Utah Boomers Magazine
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Planning Your Nest Egg

By Lon Jefferies

financesQ. How can I be more comfortable with my financial situation and confident I won’t outlive my nest egg?

The first step to financial piece of mind is developing a comprehensive financial plan. Having a constantly updated financial plan enables you to continually know where you are in relation to your goals, and consistently highlight actions that should be taken so you can enjoy the retirement you’ve imagined. Additionally, a well-crafted financial plan should contain strategies for accruing and preserving wealth. According to a study conducted by the Securities and Exchange Commission, investors with a financial plan have twice as much cash and investable assets as investors without a plan.1

What qualifies as a financial plan? First, any document provided by a stockbroker, insurance agent, or annuity salesman is likely not a financial plan, but a sales presentation. A financial plan should be objective in nature and investment decisions should be based on the plan; the plan should not be a tool to steer you toward predetermined and limited investments. A comprehensive plan should define your current financial position, outline your goals, and chart a detailed strategy for achieving those goals. With an emphasis on minimizing taxes, your plan should include:

  • A variety of retirement projections
  • An analysis of your insurance coverage
  • An examination of your estate planning documents
  • A clearly defined investment strategy, and
  • A plan for funding education accounts for heirs

Retirement projections are useful for estimating the standard of living you are on pace to enjoy, and can even illustrate how your lifestyle would be affected by variables such as inflation, life expectancy, and the rate of return achieved. This tool is great for quantifying the actions you must take to reach your goals, such as how much you must save each year, how long you must work, etc.

The investment strategy portion of your plan should identify an asset allocation appropriate for your risk tolerance. Your asset allocation is the mix of stocks (most aggressive), bonds (less aggressive) and cash (most conservative) in your portfolio. A predetermined asset allocation should reduce your probability of losing more than you can afford during market declines, and help you sleep better at night. Additionally, having a comprehensive long-term plan will minimize emotion and emphasize logic when making financial decisions.

Beware! It is not enough to have a financial plan collecting dust on your bookshelf; your plan should be a living document. Circumstances in your life are frequently changing—new family members, market movements, changes in employer benefits, fluctuating health status, etc. Your plan should be updated at least annually to reflect these changes.

1  SEC, Office of Investor Education and Assistance, February 24, 1998

Lon Jefferies is a fee-only financial planner with Net Worth Advisory Group (www.networthadvice.com). He never collects commissions so he can provide objective advice. He is a candidate for CFP™ certification and a member of the National Association of Personal Financial Advisors (NAPFA). Contact him at (801) 566-0740 for a no obligation consultation to review your financial situation. Have a question you’d like Lon to answer in an upcoming issue? Email him at lon@networthadvice.com.

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