Do you have a written plan that covers every aspect of your financial life? If your answer is no, you’re not alone. According to a study from the Certified Financial Planner Board of Standards, only 19 percent of Americans could be categorized as “comprehensive planners.” The remaining 81 percent may plan for specific goals or challenges, like retirement or debt management, but don’t have a comprehensive plan that pulls everything together.1
Certainly, some planning is better than none. If you lack a comprehensive financial plan, however, you could be missing out on opportunities and may be unaware of potential threats.
The different areas of your financial life are likely intertwined, so any planning that you implement in one area could affect another. For instance, your retirement planning could impact your estate planning. Your college savings for your children could impact your ability to save for retirement.
As you approach retirement and the later stages of your life, you may be considering your legacy and how you will pass your assets on to your loved ones. Perhaps you want to fund your grandchildren’s education or help your grown children get started on their retirement nest egg. Maybe you have assets that hold sentimental value that you would like to distribute to specific relatives.
To achieve these goals, it’s helpful to have an estate plan in place. Your estate plan should prioritize your objectives and offer a strategy. It should also identify risks and challenges, such as taxes, end-of-life costs and even probate expenses.
Any solid financial plan is built on a foundation of risk protection. It’s difficult to reach your financial goals if you are vulnerable to risk. It takes only one sizable threat or unexpected event to create a financial crisis and throw your planning off track.
You probably have various types of insurance to minimize your risk exposure. For example, you may have health insurance, life insurance, homeowners insurance and more. If you’re like many Americans, however, you may not be protected against one significant risk—disability.
Are you recently retired or nearing retirement? If so, you may believe that a financial plan isn’t necessary at this stage of life. After all, retirement planning is a major component in most financial plans. If you’ve already achieved your retirement goals, do you still need a plan?
The truth is that retirement planning is just one piece of a comprehensive financial plan. Even after you retire, you will still have other financial objectives, challenges, and needs. You’ll need to make your retirement assets last through your lifetime. You may have legacy goals on how your estate is distributed after your death. You will likely face health care costs and other financial risks. A comprehensive financial plan can help you tackle these issues.
Todd Gregory of Gregory Financial Group recently appeared on the syndicated financial talk show Right on the Money with Steve Savant to discuss investment risk analysis and management. In the segment, Mr. Gregory and host Steve Savant talk about the fact that many baby boomers have a portfolio that doesn’t align with their risk tolerance.