The Retirement Marathon
In today’s environment of self-directed planning, investors must plan and invest intentionally if they are to achieve their most important financial goals. Here is our recommendation for how to make that happen.
The Current Environment
→ News flash…we have, without doubt, seen a societal change in the way in which we plan for retirement. Early in my professional training, I remember the three-legged stool for retirement planning: personal savings, employer sponsored retirement plans, and Social Security. With corporate pensions being transitioned to 401k plans and Social Security’s questionable future, the burden of long-term financial stability now rests squarely on each individual’s shoulders. Given all this change, how can investors reach goals successfully? ⇣
Keep the Best of the Old and Add Something New
⇢ While current realities certainly create a headwind, the best foundation to move forward is a working knowledge of sound financial management principles. These are timeless truths you’ve likely heard before, but are worthy of repeating.
“Once investors have their arms around these fundamentals, adding some structure through a financial plan can help manage resources most efficiently. ”
First, spend less than you make. Having surplus in your cash flow allows you to plan for contingencies and to take advantage of opportunities when they arise.
Second, debt must be serviced and paid off from future earnings so use it wisely. Specifically, avoid non-productive debt. Mortgage debt and debt used for education can be productive, but of course must be used appropriately.
Third, make sure to maintain adequate insurance coverage by protecting your life and ability to earn income.
Fourth, start saving and investing early and often. Start with a cash reserve, put money in your company sponsored retirement plan (where you may receive matching contributions), and then contribute to other investment vehicles.
Once investors have their arms around these fundamentals, adding some structure through a financial plan can help manage resources most efficiently. Our experience with the traditional model offered by many financial advisors leads us to the conclusion that it is not the best solution to help clients reach their financial goals.
There are several examples of why this is so. First and foremost, investors are looking for recommendations that are in their best interest. However, many advisors operate in an environment burdened by conflicts of interest with no fiduciary duty owed to clients. Additionally, while investors prefer a turnkey process to simplify the planning experience, they often receive overwhelmingly complex financial planning advice in technical language. When a simple question of “how am I doing?” is asked, investors hear a detailed explanation of past performance. And finally, when they ask about recent economic changes and how they impact their goals, they receive an explanation of the latest hot product designed to solve all their problems. ⇣
Forward Wealth Management’s Path Planning
⇢ We believe if we’re going to have a positive impact on investors and their ability to overcome these challenges, it will require a new approach to managing wealth. Aware of the problems investors currently face, we’ve developed our own services to help clients reach their most important financial goals. Path Planning is a wealth management structure combining values, goals and resources with a systematic process – giving you confidence in managing your financial life.
The Path Planning process involves four steps.
First, we ensure you are getting the most value of your financial resources by compiling a comprehensive balance sheet.
Next, we establish estimates for “timelines and finish lines,”—i.e. future spending goals. This means quantifying, in both price and time, the amount of money likely required to accomplish each goal.
Third, we manage existing assets as well as future contributions within a customized wealth management strategy.
Finally, we adjust to changes by providing life-relative planning advice and progress reporting.
Goal-based planning provides a lens in which life events can be filtered, ensuring that actions or revisions line up and are consistent with goals. Stated simply, our approach provides the ability to filter out much of the “noise” that may otherwise take investors off course.
When establishing a path from today to, say retirement, it is important to mention the path itself is not a precise path. Given the reality that markets do not move in a predictable manner, the level of wealth will fluctuate around the value of the path over time. Given the uncertain nature of the future, there will inevitability be times when investors face setbacks or deviations from the path that require action. The beauty of the process is, when viewed through the appropriate lens, these setbacks can actually create planning opportunities.
This is a new kind of planning—active planning—and it is the kind of planning we believe will best support investors as they prepare for their financial future. ⬥
Investment advisory services provided by Forward Wealth Management, LLC. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.