Making the decision to retire can bring on a wave of emotions. Excitement for the new freedom and apprehension for your financial future are both common feelings. By making the decision to work with an advisor and map out a financial plan, you can take control of your well-earned retirement and have an ever-evolving game plan to rely on.
A comprehensive financial plan dives deep, examining all aspects of your retirement. Account balances, portfolio designs, spending habits, insurance planning, and personal retirement plans, including travel, gifting, and estate planning, all play a part in creating a retirement playbook for financial planning.
The true difference with a financial plan, compared to general advice, is the data-driven reporting. Using mathematical models to stress test different scenarios, your plan is molded to fit your needs. Just like your life, your plan is ever-changing and can be adjusted to account for the unplanned or unexpected.
A well-thought-through financial plan will approach each account – IRA, taxable, and trust for example – to determine how it fits in the overall picture. A portfolio can then be designed tying in all needs and limitations to achieve the best statistical outcome.
When looking at portfolio design, it is important to clarify not only the risk level, but also the overall objective of the account. Is this money to be set aside for growth? Is this a nest egg that needs to be maintained? Is income being actively drawn?
Look to pair each one of these objectives with a portfolio style that complements its needs. Once the goal objective is established, the risk dial can then be adjusted to further customize the portfolio for your needs.
The layering of income streams is another aspect where a financial plan can shine. Planning cash flow from an IRA and Social Security is straightforward, but adding in the complexities of annuities, executive benefit packages, real estate earnings, and direct investments, can lead to confusion.
By mapping out each income source and modeling outcomes for different scenarios, an optimized plan can be drawn up to streamline your cash flow. This allows for your advisor to speak specifically to your unique situation instead of offering generic advice.
A thorough financial plan can also uncover weaknesses that were not previously addressed. A common oversight is that one may enter retirement heavily covered by life insurance but without the protection of long-term care insurance. Gauging the type and amount of insurance is critical to the stability of a plan, a balance that will vary from person to person.
With all the complexities of life it can be invaluable to have a financial plan in place that lays out the details of your retirement, freeing your mind and time to enjoy what matters to you. Our belief at WealthPartners is that with solid foundational planning comes confidence, and with confidence comes the ability to enjoy your retirement to its fullest.
John F. Hill, CFP®, is the founder and CEO of WealthPartners in Ridgeland, MS. A graduate of Mississippi State University’s Adkerson School of Accounting, he has been named to the Forbes Best-In-State Wealth Advisors List the past three years. He was appointed by Mississippi State University to the MSU Finance and Economics Advisory Board. He serves on the Board of Directors for the Community Foundation of Greater Jackson, the Woodward Hines Education Foundation Board, and The Hundred Club Board.