Creating a Plan in Your 40s and 50s

KEY TAKEAWAYS:

  • Saving for your long-term retirement and financial goals can seem overwhelming. Break down your goals into smaller, more manageable steps.
  • Creating a true financial plan will provide you with much needed clarity (and relief) about what it takes to accomplish your goals.
  • Constantly monitor and adjust your financial plan with your advisor. The future is uncertain. Nothing should ever be set in stone.

I attended a great presentation the other day by John Naber, the all-American swimmer who took home four gold medals from the 1976 Olympic Games in Montreal. Naber, who set world records in each of the events he won, is a passionate, funny and entertaining speaker – one of the best I have heard in a long time. During his presentation, Naber described how he approached the daunting task of knocking four full seconds off his previous best time in the 100 meter backstroke during his training for the Montreal Games. That quantum leap in performance was what he thought it would take to win the event in Montreal, which he ultimately did in record time. Dropping four full seconds in any swim event at the world-class level, especially in a 100 meter sprint, is an enormous challenge that would intimidate most elite swimmers. However, instead of feeling overwhelmed, Naber methodically broke down his task into incremental measurable pieces, always keeping the end goal in mind.

THE PROCESS

At the start of his Olympic training cycle, Naber first looked rationally at how many years, months, weeks, days – even how many practice sessions he had left before the Montreal Games were to begin. Then he methodically calculated just how much time he would need to drop in each practice session to get closer to his ultimate goal. What seemed like an overwhelming challenge at first, became more manageable in Naber’s mind. That’s because his plan provided clarity about what he needed to do each day on his path to the Olympic podium.

What intrigued me most about Naber’s systematic approach to gold was that it reminded me of the process we encourage our own clients to use when building a long-term financial plan. In personal finance as in competitive swimming, you can’t just focus on your end goal or magic number, you need to break the goal down into manageable steps while monitoring and adjusting frequently as you move forward and conditions change.

Many of our clients come to us in their 40s and 50s because they have reached a point in their lives in which they feel a sense of urgency to focus on personal and financial fulfillment. Most have worked very hard to build successful careers or businesses, and have saved diligently during that time. Sure, they’ve taken some positive steps toward a smart retirement, but they haven’t necessarily spent time focusing on their long-term goals. This sense of urgency can also create anxiety when you don’t have clarity about what it takes to get to your goals. Also, many new middle age clients are afraid of hearing that they’ve started their planning too late in life or that they’re too far behind the curve to reach their goals.

START SMALL

Suppose you were asked to swim the English Channel rather than start to swim 20 laps without stopping, a month after joining a learn-to-swim class? Suppose you were asked to run a marathon, rather than starting with a local 5K, just a few months into a beginners running program? Those goals are way too intimidating for most people, but that’s what it can feel like to folks who must suddenly put a comprehensive financial plan in place after several decades of “winging it” throughout their working lives.

However, if you approach financial planning, rationally and systematically, it is exactly what you need to relieve anxiety and provide clarity about what you want to accomplish. That doesn’t mean you will be able to accomplish every one of your goals. You may need to adjust expectations by saving more, or by working later in life than you expected. However, our experience is that once people put forth the effort to follow their plan, they are relieved and then feel empowered to take action about what needs to be done.

The four key steps to a successful long-term financial and investment plan are as follows:

  1. Develop a thorough understanding of your financial values, goals and assets. Only then can you start making smart decisions about what you want to do.
  2. Set priorities and break the process down into manageable steps. Take what seems like an overwhelming process and make it more manageable.
  3. Create an investment allocation based on low-cost and tax-efficient stock and bond mutual funds. Let the markets work for you and ignore the constant media barrage about how to react to or time the market.
  4. Constantly monitor and adjust. The future is uncertain and nothing is set in stone. You cannot just “set it and forget it.”

FINANCIAL PLANNING MATTERS

Many people think saving for retirement and other long-term financial goals are all about the investments. The financial planning process is just as important as the investment strategy. There are so many variables that can affect a financial plan, including future returns of the stock market, inflation and taxes, and focusing on what you can control, such as your spending and saving. You also need to adjust as you move toward your goals. Whether you are training for the Olympics or building a happy and stress-free retirement plan, you need to set ambitious, but realistic goals that can be broken down into manageable increments, easily measured, and adjusted as conditions change. With that advice in mind, we hope to see you soon on the retirement planning podium.

 

Todd Flynn, CPA, CFP ® is a Principal at Soundmark Wealth Management, LLC. Todd works closely with physicians, business owners, and other high-net-worth individuals to help them define their financial goals and implement an ongoing financial planning process.