Time is our most precious asset, especially when it comes to reaching your financial goals. The decisions you make today can profoundly impact the quality of life you lead tomorrow. Unfortunately, many people postpone financial planning, believing they have plenty of time to address it later. But this “wait and see” approach can come at a cost—potentially jeopardizing long-term goals and financial stability.
In this article, we reveal the high price of delaying financial planning and 5 reasons why today is the best day to start. From buying a house to planning a wedding or preparing for retirement, the importance of early planning cannot be overstated. Read on to learn how to set your sights on a path toward success so you can begin to realize more freedom from your finances.
The first reason you shouldn’t put off financial planning is that you’re probably not saving as much as you should. That’s not to say that the savings you do have shouldn’t be celebrated. But no matter the amount you have, you need to be sure it will be enough.
If you plan to retire in your mid-60s, your retirement savings may need to carry you through 30-plus years. Not to mention rising inflation that will decrease the value of your savings over time and the additional expenses you will likely encounter along the way. A study by the Center for Retirement Research estimated that the median retirement savings of Americans ages 55-64 is $120,000, yet the average retirement cost is nearly $46,000 per year! At that rate, a savings of $120,000 will only last 3-4 years.
One strategy that can help is to work with a financial professional to understand what your savings can handle. Contrary to popular belief, you cannot use a multiple of your annual income to determine how much to save. This is why it’s crucial to plan ahead. The sooner you understand your need, the more options you will have and the easier your goals can be to pursue.
If you’ve ever held a hefty medical bill in your hand, you aren’t alone. Healthcare costs in America are among the highest in the world. And as you age, you will likely require more healthcare services. According to the Fidelity Retiree Health Care Cost Estimate, the average couple at age 65 will need about $300,000 saved to cover healthcare costs in retirement. Most people don’t even have that much in their retirement accounts to live on, let alone cover medical costs.
Given the events of the past two years and continuing inflation, it’s more important than ever to start preparing for the ever-increasing cost of care. The longer you wait, the fewer options you may have. Working with an experienced professional can help you evaluate your options and build a long-term plan for healthcare.
Another reason not to put off financial planning is that if you don’t start early, you might miss out on several tax strategies that take years to implement, including:
If you’re in a high tax bracket, being able to save for retirement with pre-tax dollars can be an advantage because pre-tax contributions reduce your taxable income and may ultimately reduce the amount of taxes you owe. This strategy could save you thousands of dollars in taxes each year. The earlier you start, the more you can save over the course of your career.
Roth conversions can help to increase your retirement savings and decrease your long-term tax liability by transferring funds from a pre-tax retirement vehicle (traditional IRA) to an after-tax account (Roth IRA). This allows your money to grow tax-free for as long as you’d like, and required minimum distributions (RMDs) are avoided as well.
When it comes to withdrawing from your retirement accounts, how you take your distributions can make all the difference. Each retirement asset (employer-sponsored accounts, Social Security, traditional IRAs, etc.) has different tax characteristics. Creating a withdrawal strategy can help lower your tax burden by structuring withdrawals from each income source in a tax-efficient way.
To properly implement these strategies and more, a long-term understanding of your full financial picture is required. Putting off financial planning can leave you stuck with a huge tax bill that could have been avoided.
Just as saving early allows you to take advantage of massive tax savings over time, there is a compound effect that occurs with the money that is invested as well. The money contributed to your retirement account each year can grow exponentially over time, but the key part of that equation is time.
If you wait to invest, you may be missing out on growth year after year, and the resulting loss of earnings can be substantial. Not to mention the potential for loss when you try to invest yourself without the proper advice and guidance of a professional. We’ve found that many clients are often invested too conservatively and miss out on the opportunity for significant growth in even just a slightly riskier portfolio.
Do you feel 100% confident about the myriad of financial choices you make day in and day out? Have you encountered more complexity as your assets have grown? Partnering with a financial professional can help guide you through the stressful unknowns when figuring out your finances.
Think about all the time you spend worrying about finances and whether you are saving enough money. Are those thoughts preventing you from making great memories and actually living your life? For many of our new clients, the answer is yes. But it doesn’t have to be that way.
Financial planning can help you take control of where you are now and how to work toward your goals with confidence. It can provide clarity by defining a path from point A to point B and allowing you to get the most out of your life along the way.
Starting the financial planning process early brings you a host of advantages over those who choose to wait. But it’s never too late to begin the journey! Whether your goals involve buying a house, planning a wedding, or saving for retirement, working with a professional can increase your chances of pursuing financial confidence.
At Wealth Advocate Group, we offer customized, risk-managed portfolios, making the selection and implementation of an investment strategy easier than ever. Feel confident about your financial future and get back to enjoying the life you love by taking the first step. Reach out to us at Contact@Wadvocate.com or 440-505-5578 to schedule an introductory consultation.
Jason Cohen is Chief Operating Officer and wealth advisor at Wealth Advocate Group, LLC, an independent, fee-based wealth management company. Jason has 15 years of experience and spends his days managing firm operations, including portfolio trading and analysis, training of new advisors, financial plan production, and client relationship management. Jason specializes in serving real estate professionals and other independent contractor business owners, helping them navigate their unique financial challenges, such as unpredictable cash flow and tax issues, so they can pursue financial independence. Jason has a bachelor’s degree in public management from Indiana University and is a CERTIFIED FINANCIAL PLANNER® professional and believes that everyone should have access to comprehensive financial planning. He is passionate about doing his best for his clients and setting others up for success. Outside of the office, you can find Jason staying active in a variety of sports and spending time with friends and family. Learn more about Jason by connecting with him on LinkedIn.
The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Wealth Advocate Group and LPL Financial do not offer tax advice or services.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
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