Five Steps to Getting Financially Organized Before Retirement

by Jonathan G. Cameron, CFP®

Getting financially organized before retirement can be a daunting task. There are many unknowns and it can be hard to know where to begin. For that same reason people often wait too long to address retirement needs and, unfortunately, don’t achieve the financial freedom for which they long. When people get serious about retirement, many start by analyzing their investment account(s) (or lack, thereof). Ideally, they’ll meet with a CERTIFIED FINANCIAL PLANNER™ professional to get them on track.

Financial organization starts by identifying and prioritizing what is most important to you.  This is the beginning of a goals-based financial planning approach.

Step 1: Identify What is Most Important to You.

I start by asking clients to list what is most important to them and help them identify what they’d like to accomplish. Spending more time with family, traveling, volunteering, reading, relocating, starting a new business, etc. They fill in the blank. I ask that they be specific. Also in this step, I ask about primary financial concerns, where relevant, such as an aging parent, troubles with children, or debt questions.

Step 2: Prioritize What is Most Important to You.

Often I ask clients to sort their goals list into three columns: needs, wants, and wishes.  When I refer to goals I primarily mean non-financial things; qualitative as opposed to quantitative, such as the items listed in step 1 above. The things, people, and experiences that clients value or desire will cost money, certainly. But it is critical that we focus on the qualitative aspects of financial planning first in order to give a purpose to the quantitative side of financial planning. In other words, once we’ve identified and prioritized goals, money in a retirement account will have a purpose – namely, to fund what is most important in life, as defined by the client.

Step 3: Create a Budget

This is where we back into some numbers. Here I’ll make a distinction. Planning for retirement is planning with tomorrow in mind. We start with the end in mind, as in steps 1 and 2, and work backwards to see what actions need to be taken today to fund those goals.   Do I need to save more?  Am I spending too much now?  Consequently, I spend a significant amount of time on budgeting in client meetings. It is time very well-spent, and is often where we provide the most value.

Step 4: Gather Your Financial Documents in One Place.

It is easy to accumulate financial paperwork. Bank, investment, retirement, college savings accounts. Life, disability, long term care, homeowner’s, auto, umbrella liability insurance coverages. Wills, trusts, powers of attorney, guardianship arrangements, living wills. Student loans, credit cards, mortgage, personal or business loans. The list goes on. This usually adds up to a box or two full of papers. Most of what people save is ancillary material, and may be thrown in the trash. I ask clients to bring their box of papers and we’ll sort it all together, or they may scan and upload documents to a secure online vault to which we give them access. Once uploaded to the online vault, most of a client’s financial life is accessed under one convenient login via secure cloud storage.

Step 5: Work Closely with a CFP® Professional to Pull it All Together

This is where working closely with an experienced CERTIFIED FINANCIAL PLANNER™ professional is essential. In this case, a client pays a fee for unbiased, financial planning advice; no financial products are involved. This is an important aspect of the fiduciary standard of client care. Some financial advisors say they don’t charge for planning advice. No one works for free. Oftentimes a financial advisor wants to sell an investment product, which creates a conflict of interest.

What’s the end result of an advice-based financial planning engagement? Recommendations given in a client’s best interests.  Peace of mind in knowing that you've sketched out your goals and priorities, and have made a plan to achieve them - financially at least.  

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Check out Jonathan's post on Goals-Based Investing. Questions? Feel free to get in touch with us at [email protected] Also follow us LinkedIn, Facebook, Instagram, and YouTube for more personal financial information relevant to you!