As a woman, you’ll almost certainly be completely responsible for your finances at some point in your life.  It may be because you choose not to marry, or because you marry but later get divorced.  Or it may be because you’re married, but at some stage will be widowed – after all, women on average live five years longer than men.  For this reason, it’s critical that as a woman you’re involved in the planning for your retirement.  And retirement planning is an essential component of a robust financial plan.  Here’s why you need an effective financial plan in place.

What a Financial Plan Does

If you imagine your life as a journey, then you might think of a financial plan as a roadmap – or, if you’re a sailor, as a course to plot – designed to get you from where you are today to where you want to be in the future.

What a Financial Plan Includes

A robust financial plan will address all of the following areas of your financial life:

  • Cashflow planning
  • Risk management and insurance
  • Investment management
  • Retirement planning
  • Tax planning
  • Estate planning

Why You Need an Effective Financial Plan

Visualize What’s Important to You

An effective financial plan will help you define and prioritize what’s important to you.  Naturally, income in retirement is a top priority.  But there are also things you’ll need to spend money on, like health care (which tends to increase in price more than other goods and services), periodic home maintenance and upgrades, replacement cars and, potentially, care at home or in a facility later in life.  And you’ll definitely have things that you may want to spend money on, too – like travel, education and support for your kids or grandkids, and charitable giving and philanthropy.

Once you’ve defined and prioritized your goals, you and your financial planner can start to figure out how to pay for them.

Want to learn more about retirement planning? Contact our team at Springwater Wealth today to learn how we can help you develop a plan for your financial future.

 

How Much Do I Need to Save?

When you retire, you’ll most likely be able to claim a Social Security benefit.  If you’re married, your benefit will be the larger of your own and one-half of your spouse’s.  If you’re divorced, your ability to claim a divorced spouse’s benefit will depend on how long your marriage lasted and whether you’ve remarried.  And if you’re widowed, you’re entitled to claim a survivor benefit – up to 100% of what your deceased spouse or deceased ex-spouse collected or was entitled to collect at the time of their death.

But, if you’re like most women, a Social Security benefit alone won’t be enough to meet your income need in retirement, and so you’ll need to accumulate savings in retirement and investment accounts, like a 401(k) or 403(b) plan, a traditional or Roth IRA, and a taxable brokerage account.  Employer-sponsored retirement plans like 401(k)s often include incentives to participate, like employer matching contributions, so you’ll want to make sure you take advantage of these, if they’re available to you.

In preparing an effective financial plan for your retirement, you and your financial planner will use some fairly sophisticated software that will help you determine how much you’ll need to save in these different types of accounts, so that you build an adequate nest egg.

How Should I Invest?

You might think of your portfolio as the engine for your plan.  Its performance fuels the growth of your investments over time.

Many people think that the key to investing success is buying “hot” stocks – like finding the next Microsoft or Google, or “timing” the market – knowing when to buy and sell ahead of a market rise or fall.  If this sounds a lot like looking into a very cloudy crystal ball, it is – and the dismal track record of investors who try to beat the market with these strategies should be all the proof you need that it’s the wrong approach.

At Springwater, we know the factors that will largely determine the performance of your portfolio – and they’re things that a disciplined, professional advisor can help you control, like asset allocation (your “mix” of investments), diversification (owning a variety of investments that perform differently over time), taxes and fees, and, perhaps most importantly, your emotions.

Your investment strategy should be designed to take as little risk as possible, while still helping you achieve your goals.

What Can Go Wrong?

To paraphrase the Scottish poet Robert Burns, “…even the best-laid plans… [can] go awry”.  As a woman planning for retirement, you’ll want to be sure that your financial plan takes into account things that could potentially jeopardize your financial journey.  Together with your financial planner, you’ll want to assess the potential impact of things like lower investment returns, higher taxes, reduced Social Security benefits and, perhaps most importantly, longevity.  Living longer than planned simply means that you’ll need even more resources to provide the income you need.

Peace of Mind

Let’s bring full circle the sailing analogy that we started with, and imagine that you’ve decided to sail from the San Francisco bay to Hawaii.  Your boat is fairly new and well-maintained, you’ve got the latest navigational and safety gear, and you’ve wisely decided to bring along a co-pilot (your financial advisor).

From all of your research, and from conversations with sailors who’ve made the trans-Pacific journey before, you know that you’re bound to encounter some storms along the way.  You’ll also benefit from tailwinds at times.  And you may encounter the occasional lull, when nothing seems to be working, and little or no progress is being made.

But you take comfort from the fact that you have a well-thought-out plan, one that takes into account the challenges you’ll face along the way.  And while the conditions may push you slightly off-course now and again, by making periodic incremental course corrections you can stay on track.   Knowing you’ve given yourself the best possible chance of reaching your destination safely and securely provides tremendous peace of mind.

As a woman planning for retirement, having an effective financial plan in place can help you make smart decisions that will protect your future, while balancing your lifestyle with supporting family, friends or causes you care about.