Tuesday, April 29, 2008

Financial Planning "Through the Years"

On April 9, 2008, the Janus Report: Investor Newsletter posted an article online entitled "Through the Years -- Financial Planning for Each Life Stage", by David Alexander.

I knew that David was writing the article for Janus Capital Group, since he interviewed me by phone in January as a source, and then he sent me a draft before finalization.

The article can be accessed on the Janus website, under the "Inside this Issue" tab of its Investor Newsletter home page.

Other current articles posted by Janus include: "A Happy Medium"; "Time to Fuel your IRA"; "Smart Growth"; and "Investing for College".

also offers various "Investment Tools & Calculators" on its website for public use , as well as primers on the topics of education financing, personal investing, retirement saving, portfolio management, and more.

The author of the article consulted two sources to illustrate his ideas. For the financial aspects, he interviewed
Jonathan Pond, who is a public television host and the author of such books as You Can Do It! The Boomer's Guide to a Great Retirement and Grow Your Money-Plan, Save and Invest. For the legal aspects, he interviewed me, identified as "an estate and fiduciary law attorney with Goldberg Katzman, P.C., in Harrisburg, Pa., and an adjunct professor at the Widener University School of Law."

In considering "what makes people financially successful," Jonathon Pond identified five elements:

  • living beneath your means;
  • investing wisely;
  • avoiding serious mistakes between now and the time you retire;
  • being adequately insured; and
  • never borrowing to buy a depreciating asset."
The author suggested a sixth factor: "maintaining a flexible perspective and being willing to adapt your strategies over time in response to changing conditions."

The article then specified, with examples, various elements of a sound financial plan, stretching across four life stages.

  • Young Adult (18-30)
    • Establish good credit and avoid excessive debt.
    • Invest aggressively for retirement, taking. advantage of compound growth.
    • Buy a first home and build equity.
    • Consider crafting a will and health directives.
  • Middle Adult (30-45)
    • Create an estate plan.
    • Buy adequate life and disability insurance.
    • Keep investing as much as you can.
    • Save for your children's college.
  • Pre-Retirement (45-65)
    • Leverage peak earning years to build financial security.
    • Shift retirement savings as necessary.
    • Review estate plans regularly as assets grow and to reflect changing life circumstances.
  • Retirement & Beyond (65+)
    • Appropriately rebalance assets to manage risk.
    • Plan portfolio and Social Security distribution strategies.
    • Take action to minimize estate taxes and facilitate wealth transfer to descendants.
    • Make sure health insurance is adequate.
My comments noted that "[t]he legal frameworks you use -- wills, trusts, health directives and guardianships for minor children -- don't change * * *. But the accumulation of substantial assets and the increased possibility of health issues make it imperative that estate concerns are adequately addressed."
"Perhaps the most distinctive aspect of growing older is a concern about long-term care and housing. As they grow older, people want to know where they are going to live and how they will pay for the health care they will need." * * *
I also reinforced a core principle of the estate planning process -- involve more than one professional, and, if possible, a "team" of professionals from different disciplines. Beyond the lawyer (who drafts legal documents), as complexity increases, a qualified investment or financial advisor should be involved.

Read the posted article on the Janus website for further advice about planning "through the years", during the four life stages.