A basic tenet of financial planning is contained in the very name “financial plan-ning”: Have a financial plan!
Multiple studies have shown that people who follow a financial plan save significantly more money for retirement than those who do not follow a plan. The latest Retirement Confidence Survey from the Employee Benefits Research Institute bears this out.
According to the survey, workers with a financial plan far out-save those without a plan: Among workers following a plan, 22 percent have saved $100,000-$249,999 and 29 percent have saved $250,000 or more. Among those who did not follow a plan, just 6 percent have saved $100,000-$249,999 and 2 percent have saved more than $250,000.
The survey defines “having a financial plan” as at least owning an IRA and/or a retirement plan such as a 401(k) plan: 28 percent of all respondents said they also work with a financial planner, and another 33 percent said they plan to do so, while 38 percent of retirees have a professional financial adviser.
Having a plan boosts confidence, as well: 74 percent of workers with a plan feel at least somewhat confident about retirement, compared with 39 percent of no-planners, according to the survey.
While contributing to an IRA and/or a workplace retirement plan is a great first step toward retirement security, it’s just one component of the type of comprehensive financial plan you can design with the help of a Certified Financial Planner.
A professional financial plan considers the broad range of your life goals and creates a timeline and a plan for saving and investing while taking into account taxes, spending, future expenses, health care needs, estate planning and other aspects of your financial life.
Creating a financial plan gives you an overview of your current financial situation and a clear understanding of where you are headed. An effective plan sketches out how each aspect of your financial life is interrelated and eliminates confusion. This builds confidence and peace of mind, because you know where you are and where you want to go.
A comprehensive financial plan provides you with a clear roadmap to guide your everyday financial decisions and actions. A big part of your plan will involve setting priorities among all of your life goals, which leads to a clear timeline you can follow.
A byproduct of this planning process is to leave you better prepared to handle emergencies and milestones. You’ll put aside an emergency fund for unexpected expenses, and you’ll put aside special funds for events such as buying a house, paying for a wedding, or taking a dream vacation. Knowing you have planned for these things will add to your peace of mind.
Most importantly, following a financial plan will include retirement planning, which involves savings, investment and tax planning. The goal is to leave you in a better position to enjoy a comfortable retirement.
Eric Tashlein is a Certified Financial Planner professional and founding Principal of Connecticut Capital Management Group LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Registered Representative, Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Inc., A Registered Investment Advisor. Cambridge Investment Research Inc., and Connecticut Capital Management Group LLC are not affiliated.