Posted Monday, January 2, 2023

Financial planning is much more than plugging a few numbers into a financial calculator or website and getting “your number.” A retirement checklist is nice, but it is only a tool in the financial planning toolbox. Retirement and financial planning is a comprehensive on-going process as the image to the right illustrates. Pretty pictures are just that.. let’s break this down and drill into some of the finer details.

As mentioned elsewhere, there are three major asset and wealth components-

• Accumulation (fun and exciting part)
• Preservation (tricky part)
• Transfer (necessary evil part)

To be successful with each of these components requires financial planning, but beyond these considerations financial plans offer three exciting benefits-

Define Goals and Objectives

How do you create a plan without a goal or an objective? You don’t of course, but at the same time you might need help defining and shaping your retirement goals. A good financial team will run through a checklist of various things. A great financial planning team will dig deeper into your financial world than some checklist to determine the root reasons for your goals and objective. For example, people might say that want to help pay for education, but the root cause of this objective might be deeper than that. Parents could really be saying that they want to help their children transition from childhood to adulthood, and education is only a part of that transition.

Create A Custom Blueprint

Colorado Springs has a home builder who has built the same model no fewer than a 1,000 times. The framers could probably build the house with their eyes closed, yet a blueprint is still used. Same with a financial plan. And to continue the house motif, most houses have four walls, a roof, a kitchen, a bedroom, etc. But what makes your house a home are the finer details such as paint colors, carpet selections and furniture. While most people have the same major retirement goals, your financial plan must be customized for your unique situation including risk mitigation.

Measure Success

A financial plan allows everyone on the financial team to measure success. If a plan has been created, reviewed and signed off by everyone, then it is easy to use that as a measuring stick and keep everyone accountable. Remember, your financial team includes you, your financial advisor, your tax professional and your estate planning attorney. Having a plan and referring to the plan gives you confidence in your path to success.

Remember the quote from The Hunt For Red October-

Admiral Painter “What’s his plan?”

Jack Ryan “His plan?”

Admiral Painter “Russians don’t take a dump, son, without a plan.”

People don’t plan to fail, but most fail to plan!

The financial planning process has three components. First component is analysis where you identify your personal goals and then prioritize your financial goals in terms of urgency. Next component is developing a strategy which starts with gathering financial information and analyzing the data to develop solutions.

The final component is the most challenging and is the largest stumbling block. The last component is to implement the plan, and then review and monitor the progress. The financial planning process starts all over again with identifying your goals and objectives, to ensure that things haven’t changed. When you were eight years old, your priorities were Otter Pops in the freezer. When you were 25, beer in the fridge.

As you move through life, your objectives and tastes change, so the financial planning process must repeat itself to capture these changes. Your cash flow needs will change through time as well. 50s and 60s see a lot of travel and eating yummy food. 70s and 80s see a lot less travel, and more medical expenses.

A retirement checklist that is comprehensive and meaningful to you cannot be found on the internet or in a book. Sure, as mentioned earlier there are topics and objectives that cover 70% of what you need. In other words, everyone has the same 70 items on their retirement checklists. But the remaining 30% must be unique to you, and must be vetted out and reviewed by a competent financial team which includes you, your tax professional, your financial planner and your estate attorney.

Some things to consider- Do you want to leave a legacy for your heirs or will your check to the mortician bounce? Is your retirement a cliff retirement like an airline pilot or a slow slide into retirement with consulting work? How critical is debt reduction? Our physical longevity is outpacing our mental cognitive abilities necessitating long term care planning. This list could go on and on, and answers to these basic questions will probably yield more questions than answers.

Be weary of the one-size-fits-all retirement checklist. You are you.

Financial planning including retirement strategies and calculations is not investment advice. We cannot tell which securities to invest with or how to balance your portfolio. We have two options, streamlined and advanced.

Streamlined Financial Planning
This includes general discussions about-

• Qualified accounts, and how too many people chase after 401k plans and IRAs, and not enough focus on intermediate horizons.
• Building wealth, and how that should be your primary goal (saving taxes is a distant second, really!).
• Roth or pre-tax contributions to 401k plans and IRAs.
• Alternative retirement plans such as profit-sharing and defined benefits pensions (cash balance plans).
• Roth conversions, how they work (and the proportion problems), why they are wonderful, how much should you do, the tax consequence and the necessary planning.
• Education savings, and the various ways beyond 529s.
• Rental properties, how they might benefit your financial plan including tax matters.
• Budgeting, and Yes we save this for last since it is such a buzzkill, but it is the most important.

Our annual fee is $900, and includes two annual meetings (usually May and November) to discuss the above.

Advanced Financial Planning
A deeper dive into all of the above with a customized fee structure. For example, we recently engaged with a client who wanted a bunch of rental property analysis, assistance with loan applications including a PFS, and other related matters. We did a monthly fee of $175 for bi-monthly meetings, plus a $2,500 retainer for any overages.

All financial planning is done by Jason Watson, CPA, who used to run a Registered Investment Advisor firm before focusing primarily on small business advisory services.

Business Advisory Services
For our wonderful clients engaged with WCG on our Business Advisory Services (BAS) plan such as the Vail, we can perform “financial planning lite” calculations such as-

• Max 401k contribution for you, the employee, and the company.
• Adding your spouse to double-down on employee contributions.
• Roth conversion tax consequence (in connection with your tax planning).

Plan Administration
WCG cannot engage in plan administration or compliance. For example, we might say, “You might have a controlled group situation. You should review with a plan administrator for compliance.” However, we cannot opine to the compliance aspect of your plan.