It wasn’t long ago that financial planning was thought of as a discipline that only applied to the very wealthy. Most people didn’t feel the need to plan, and, frankly, most financial advisors felt the same way. If you consider the fact that, just a few decades ago, the average life expectancy was just 70 years, few people were concerned with making their retirement income last a lifetime. And, back then, the majority of retirees were supported by the three-legged stool of Social Security, personal savings and guaranteed pensions.
But much has changed in just the last 15 years that has extended the need for financial planning to anyone with hopes of achieving their most important goals and securing their financial future. Consider how our financial world has evolved:
- Life expectancy took a huge leap in the last twenty years with average life spans increasing to 85 years and an increasing number of people living into their 90’s. Add to that the continued extinction of guaranteed pension plans and suddenly people are concerned about outliving their resources.
- Health care costs have more than doubled over the last few decades threatening to consume as much as one third of a retiree’s resources.
- The near vertical trajectory of the stock market of the 1980’s and 90’s has become, to many people, a sadistic roller coaster ride they would rather not have to stomach.
- The proliferation of investment products and providers over the last couple of decades has created too many choices which have led to confusion, and, ultimately, investment paralysis.
- Current and future generations will spend an additional 15 years on average caring for family members – either a child with financial problems or an aging parent, or both.
- College tuition continues to climb out of the reach of many American families.
- Over the last twenty years, the Internal Revenue Code has become, arguably, one of the most complex in the world.
Of course, these developments as well as the ongoing evolution of the financial world affect all of us, but women more so than men. The paradox of wealth accumulation is that the better you do, the more complicated your needs become. And, there is an additional layer of complexity in solving for longer life spans, higher health costs, less earnings, smaller pensions, and fewer accumulated assets.
A comprehensive, well-coordinated financial plan needs to be able to address all of your needs and concerns and do so in a way that allows you to worry in order, one priority at a time.
No one plans to fail, but until deliberate steps are taken to clearly define your goals, assess your current financial situation, and implement actionable strategies towards achieving your goals, you will have failed to plan. And, that can be devastating at a time when the stakes have never been higher.
The financial planning process enables you to focus clearly on your specific goals while addressing all of your concerns so they are no longer obstacles. And, having a well-conceived, comprehensive financial plan enables you to shutout the constant drone of doom and gloom, because, in the long-term, your plan and your objectives are all that matters.