If you have ever been in one of my client planning meetings, you will often hear me refer to projecting one’s flight path. The reason I have used this term is that it requires advanced planning and navigational skills when it comes to developing a financial plan. Webster’s defines flight path as “a course or route of travel.” One of my college professors would often say to us, “if you don’t know where you are going, any road will get you there.” He was urging us to have a plan. As we begin 2021, most can agree that a flight path for one’s financial future is more important than ever. But with so many unknowns, is this even possible?
In March of 2020, no matter who you may have been speaking with, you would have probably heard them begin the conversation with “Aren’t we living in unprecedented times?” As I wrote in a blog about that time, I stated that after 35 years of advising clients, this wasn’t my first rodeo. My reason for this statement was that there have been numerous unprecedented times like the pandemic that have been disrupters in our history. However, this disrupter has been especially horrific and it is simply different. The key now is how do we respond or navigate through it?
To return to my initial analogy: before an airline pilot takes flight, he always has a flight plan to guide his navigation; he knows exactly where he will be going and how he plans to get there. Every flight has a different plan which is created based on weather forecasts and winds. They will also consider the most economical route, but will often opt for a route that avoids severe weather or more favorable winds. But experienced pilots know that even with the best, most well-thought-out flight path in hand, after the plane has left the tarmac there may be good reasons to alter course.
Another critical part of the flight plan is the pre-flight check list. This is a list of tasks that should be performed prior to take-off. Its purpose is to improve flight safety by ensuring that no important tasks are forgotten or overlooked. So how does all of this compare to a financial plan?
Let’s say you are age 50 now and you want to retire at age 62. Some of your “preflight check list items might be:
- Enroll in my employer’s retirement plan.
- Calculate my expected monthly expenses at age 65.
- Determine how much I plan to travel and estimate budgets for vacations.
- Ensure I am setting aside the proper amount from my paycheck to accumulate the necessary funds to draw upon when I reach 65.
- Consider the three-year gap between age 62 and 65 when Medicare kicks in. How will I pay for health insurance? How much will it be?
- Set the proper allocation of stocks to bonds in my investment funds that will allow me to sleep at night thru volatility but still reach my accumulation goal.
This checklist is by no means exhaustive, but it is a starting point to help set a successful flight path to retirement. Keep in mind that much like in aviation, there will be times when adjustments will need to be made along the way. This “unprecedented time” is a stark example. Other bits of turbulence you might experience or want to plan for are health issues, which can be addressed by researching and planning for long-term care insurance or self-funding your healthcare through your own earmarked investments. It is possible that items like this may require extending the date of your retirement plan or possibly finding a part-time consulting position to help with the transition. The point is that thinking through these possibilities ahead of time and utilizing tested retirement planning methods to mitigate them is the best way to stay on track and arrive at the destination you had in mind.
Are you ready to create your flight path and pre-flight checklist? It can be a difficult task to undertake on your own. If you would like professional assistance in getting your financial plan on track, we would be honored to sit down with you and talk first about the goals you have for your future, then how we can help you create a financial plan to support them. Give us a call today at 757-436-1122.