An investment plan is a tool you can use to help you understand where you stand in retirement at every step of the way. Are you still on track to reach your retirement goals? How likely is it you be able to maintain your current lifestyle throughout retirement? Can you afford your current and potential healthcare costs? How much will you be able to leave behind for your loved ones?
A well-constructed investment plan can give you a good sense of the answers to these questions. Instead of figuring it out as you go, you can examine a variety of outcomes to help you make more informed choices.
Factoring Spending Goals into Investment Plans
Before you can use an investment plan to help monitor your spending in retirement, it’s important to provide detailed answers to some fairly basic questions: what are your income needs/desired income in retirement? How might those needs change over time?
This means creating a budget that outlines your proposed spending needs in retirement year by year, while also considering one-time expenses or planned increases to spending needs, such as a year in which you wish to travel or buy a new car.
Your Investment Plan as a Dynamic Retirement Tool
Once you’ve created an investment plan that factors-in your cash flow needs in retirement, you can make adjustments to it to see how it might impact your ability to reach your goals.
For instance, if you add in a hypothetical purchase of a new car in five years, how does that cost affect the trajectory of your net worth over time? Would it maybe make more sense to wait 10 years to get a better feel of where you stand then?
You can also adjust your investment plan based on other factors, such as inflation projections, increases to health care costs, or rate of return you receive on your investments. As those inputs change, it could impact your net worth—and therefore spending capacity—over time. Looking at different scenarios and outcomes can help you make more informed investment choices.
An Investment Plan that Changes as Your Needs Change
One of the great things about an investment plan is that it can change with you, as your needs change. That way you can consistently have a sense of where you stand, even if life events cause a substantial change to your original retirement plans. The investment plan will help you make smarter decisions about adjustments to things like spending or the asset allocation of your portfolio.
At WrapManager, we create and help update investment plans over time for our clients to chart their retirement plans and help them stay aware of the probability of reaching their goals. If you want to explore creating an investment plan for yourself and your family, please give us a call today at 1-800-541-7774 to get started, or click here. One of our Wealth Managers would be happy to help you.