Understanding The Financial Life Cycle

Just like there are four seasons in a year, there are different seasons of financial planning during your lifetime. By starting early, you can gain a better understanding of where you are at and what challenges may lay ahead, as well as how you would like to get where you want to go.

Of course, every situation is unique, including the age and circumstances under which you begin implementing a financial strategy. And what suits you at age 25 is typically different from what meets your needs at age 55.

In a nutshell, the stages include:

• Protecting assets—At younger ages or when you begin to accumulate financial assets, the ability to earn income may be your most valuable asset. Protecting your income is critical. It’s also important to establish an emergency fund and build a strong personal savings base.
• Investing for the future—As you grow financially more successful, you typically begin having more discretionary income. During this stage, you’ll start planning and saving for future goals, such as a child’s college education and/or a comfortable retirement. It’s important to make sure you have a well-balanced and tax-diversified portfolio to provide potential growth opportunities.
• Taking retirement income—As you near or enter retirement, you’ll want to make sure that you have flexibility to take income in tax-efficient ways to continue your lifestyle and help minimize the amount of your hard-earned dollars that go to Uncle Sam.
• Transferring wealth—As you become older and more financially secure, leaving a legacy becomes paramount. During this stage, you want to evaluate your financial situation and identify any assets that you are unlikely to need for income and then plan to transfer them to those who matter most to you.

There is some overlap in each of these stages. For example, you may take steps to get the right protection in place while laying a foundation to grow your assets. Or you may take retirement income while planning ways to transfer your wealth.

Regardless of the stage you’re in, it’s important to make sure that your legal and financial documents are properly structured to ensure the most efficient and effective transfer of your assets—including property, personal belongings and investments—in the event of your death. Doing so can give you the added peace of mind that comes from knowing your family is as financially stable no matter what happens.