How would I set up a financial plan without retirement in mind?
It sounds like a lot of financial advisors focus on retirement planning. How should someone set up a financial plan when they don't know when, or if, they will ever want to retire?
Retirement in truth means different things to different people. My father said he was retired when he reached the point where he only worked when he wanted to work. Which at that point was almost every day - but he was doing something he loved. As he grew older, he cut back more and more - but he never retired in the classic sense.
I would say only about half of the people who I create financial plans for have a firm retirement in mind. What these people are really looking for is to be in the position my dad was in. That is to say, they want to achieve financial independence, rather than retirement. Financial independence means work is a choice, rather than an obligation. It gives you the freedom of telling the boss to go to hell, if you wish, and know you can live without the paycheck. It gives you the freedom to start a business, take a sabbatical - whatever you want to do!
Financial independence is also an important protection against "Murphy's Law". Many people do not choose their retirement date, but have it forced upon them by circumstance - a lost job, health crisis, family crisis, etc. Knowing you can survive without the paycheck takes a world of stress off your shoulders in such situations.
So you build your financial plan based on what will it take to accumulate sufficient assets so that I could maintain my lifestyle without income from work.
I am located in Bridgewater and Flanders in northern and central New Jersey, if you are seeking a CFP to help with this, I'd be pleased to help.
I help many client plan for "financial independence" they day work become an option. It doesn't mean you need to stop working, but ti can give you a lot more options if you aren't dependent on every cent of your paycheck.
Develop your financial plan around the goals that are most important to you. Use retirement accounts like a 401(K) to minimize taxes now and give you more financial freedom later. Also even if you never plan to retire- getting every cent of employer match in the 401k is like getting a raise without working any harder.
Look for a financial advisor who is a good fit for what you are trying to accomplish rather than someone just pushing retirement planning on you.
DAVID RAE, CFP®, AIF® is a Los Angeles-based financial planner with DRM Wealth Management, a regular contributor to Advocate Magazine, Huffington Post, Investopedia not to mention numerous TV appearance. He helps smart people across the USA get on track for their financial goals. For more information visit his website at Financial Life Planning Los Angeles by David Rae.
It's great that you are planning way before you are thinking about retirement, so congratulations! Too many wait until it's too late to adjust course.
There are a lot of people that don't know when they will retire, but they still want to know they are doing all the right things, and perhaps that they are on track for financial independence - or the idea that you have enough to do what you want whether that's work or something else.
Others have noted it is still important to plan for taxes, estate planning, insurance, investments, and other goals you may have. Just because retirement isn't a goal yet doesn't mean there isn't plenty to plan for!
You are right that many financial advisors call their long-term work "retirement planning." However, that is just a way of speaking and doesn't necessarily have anything to do with retirement. I enjoy my work and plan to keep doing it until I am no longer physically and mentally capable of doing so, even if I reach 90 or 100. Nonetheless, I put the maximum into all so-called "retirement accounts" each year--not because I plan to retire or because I might be forced to retire, but because the government provides tax incentives which make it very favorable to put as much money as possible into these vehicles. This includes Roth IRAs, 401(k)s, SEP-IRAs, HSAs, and all the rest. These accounts can be inherited and slowly withdrawn by a young designated heir or heiress, so they might still provide tax-free gains for another century or so.
A better name would probably be long-term tax-advantaged multi-decade compounding accounts. However, it is simpler to call them retirement accounts, so that is what most people do. You definitely don't have to retire to gain their numerous advantages.
There are many milestones in life that one must have a "Financial Plan" for not just retirement. I think my first financial plan was saving for a 1982 Gibson Les Paul Custom. I knew exactly how much it cost and worked back from there. I knew that I would have to mow 25 yards at $20 apiece to get my hands-on Excalibur. The further out a goal is the harder it is to take dead aim planning for it. You may want to consider creating a financial plan with variable milestones in place. Perhaps this would include paying for a wedding, buying a house, paying off student loans, funding your kid's college accounts or buying that new Tesla. These milestones will obviously have an impact on that distant retirement goal, but that is the reason we do financial planning. I like to think of financial planning or retirement planning as Sustainability Analysis. Do the choices you make in your financial life allow you to be sustainable to the lifestyle you are accustomed to or desire to have.