5 Reasons You Need to Engage in Long-Term Financial Planning

The movie classic Gone With the Wind ends with Scarlett O’Hara…procrastinating. 

“I’ll think about that tomorrow,” she declares in her exaggerated Southern drawl. “After all, tomorrow IS another day.”

I can’t tell you how often I meet people who embrace that “later” mindset when it comes to their financial futures. They say things like, “I don’t like all that long-term planning stuff. I’ll cross those bridges when I get there.”

Hmmm. My guess is those people also don’t like rainy weather. But I bet they keep an umbrella in their car. Last time I checked, arriving at work nice and dry beats walking in the door dripping wet.

Listen…you may not enjoy thinking about long-term financial matters. But—unless you are very ill or very old—odds are you’ll live to see those long-term realities. 

With that in mind, let me give you five reasons you need to be thinking long and hard about your financial future:

1. Financial markets. If you were 65 and ready to retire in 2008, you had a tough year. (Remember the real estate crash?) Ditto for 2000 and the dot-com bubble imploding. What about those poor retirees in Japan who got a gold watch 30 years ago? The stock market in Japan was in the tank for two decades! My point? There are no guarantees that the financial markets will behave as you hope right at the time you plan to transition into retirement. What plan “B” do you have for this possibility?

2. Interest rates. If part of your plan for managing the risk of erratic financial markets involves shifting assets to low-risk savings, what happens when those savings yield nearly zero? It wasn’t long ago that a saver with $1,000,000 in the bank could expect to receive less than $10,000 of interest income from it per year. Even with recent increases in interest rates, the average savings account is only paying 0.46% and the average 12-month CD is paying 1.83%. What plan do you have for the possibility of low interest rates?

3. Taxes. Could taxes go up after you retire? If so, what would that do to a plan built on the idea of deferring taxes as much as possible into the future? What plan do you have for this possibility?

4. Cost of living. Could your cost-of-living increase after you retire? Do you tend to spend more money or less money when you are on vacation? When you are retired, is it possible you may spend even more than you do now? What plan do you have for this possibility?

5. Health problems. What are the chances that, the older you get, the greater your cost for healthcare will be? I’d say that’s a pretty safe bet. What if you have a really big healthcare cost – could it wipe you out because you didn’t want to think about it? What plan do you have for this possibility?

6. Benefit reductions. Could some of the retirement benefits you are now counting on be taken away or reduced? This is THE hot potato in Congress. (Barring a change, Medicare will run out of money in 2031, Social Security in 2034.) Without some changes—higher taxes or reduced benefits, or both—we will not be able keep the promises we’ve made to seniors. 

We cannot wish away this problem. Every year, it gets closer, and the solution gets more expensive. If the solution results in a reduction in your retirement income or an increase in your cost of healthcare, what’s your plan?

None of the items listed above can be absolutely predicted or prevented. 

But they can be prepared for.

When it comes to your long-term finances, don’t be Scarlett O’Hara.

Start thinking about them…today.

Here’s a practical thing you can do today. Start figuring out the best way to turn your retirement assets into regular retirement income that will last for the rest of your life. Email me (bmoore@argentadvisors.com) for a link to take our free, 5-minute quiz. It’s an ingenious tool that can help you figure out—based on your unique “financial personality”—the optimal plan for you.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

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