1. Accumulation phase
This is typically the longest phase and everything we do here will affect our future. We should perhaps try to look at this phase of planning from the future – when I am 70, 80, 90 – what will I hope that I have planned for if I were to look back from those ages?
Will I have planned for Tax efficiency, a decent Rate of Return, what were my Asset allocations and how did they cope in times of volatility – good and bad. What is my risk tolerance and how do I achieve what I want to without being stressed the whole time about what the market might or might not do? How do I protect my assets from creditors, fires, earthquakes and lawsuits? This will include planning for things like College, Mortgages, Debt, Taxes, Emergency Funds, Life Insurance. (See – 4 Questions every Financial Advisor should be able to answer)
2. Preservation Phase
Now that I have spent many years of my life accumulating, how do I preserve what I have saved?
This is a completely different question to what I face in the accumulation phase, but influenced by what was done in the Accumulation phase which is why early planning for the next 3 stages is so important during the Accumulation phase. For instance – If I did not plan for permanent life insurance earlier on, then this is when all my Term Insurance typically starts to expire. If I did not plan for Long Term Care earlier on it becomes tougher now.
3. Distribution Phase
This is when I start taking money out for Retirement. How long will my money last? What is the rate of return I need? Will I have some pension income? Sequence of withdrawals, planning for sequence of returns, when can I be a little more aggressive with some of my investments and when should I be more conservative. (Often this is counter intuitive to what we think should happen). When is the exact month that will be optimal for each spouse to take their social security? (Click HERE to find out) What about Medicare and what is the tax torpedo? What % inflation should I plan for? (This is why I actually got my RICP® designation)
4. Transfer Phase
Just this week I was with a client at the Estate Planning Attorney’s office making the complex decisions about what happens when one or both spouses are no longer with us. Do I have a will? Do I need a Trust? Who will administer my estate when I am gone? Who gets the money? Do we want to protect our son or daughter from what a rogue spouse might do? Do we leave money directly to our grandchildren and what effect does that have on their College Planning? At what age should they get money? Do we leave money to a kid who has a drinking or drug problem? What are our thoughts about charitable giving? What happens to a spouse in a second marriage? How do we protect both the remaining spouse AND children from a previous marriage? Do I have medical directives and who do I trust to make decisions for me when I cannot? (See – Our Legacy, its not what we leave to our kids)
This all boils down to proper planning for and during each phase and it’s never too early to plan.
Whether it be for College Planning or Retirement Financial Planning, let’s PLAN
To schedule a time to meet with us please e mail davec@collegeplanningamerica.com or call 714-813-1703
Dave Coen RICP® is CEO of College Planning America and a Registered Representative at SageView Advisory
davec@collegeplanningamerica.com dcoen@sageviewadvisory.com
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