National Retirement Planning Week (April 8-12) offers a great reminder for consumers to chart the course toward a retirement plan that meets their financial life goals. This article series discusses three opportunities that I see as a CERTIFIED FINANCIAL PLANNER™. In Part 2, I focused on how consumers can invest early to reap the full benefits of compound interest. Today, let’s talk about finding help from a credentialed advisor.
Course Correction #3: Consult with a CFP® Professional
Retirement can feel insurmountable to many of us, who are bewildered by the task of creating a balanced plan. How do we simultaneously save for retirement, a new home and our children’s college tuition, especially if we also have to pay down debt? A professional can help put our financial life in balance for greater clarity and confidence.
For many investors, the 2008 financial crisis looms large in their thoughts. They hesitate to invest, for fear of a market crash wiping out their nest eggs. They probably don’t realize that people who stayed invested in the stock market from 2007 through 2018 generated a 100 percent total return (based on the S&P 500 index). Put another way, these investors doubled their money over 11 years by committing to a long-term approach and resisting any temptation to pull out during this tumultuous period.
Nevertheless, fear of market downturns leads many consumers to keep their money in cash as a protective measure, reflecting little awareness of the danger posed by inflation. Even when earning 1 or 2 percent of interest each year from cash, your real return after taxes and inflation is negative in terms of purchasing power.
Inflation risk may be difficult to understand because the impact is barely noticeable on a day-to-day basis. But analyzing any 30-year period demonstrates how it can dramatically decrease monetary value. The counterintuitive truth of saving for the future is that being too conservative is actually quite risky.
Consult a CFP® Professional. They can help you establish a plan, avoid excessive fees and understand the greatest risks in retirement: 1) market performance, 2) inflation, 3) longevity, 4) health, 5) tax and policy changes, 6) unexpected events, and 7) inappropriate allocations.
It’s important to recognize the urgency of investing even if retirement might be several decades away. At Facet Wealth, we emphasize actions that can be taken each year to prepare for retirement, such as maxing out your Roth IRA or increasing your 401(k) contribution. Specific, measurable and achievable annual goals help break down long-term planning into more manageable aspects.
Planning for life
Financial life management is a life-long commitment. From the day you start earning money until the day you retire and perhaps 30 years beyond, you need to consider how you’ll protect yourself, as well as your family and income. Remember that retirement is not the end! Rather, it is the start of what should be an exciting and enjoyable new chapter in your life. Proper planning is about ensuring you can have the retirement of your dreams filled with family, friends, security and peace of mind.
The only historically proven method to achieve this goal is long-term investment, with an intelligently evolving strategy based on risk, time horizon and proper age-related allocations. And don’t forget to celebrate small victories along the way and enjoy the journey.
Ready to get going? Schedule your intro call or check out the link here to a few tools that can support your journey.
Brent Weiss is the co-founder and head of planning at Facet Wealth, a next-generation financial services company offering financial planning and advice to consumers.