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Life Stages and Financial Planning

Financial resolutions are only as good as your follow-through. Here are some planning considerations for the three key stages of your financial life -- accumulation, preservation, and transfer.

As you progress through the major stages of your life, it's normal for your goals to change too. In addition, current volatility in the financial markets along with other unsettling factors such as the impending presidential election and widespread geopolitical unrest may cause you to pause, rethink your financial situation, and set new expectations for the future.

Resolutions typically fall into one of three financial "life stages" -- accumulation, preservation, or transfer of wealth. In order to establish action plans for these phases, you need to examine opportunities, identify challenges, and add a dose of reality to your planning efforts.

Accumulating Assets

The key to pursuing longer-term financial goals, such as retirement and education funding, is to have a well-thought-out plan that assigns actual dollar amounts to each goal -- and a timetable for getting there. On this score, many investors are falling well short of the mark.

For instance, research compiled by the Employee Benefit Research Institute (EBRI) indicates that a sizeable percentage of workers say they have virtually no money in savings and investments.¹ Specifically, among workers who provided this type of information, 57% reported that the total value of their household's savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000. This includes 28% who say they have less than $1,000 in savings. ¹

If you find yourself behind in your accumulation efforts for major life expenses, such as retirement, don't despair. There are many opportunities to jump-start your savings campaign.

  • Make the most of employer-sponsored plans. For participants in 401(k)s, 403(b)s, and 457 plans, the contribution limit stands at $18,000 for 2016 with an additional $6,000 in catch-up contributions allowed for those who are 50 or older.

  • Maximize IRA contributions. In 2016, you can contribute up to $5,500 to a traditional or Roth IRA (or split that amount between the two types of accounts). Add another $1,000 to that total if you are making catch-up contributions.

Don't let procrastination get the better of your best-laid plans. Make 2016 the year you get serious about saving.

Preserving Assets

Holding on to your assets requires a disciplined, long-term view. Most people plan for a retirement to span 25-plus years. However, when we encounter volatile market conditions, investors tend to move in and out of positions too quickly, potentially causing them to sell low, buy high, and abandon asset allocation fundamentals.² Short-term declines are normal and inevitable, but can tempt the most grounded investor to make impulsive investment choices. Consulting with your Certified Financial Planner™ during market downturns can help you better understand the market environment and allay your fears.

Many investors tend to hold on to a stock too long because they want to avoid paying capital gains taxes. Sometimes, making decisions based on tax consequences alone can be like the tail wagging the dog. It could cause you to miss opportunities. Speak to your CFP™ or CPA now about your 2016 strategy, particularly if you plan to rebalance your portfolio.

Transferring Assets

To leave a financial legacy requires significant advance planning. Questions regarding how much you want to leave to loved ones, how long your bequest will last, and how much will be eroded by taxes are difficult to assess on your own. Planning converts uncertainty into real strategies to make a difference.

When crafting your estate plan, be sure that documents are written to be flexible and easily adapted to changing circumstances. If balances on investment accounts decline, you may need to rethink -- and restate -- your intentions, perhaps even change beneficiary designations to reflect changing market dynamics.

When faced with these and other important financial planning considerations, a trusted advisor can be an invaluable resource. Working together, you can address new realities by setting practical expectations and crafting a plan for success in 2016.

¹ Employee Benefit Research Institute, 2015 Retirement Confidence Survey, April 2015.

² Asset allocation does not assure a profit or protect against a loss.

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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