The three lifetime goals every financial strategy should address

1. Retirement. Encore. Second career. Next chapter. No matter how you define it, you likely want to retire someday. And depending on where you are in life, there are steps to take to help ensure your retirement aligns with how you define it.
Source: Edward Jones.
This hypothetical example shows the effects of time, money and return rate on a portfolio's value and potential annual retirement income. Saving $450 per month for 30 years with a 6% return per year would yield a portfolio value of $450,000 and potential annual retirement income of $18,000. Saving an extra five years increases the portfolio's value to $640,000 and the annual retirement income to $18,000. Saving either $100 more per month or earning a 1% higher return increases the portfolio's value to $550,000 and the annual retirement income to $22,000. Doing all three actions – saving an extra five years, saving $100 more per month and earning a 7% return – increases the portfolio's value to $990,000 and the annual retirement income to $39,600. This hypothetical example is for illustrative purposes only and does not reflect the performance of a specific investment. Retirement income is based on a 4% initial withdrawal rate. Portfolio value is rounded to the nearest $5,000.
2. Preparing for the unexpected. If the past year taught us anything, it’s that we should expect the unexpected. You know there will be surprises that can pull you off course. Even though you can’t predict the future, you can still prepare for it. The key is to develop a strategy that not only addresses what you hope to accomplish but protects you whenever the unexpected occurs.
3. Estate/legacy. Isn’t estate and legacy planning for later in life? And isn’t it only for the wealthy? The short answer to both is “no.” An estate strategy gives you control over decisions if you’re no longer able to make them yourself, such as if you become incapacitated.
Your goals will evolve over time, and there may be many that come and go throughout your lifetime. But these three goals should always be part of your strategy. Your financial advisor can be an important guide along the way, helping to make sure you have a strategy that is aligned with what’s most important to you.
Scott Thoma co-chairs Edward Jones’ Investment Policy Committee and is responsible for Client Needs Research, the team that develops and communicates advice and guidance for client needs, including retirement, education, preparing for the unexpected and leaving a legacy.
He is a CFA® charterholder and a member of the CFA Institute and the CFA Society of St. Louis. Scott also earned the CFP® professional designation. He graduated summa cum laude from Southern Illinois University-Edwardsville with a bachelor’s degree in business administration, with an emphasis in finance. Scott earned a master’s degree in economics and finance from the same university.
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