When you set out on a long journey — especially if you’re going somewhere you’ve never been — creating a plan is one of the most important things you can do to get organized and feel confident about reaching your destination. Planning for your future retirement shouldn’t be any different as it requires the right amount of time, energy and a holistic strategy. For example, if your goals include a worry-free retirement, funding your children’s education or buying a house, a holistic plan can help you get there.
To help guide you on your journey to a secure financial future, follow these steps to get your plan under way.
Get organized. Before starting a trip, one of the first steps is to gather your travel essentials — such as your passport, itineraries and personal items. A similar approach applies to planning for your retirement. This includes getting your 401(k) in order, creating a budget and setting goals — getting and staying organized are essential components of financial planning.
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But, how do you know what to assemble? Start with the basics.
First, think about putting together a budget and find a way to keep all your information in one place. For example, online resources like Voya’s Personal Financial Dashboard can help you manage and budget your finances all in one place. These types of tools will help you keep track of your daily expenses and get detailed information as to where your money is actually going.
Having the ability to organize, integrate and manage all of your information in one place is a great starting place for organizing your financial life.
Set your goals. With any trip, it’s important to know what you want to do and see to make the most out of your time. When it comes to your retirement plan, you’ll want to know what your goals are in order to make the most out of your savings.
Your primary planning goal is to determine what you are working toward. Good financial planning starts with a conversation about your needs, wants and wishes. This includes questions like: What’s most important in your life? What makes you happy? Where would you want to live? What are your dreams for the future?
The more you know about what motivates you, the better you can work towards your goals.
Get professional help and guidance. Just like how a travel agent or internet resource can help you plan for a successful trip, the same applies for your retirement.
It’s often a good idea to work with a financial advisor as a successful financial plan can be built around that relationship. Together, you can map out an investment plan that includes everything from your retirement timeline and goals as well as risk tolerance and future income needs.
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It’s a lot easier to plan when you break things down into manageable pieces. To help do that, try utilizing these key planning strategies when meeting with your financial advisor:
— Evaluate your net worth
— Conduct an analysis of your retirement income and health care expenses
— Review your cash flow and estimate any savings gaps
— Ensure you’re saving enough (such as taking deferrals from your paycheck and saving into an individual retirement account)
— Consider tax-efficient strategies and life insurance
— Optimize Social Security strategies
— Understand your retirement income plan
— Prepare and protect against the unexpected
— Plan for leaving a legacy
Be prepared to adapt your plan. When you plan for a trip, you also need to know how to adapt that plan for certain contingencies. If you’re heading to the beach and rain is in the forecast, what do you do? Just like traveling, a well-thought-out retirement plan could be damaged if you don’t take the time to monitor and adjust it.
A recent Voya survey found that only 20 percent of Americans have reviewed or made adjustments to their retirement plan in the last year. Growing and retaining your plan takes more than just creating it. Regular reviews are necessary to gauge progress toward your goals and “course-correct” along the way.
But remember, you don’t have to go at it alone. Working with an advisor can help you manage portfolio risk and possibly defer or reduce taxes.
[Read: Why Taking a 401(k) Loan is Risky.]
A plan is like a journey — every stage in life presents new opportunities and new challenges. No matter where you are along your path, make sure to review and adapt accordingly. As your life changes and evolves, so should your plan.
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How to Create a Financial Plan for Life originally appeared on usnews.com
