What Can Financial Planning Do For You?

Have you wanted to chart a course for your financial future and take the guesswork out of today’s decisions? If so, you may benefit from a financial plan.

The financial planning process can help you get organized financially, understand how to use and grow your assets, create a call to action (i.e., to save more, take more or less risk with your investments), and give you peace of mind so that you can sleep well at night.  A financial plan is a roadmap for how to achieve your goal(s) and can help you:

  • Identify and prioritize your goals (i.e., paying for college, funding your retirement, buying a second home);
  • create and implement a strategy for achieving that goal;
  • assess and evaluate whether you are on track to achieve that goal; and
  • modify your strategy or your goal as life events occur.

Less than a quarter of participants in a recent study had a formal financial plan. Yet 90% of those participants with a plan responded that it was useful to them.  Further, 30% of those with a plan maintain that it was critical to achieving their retirement goals.

Retirement is not the only goal for a financial plan; each individual or family has many financial goals throughout their lifetime.  Some goals are anticipated, and some goals are the result of challenges or opportunities that arise.

At HTG, we consider financial planning as an ongoing process that evolves as your life changes and transitions happen.  The process is not limited to investing your assets; it can also help with tax planning, determining how much and what types of insurance are needed, how to fund college education for your children, understanding your spending, creating savings goals, evaluating a relocation or new job, determining when to start social security benefits, etc.

What types of questions can financial planning answer?

Here are some practical and concrete ways we have helped clients using the financial planning process.

Gifting to Next Generation

Joe and Susan were in their early 60’s and wanted to understand the optimal timing and the magnitude of assets they could transfer to their children and grandchildren while minimizing estate taxes and not jeopardizing their own financial needs.  First, we focused on their spending and goals for retirement and how many assets would be necessary to fund their lifestyle through their deaths.  From that process, we determined that Joe and Susan were likely to have a taxable estate at death and outlined what steps they could take now and in the future to reduce their estate tax liability.  By working with their estate attorneys and accountants, we created a strategy to transfer certain assets into a trust for the benefit of their descendants. The assets would grow outside of their estate but still allow Joe and Susan to retain some control over the timing and use of the assets by the next generations.  As the federal and state estate tax exemption amounts have grown, we have helped Joe and Susan identify new opportunities to gift assets to their descendants and plan for charitable bequests while ensuring that they keep sufficient assets in their portfolio to ensure that they do not “run out of money”.

Negotiating a Divorce

Kristin was in the process of divorcing her husband after being out of the working world for 20+ years while raising her children.  Her husband had always taken the lead on their family finances, and Kristin didn’t have a solid understanding of their financial assets or access to information about them.  She needed someone to help her digest the financial affidavit submitted to the courts by her husband and partner with her and her attorney through the divorce process. First, we helped her create a budget for living expenses post-divorce, understand the potential division of, and advocate for her fair share of the family’s assets, and provided her with resources to increase her financial knowledge and confidence. Then, once the divorce was final, we helped her invest the assets awarded to her, create an income stream from the assets, and determine how much she needed to earn each year to meet her budget.

Evaluating Costs and Benefits of Insurance

Harry and Samantha were married with three young children and finally reached the point in their careers where they were starting to accumulate assets.  They had group life insurance through their employers and had purchased a permanent life insurance policy but were unsure whether they were adequately insured.  We explored the purpose of their life insurance -in their case, income replacement – and then analyzed their insurance need in terms of both death benefit and time period required.  Then we assessed the cost and terms of their current insurance coverage and helped them secure term insurance from an independent broker with a larger death benefit and lower cost.  Using the premium savings, they were able to start contributing to a taxable account.

Balancing Education and Retirement Savings

Cathy was a 45-year-old mother of 2 middle school children who was restarting her career after a recent divorce.  Cathy wanted to help her children pay for college but needed to start saving for retirement as well.  Through the planning process, we helped her understand her current spending and created a plan for how much Cathy could set aside each month for education savings while maximizing her retirement savings. We were able to give Cathy a better understanding of the projected cost of a college education for her children, how much she could reasonably save for college, and identify ways to reduce the education costs through scholarships, school selection, and loans.

Analyzing Pension Options

Stan and Mary were in their mid-60s, happily employed, and with no plans to retire before 70.  From a prior employer, Mary had a pension which at age 65 needed to be annuitized (changed into a stream of monthly payments through death) or rolled into an individual retirement account and invested.  We helped Stan and Mary understand their current income and marginal tax bracket, assess their longevity expectations based on age, health and family history, project their expected retirement income, and consider whether they would be better off with a fixed annuity payment or investing the pension assets in an IRA account.  Stan and Mary decided to roll Mary’s pension assets into an IRA account as they had no plans to retire anytime soon and no additional current income needs.  A few years later, when Stan and Mary decided to retire and spend more time with their grandchildren, we helped them create an income stream with withdrawals from their taxable and retirement assets with a view to minimizing their taxable income.

Every client is unique, and there is no one-size-fits-all financial plan.  No matter how much time and effort you exert to create a financial plan, you are sure to encounter unforeseen challenges and opportunities that will necessitate changes to your financial plan.  A trusted advisor can help you with the financial planning process and help you achieve your ever-changing and evolving goals.

If you would like to learn more about how HTG can help you successfully shape your financial story, contact us to arrange a complimentary meeting.

Kerry B. Connell, CFP®

Kerry joined HTG in 2014. She helps clients create a picture of their financial goals and directs investments to attain those goals. Kerry is also involved in the firm’s management and strategic planning initiatives and contributes to HTG’s educational and networking efforts.

Kerry is a CERTIFIED FINANCIAL PLANNER™ practitioner. She has a BA degree from Tufts University and an MBA/JD from Northwestern University.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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