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For many of us, financial planning for senior citizens has meant putting away money for a rainy-day and into savings bonds or the company pension plan to supplement Social Security for future retirement. Financial planning for retirement and developing a plan for the future may seem far-far away and far too ambitious. But today, we are reading more and more that financially planning for retirement is an important, if not essential, part of managing our hard-earned money as we face the real possibility of outliving our money when we stop working. According to a study of individuals and families designed in 1993 by Oppenheimer Funds, Americans of every age, income, and family status will face serious financial difficulties at retirement. An aging population, fueled by increased life expectancy, a decline in corporate benefits, and changing lifestyles--we spend too much of our money and save too little--have combined to create a retirement crisis. Social Security and Medicare may not be able to provide the same cash and health care benefits; corporations and employees are no longer in long-term, stable work relationships with adequate pension coverage; and individual/family savings or investments may be meager compared to what is needed. Therefore, planning for retirement income must shift from corporate pension programs and reliance on government entitlements to the individual. As health care professionals promote expert advice for physical health, financial professionals provide expert advice for achieving financial health.
The essence of planning
Professional financial planners agree that it is never too late to begin planning a serious program for your retirement. It is not possible to make up for lost time but it is possible to gain significant benefit over the long run. Financial planning is the development of an individual's action plan for saving, investing, and distributing moneys and assets for future use. In general, financial planning is used for major life events such as the funding of college tuition and retirement. The essence is four simple rules.
- Act now
- Spend less
- Save more
- Invest better
Planning and building now for a sound financial future makes good sense no matter what age you are. The National Center for Health Statistics projects that 60% of those turning 65 will live to be at least 80 years old. If early retirement is taken, one may be retired for as many years as he or she worked!
Experts advise that we will benefit from doing the following:
- Develop a plan.
- Educate your children.
- Educate yourself.
- Invest only with professionals.
- Minimize taxes.
- Purchase appropriate insurance.
- Talk to a financial planner/advisor.
Take charge of assets and money:
- Pay yourself first by putting away a set amount regularly.
- Adjust priorities--spend money only on what is needed.
- Be debt free, especially from credit cards.
- Establish an "emergency savings fund" which contains enough money to cover three months of expenses.
- Develop and implement a budget that is realistic and emphasizes the future.
- Maximize your lifestyle, find creative ways to enjoy life while maintaining financial well-being.
- Establish a personal reward system as goals are met!
What is a financial planner?
A financial planner is a financial professional who assists individuals and families in assessing their financial needs and developing a plan to meet their goals based on those needs. He or she may work as an independent consultant or may work for banks, trusts or investment houses. Many people may be able to tackle their own planning with limited advice; others are more comfortable with the full services of a financial planner. Consumer advocates caution that many individuals who are in the financial advising arena are not qualified by education, training, or experience. There are no state or federal regulations for the financial planning industry. Some individuals may have specialized training and credentials such as Certified Financial Planners (CFPs) or Chartered Financial Consultants (CHFCs). Others may hold degrees or registrations as lawyers, Certified Public Accountants (CPAs), or Certified Underwriters. The International Association of Financial Planning and the Institute of Certified Financial Planners can provide free information and the names of their members in your area. Referrals based on the personal experience of friends, family members, or business associates are often an effective introduction to a financial planner. The financial planner should provide a broad range of services which
- Assesses financial history.
- Reviews present financial situation.
- Identify areas of need, such as retirement or insurance.
- Assists with the development of a financial plan.
- Helps to implement the plan.
- Reviews progress and reassess choices as needed.
Both a savings plan and an investment program are initiated after a determination is made as to the amount of money that can be directed toward this purpose. A systematic approach is best, whereby a weekly or monthly dollar commitment is made to savings, Certificates of Deposit (CDs), mutual funds, or investment portfolios. The individual and his or her advisor/financial planner determine the specific financial package. The benefits of a financial planner with specialized training include:
- Expertise in areas such as investments, insurance, and taxes.
- Full-time attention to the world of financial affairs that may help to protect your best interests.
- Objectivity, to help take the emotion out of planning and investing; and
This article was last updated on: 06/22/2010