The day-to-day demands of work, family and life can at times be overwhelming and cause you to lose sight of your long-term goals. At other times, your financial goals may come into conflict – competing against each other for both your attention and resources. This is why financial planning is so important.

It may sound daunting or time-consuming, but the process itself is simple and straight-forward, helping you align each of your goals with sound financial tactics designed to markedly improve your likelihood of success. From retirement planning to education planning, asset protection to estate planning, a well-crafted financial plan can help keep you on track toward:

  • Meeting all your interrelated goals from your working years through retirement.
  • Minimizing the impact of taxes on your savings.
  • Funding educational costs for your children or grandchildren.
  • Building a cash reserve to meet emergency needs.
  • Providing for your family in the event of your death or disability.
  • Reducing taxes on lifetime gifts and estate transfers.
  • Ensuring the orderly transfer or sale of a family business.
  • And establishing a discipline to your investment strategy that aligns with your goals.
  1. What is financial planning?

Financial planning is the process of articulating and defining personal and financial goals and formulating a comprehensive, integrated strategy to achieve them without the assumption of undue risk. The process includes four distinct steps, as follows:

Information gathering (i.e., life goals, assets, liabilities, cash inflows and outflows, investment preferences, etc.) and analysis

Plan development; aligning resources to short- and long-term goals

Plan implementation

Plan monitoring, periodic review and adjustment

  1. What areas are typically covered in a financial plan?

A comprehensive financial plan will generally address most or all of the following topics: retirement planning, investment planning, educational funding, income tax planning, estate planning, risk management and insurance planning.

  1. What does the retirement planning process entail?

At its core, retirement planning is about striving to ensure that you never run out of money, whether from living longer than expected, market downturns or spending too much too fast. The process helps you estimate how much you’ll need to cover your essential and discretionary expenses in retirement, identify income sources to fund those various expenses, and determine most tax-efficient way to liquidate assets from multiple accounts to generate sufficient income.  These decisions will be based on a multitude of factors including:

What retirement means to you. Is it a chance at a second career or a life at the beach? What are your travel plans and other general lifestyle issues (second home, etc.)?

At what age do you want to retire? How much income do you want available to you in retirement? How would you feel if you were unable to retire at that age?

Do you envision any impediments or have any fears about achieving your goals?

How long do you expect to be retired? Is your family history one of longevity? How is your general health?

If you own a business, will it be sold during retirement? Will you receive income from it or need to fund expenses for it?

Is it important to you to pass wealth to your heirs? To charities?

The discussion generated by these and other questions will provide a visual image (“paint the picture”) of your unique retirement. It will help identify obstacles and provide a realistic framework for the best solutions to meet your goals.

  1. What is investment planning?

Your financial plan will review your existing investment holdings (asset class, liquidity, risk, diversification and tax consequences) against alternative strategies as part of a coordinated approach designed to meet your financial goals in a manner consistent with your risk tolerance and the rate of return needed to fund your goals.

  1. What is income tax planning?

Income tax planning encompasses a lot more than just filing personal or business tax returns. Typically, the goal is to reduce, postpone, eliminate and/or convert federal and state tax liability on both compensation and investments or change the tax ramifications to a more favorable rate structure. Some of the techniques available to accomplish these objectives include funding retirement accounts (Traditional IRAs, Roth IRAs, SEP, Keogh, 401(k), pension and profit-sharing plans), transfer of assets to individuals in a lower income tax bracket (custodial accounts, Coverdell Education Savings Accounts and 529 plans) and/or holding capital assets for the favorable long-term capital gain holding period (a year and a day or longer prior to sale).

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