When you think of your financial plan, do you primarily consider your 401(k) and the little widget on the plan administrator’s website that shows you a “sunny outlook” for your retirement? While that widget can give you an idea of how much money you may need in the future and how much you should be saving, it also makes many assumptions that may not be customized to you.
We generally think of retirement as the ultimate goal: How much do I need to save so I can retire? However, contributing to a 401(k) alone does not constitute a financial plan. It is a smart thing to do, but a wise person views their 401(k) investments as part of an overarching strategy that accounts for when they will need their money and how long it will last.
Life events usually equal money events. Death, marriage, divorce, and retirement all involve important financial decisions, yet not everyone has the time or resources to think them through. Typically, there are three situations when most people decide to consult a professional financial adviser: receiving an inheritance, considering a complex investment product, and making portfolio or 401(k) investment choices.
While financial planners keep their eye on the long-term goal of retirement, they also often help you set up short-term goals to keep you on track. The process of financial planning provides a way for you to gain control over your assets before you need them.
When you hire a professional, you should work with someone who monitors the overall picture of your financial life. Depending on your financial situation, you may not need a comprehensive suite of services that includes asset management. You may only need an adviser to sit with you to develop a plan that you follow. Generally, you should review your plan every three years, as goals may change, life events may derail your plan, or you may need to know if you are on track to meet your goals. The economy—something we cannot predict—may also change how you feel about your strategy. Ideally, having a plan in place keeps you on a steady path so that you do not overreact to market events or hype.
Most financial planners work closely with your other advisers, such as your tax consultant or insurance agent, to ensure that all financial matters work together efficiently. They can align your assets with your goals and objectives by defining an appropriate level of risk for your portfolio.
While there may be a scientific method to determine how much money you will need in the future, there is also an artistic method to balancing your level of risk with the expected rate of return on your investments. A financial planner has experience working with both risk and returns and can design a plan that aims to satisfy both. A professional will also be able to tailor your portfolio and financial plan to your situation.
What makes each investor unique is their individual goals, the assets they own, and their risk tolerance. It is these nuances that a professional adviser considers when developing a financial plan for clients.
If you have questions on how a financial plan can help you, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the May 25, 2024 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
