Running out of retirement savings is the biggest financial fear, while not saving enough for retirement is the biggest financial regret.
There’s an old joke: If you want to make God laugh, make a plan.
But outliving one’s savings in retirement is no laughing matter. Affluent households surveyed by Spectrem Group cite this as their biggest financial fear and not saving enough for retirement as their biggest financial regret. To avoid these pitfalls, making a financial plan is essential, not only from a savings standpoint, but for greater piece of mind.
Nearly half of Millionaires (48 percent) have received financial plan advice from their primary advisor, according to a 2014 wealth level study conducted by Spectrem Group of households with a net worth between $1 million and $4.9 million (not including primary residence). The highest percentage of these (51 percent) was baby boomers ages 55-64.
Four-in-ten millionaires have had their financial plan for at least 11 years. The majority of surveyed Millionaires (53 percent) review their plan at least semi-annually (one-third review it annually).
What is a financial plan? Generally, it is a thorough evaluation of an individual’s current financial situation with a view toward the future based on life goals and career expectations. Where to begin? It is best to think of the financial plan as a kind of map. Where do you want to go? The financial plan serves as the surest route.
A budget is the foundation of a strong financial plan. In planning for a secure financial future, one needs to have a firm grasp of how much money is spent each month vs. how much money is coming in.
The plan should also include realistic and specific short-term goals, as well as your goals two-to-five years from now and goals you envision five years from today.
Embedded in your financial plan should be personal benchmarks, such as paying off debt and milestones such as saving for a home. From this, one can set a monthly savings goal that can be adjusted in relation to actual spending.
An emergency fund is also essential to a solid financial plan. Conventional wisdom says such a fund should have three-to-six months of living expenses in the event of job loss or an unexpected expense. Other aspects of a financial plan are insurance and participating in a retirement savings plan.
A sound financial plan, according to Judy Martel, who blogs about wealth for Bankrate.com., is one “that will have the flexibility to change and grow with your personal situation, and it will also ensure you are basically covered for most life events.”
An individual who wants advice about these types of plans can get assistance using Millionaire Corner’s Best Financial Advisors search service.
Related story: Financial planning process: The role of the CFP
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.