it’s also up to you the legacy you leave both financially and otherwise.

When your financially and emotionally ready to retire, you begin “The Decumulation Phase”. Ideally, this does not actually mean that you are spending down your retirement capital or at the very least, not spending the principal at an unsustainable rate. Terms like “withdrawal rate”, “cash flow”, “fixed income sources” and eventually “RMDs”, “Legacy” and “Multigenerational Wealth” become a staple of planning conversations. Leaving your working life should be a celebration of your future, there should be no regrets and you should feel excited/nervous all at the same time.

The bottom line is that effective financial planning that changes with you in all stages is important to your success.  Taking a comprehensive view of your finances including investment management, tax planning, estate planning, cash flow analysis, financial projections and protection planning will help you maximize your financial resources for your lifetime and future generations.

I believe that retirement can be one of the greatest journeys in your life. The old view of “retirement” has been long “retired” and replaced with a healthy, active and social experience with many memories still to be made.

It is your future to make and your journey to live. Sound investment and financial planning advice are our expertise. So, let us take the journey together, regardless of what phase of the journey you are in.

Schedule a 20-Minute Consultation with Mike, here.

Mike Weber, CFP®

mweber@bluebellpwm.com

484-221-5408

Blue Bell Private Wealth Management is an independent, fee-only Registered Investment Advisor providing financial planning, investment and wealth management services for all generations.