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Financial Planning for the 5 Stages of Life Thumbnail

Financial Planning for the 5 Stages of Life

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Life is constantly changing. As you grow older and take on more responsibility, your financial planning needs change too. In your working years, a common worry is saving enough and taking the right steps to retire early. As you near retirement, the fear becomes outliving your retirement savings.

At Align Wealth Partners, we work with clients in all phases in life. Some of our younger clients want help building short-term savings, ask questions about combining finances with a spouse and want to plan to buy their first home. Many of our clients who are near retirement age often ask about their retirement income streams and wonder if they can help their children or grandchildren financially.

Between all these changes, it can be hard to know what the focus should be now to financially prepare for later on. In our experience, there are 5 general stages of life, so let’s break down what the financial planning process looks like at each of these phases.

1. Early Career

The decisions you make early on in your career will set the stage for your long-term financial health. If you choose to develop good financial habits early, there’s a better chance that you’ll reach your retirement goals having used less effort than your peers.

The main focus in the beginning of one’s career is managing your cash flow and planning out your long-term financial goals.

So, ask yourself, what do you hope to accomplish in 10, 15 or 20 years? Maybe you’d like to have enough money to comfortably get married and start a family. Or maybe you want to have a net worth of $1 million by the time you hit 40.

Whatever it is, the golden rule to live by is this: Spend less than you earn, and save the difference.

If you live by this rule and pair it with a clear set of financial goals, you can set yourself up for easy success down the road. Plus, you better protect yourself from any major curveballs life may throw your way.

During your early career, financial planning should consist of managing cash flow by:

  • Learning to spend less than you earn
  • Building savings
  • Purchasing or saving up for a home
  • Paying off high-interest debt, student loans and other debt
  • Contributing to an employer-sponsored 401(k)
  • Creating a financial plan with clear short-term, mid-term and long-term goals


It’s never too early to discuss your future. Contact Align Wealth Partners to see how we can help.


2. Mid-Career

By the time a person hits mid-career, the focus shifts from managing cash flow to long-term wealth building, protecting your family and preparing for retirement.

Chances are your income is higher than it was early on in your career and you now have the funds to set aside money for long-term goals such as starting your own business or saving for your children’s college education.

During this stage, financial planning includes:

  • Maxing out retirement contributions for a 401(k)
  • Maxing out contributions to a Roth IRA
  • Protecting your family with adequate insurance coverage
  • Maxing out tax-advantaged accounts like HSAs
  • Preparing a will with guardianship provisions for your kids
  • Saving for your kids’ college
  • Paying for short-term goals like vacations and home maintenance completely out-of-pocket

3. Pre-Retirement

Once you’re five or 10 years from retirement, you’ll want to have an intense, laser focus on your goals. This is the stage where you identify holes in your financial plan and take action to better ensure you’ll be where you want to be financially when you retire.

Evaluate your progress thus far, and determine whether you’re on or off track. If you’re on track to meet your retirement goals, consider any risks that may throw off your plan.

If you’re not on track, do everything you can to fill in the gap. This may include picking up a part-time job, moving your retirement date or changing your portfolio strategy.

Financial planning in this stage includes:

  • Adjusting your plan to meet retirement goals
  • Creating a sustainable withdrawal strategy for retirement
  • Paying off mortgage and other expenses
  • Maxing out all retirement contributions each year
  • Minimizing tax burden
  • Growing savings and other investments
  • Changing your portfolio strategy if it’s too aggressive

4. Early Retirement

For a lot of people, retirement is a brand-new journey unlike anything they’ve ever experienced. It’s the first time in your life where you ditch the familiarity of a steady paycheck in exchange for finite resources and never-ending free time. And it’s also a time to see if all your hard work has paid off.

Be cautiously optimistic entering into retirement. There aren’t any do-overs, so you’ll want to make sure you’re not exhausting resources too quickly. In fact, one common pitfall in those early retirement years is overspending.

And remember, financial planning doesn’t stop once you enter those Golden Years. If anything, it becomes more crucial to monitor your nest egg and make adjustments to ensure you’re not outliving your retirement savings.

That’s why we focus on preservation during this financial planning stage by:

  • Monitoring your withdrawal rate to ensure it doesn’t outpace portfolio performance
  • Ensuring your portfolio is positioned for protection and growth
  • Tracking your retirement budget and making necessary adjustments
  • Managing your tax strategy
  • Updating your will and estate as needed

5. Later Retirement

Your late retirement years are all about balancing health and wealth to ensure your longevity matches your assets. By this time, you may have spent several years in retirement doing all the things you love. Maybe you’ve hung out with the grandkids, volunteered in your local community or even traveled a bit. The plan is that you’ll still be able to do all these things.

But these later years are often met with higher medical bills and more health issues than you had before. In fact, retirees typically have to allocate more of their budget toward healthcare costs as they age. When you’re in your 60s, healthcare accounts for roughly 10 percent of your budget. By the time you’re in your 80s, it jumps up to 20 percent.

That’s why financial planning in this stage consists of:

  • Considering assisted living options within your long-term care plan
  • Updating your will and estate plan as needed
  • Ensuring your withdrawal rate is within a sustainable range
  • Making sure you’re selling investments in a tax-efficient manner
  • Managing healthcare costs

The Bottom Line

The only constant in life is change. As you move throughout each life stage, your financial planning strategy should change too. At Align Wealth Partners, we specialize in helping you transition through every stage of life. Whether you’re young and just getting started in your career or you’ve been doing it for decades, we can help you create a personalized plan to help you work toward all your goals. If you’d like to learn more about who we are and what we do, contact us today.