Life Cycle Financial Planning
Life cycle financial planning refers to the process of identifying and managing the financial needs and challenges that arise at different stages of life. As clients go through the various stages and life changes, their responsibilities, needs, and financial capabilities are likely to shift, so it is important to understand the needs of each phase to best serve clients. Below is a list of the 5 stages of the financial planning lifecycle, with examples of key financial planning needs at each stage.
1. Early Accumulation
aka Early Career (Starting Out)
Key Financial Planning Needs
- Creating a budget
- Paying off student Loans
- Starting to save for future goals
- Building credit and developing healthy spending habits
- Establishing an emergency fund
2. Mid- to Late- Accumulation
aka Mid-Career (possibly starting or growing a family)
Key Financial Planning Needs
- Education and family planning
- Obtaining appropriate insurance coverage
- Significant asset purchases
- Retirement planning
- Basic estate planning
3. Pre-Retirement
(generally within 5 years of anticipated retirement)
Key Financial Planning Needs
- Ramping up retirement savings if needed
- Deciding when to retire
- Social security claiming timing
- Retirement healthcare planning
- Long-term care planning
4. Retirement
(typically in one’s 60s, though it could be earlier or later)
Key Financial Planning Needs
- Income planning
- Withdrawal/decumulation strategies
- Tax considerations
- Expense management
5. Leaving a Legacy
aka Wealth Transfer (later in retirement)
Key Financial Planning Needs
- Estate planning
- Gifting
- Charitable strategies
- End of life planning
Alternatively, the financial planning life cycle is sometimes broken down into 3 overall categories: Accumulation, Pre-Retirement, and Retirement; or Accumulation, Preservation, and Distribution.
Segmenting clients in similar stages of life can create efficiencies in financial planning, as processes and workflows can be better systematized. Focusing your time by type of client also helps identify nuances of their situations, enhancing your expertise, and allowing prospects to better identify with you as a good fit for their circumstances.
For Use with the General Public. Financial Planning and Advisory Services offered through Vicus Capital, Inc., a federally Registered Investment Advisor.
