For most things in life, having a plan is one of the best ways to set yourself up for success. It should come as no surprise, then, that having a financial plan for retirement is one of the keys to helping you reach your retirement goals.

What Is a Financial Plan?

Think of a financial plan as a blueprint outlining your current money situation and long-term financial goals and then using that blueprint to create a strategy for pursuing them. A financial plan may be created independently or with the help of a professional who can bring years of expertise to the table to help you consider strategies you may not think of on your own.

Your financial plan should be comprehensive, taking a look at your financial life from every angle, but it should also be highly individualized to reflect your unique personal and family situation, risk tolerance and future expectations.

In order for your plan to effectively and efficiently help you reach your goals, it needs to be complete. Successful financial planning contains the following four components.

Key Components of a Successful Financial Plan

1. Align Your Financial Plan to Your Personal Values

This is sometimes overlooked, but it’s critical that the objectives of your financial plan are based on your core values. Ask yourself: What’s most important to me? What am I saving for? What are my goals in retirement? Reflecting on your values can help ensure you’re saving for the things that are truly important to you.

Along those lines, check with your partner to confirm what his or her core values are and ensure the two of you are aligned. For example, let’s say one of your values is family and you want to save money to help your grandchildren pay for college. If your partner values adventure and wants to travel around the globe in retirement, that could limit the assets available to put into your grandchildren’s 529 plans. Make sure you and your partner communicate regularly to avoid any misunderstandings.

2. Engage in Proactive Retirement Income Planning

During your working years, you typically have a good sense of how much you’ll earn each month. Once you retire, your monthly income can become harder to predict, considering there’s market volatility, inflation, public policy changes and fluctuating expenses. How do you estimate how much monthly retirement income (your “retirement paycheck”) you’ll have?

You can think of retirement income as a three-legged stool. The first leg used to be pension income, but as pensions have largely disappeared, it’s been replaced with income earned from a part-time job. The second leg is your Social Security benefits, which represented about 33% of income for those age 65 and older in 2020, according to the Social Security Administration. The final leg is your own personal savings that you accumulated while you were working (e.g. 401(k), IRA, etc.). All three legs have their own unique planning considerations, and you should have a plan for each.

3. Plan Ahead for Tax Liabilities

You may not be working anymore once you retire, but it’s highly likely you’ll still pay taxes. These taxes may be income taxes on distributions from a tax-deferred retirement account, or they may be capital gains taxes from assets in a brokerage account.

The bigger surprise for many people is the fact that your Social Security benefits can also be taxed at your regular income tax rate. Married filers who earn over $32,000 ($25,000 for singles) could see up to 50% of their benefits taxed. Married filers earning over $44,000 ($34,000 for singles) could see up to 85% of their benefits taxed. These thresholds are fairly low, and it’s likely you won’t be able to completely avoid paying taxes on your Social Security. The important thing is to be aware of and plan for the likelihood of this tax.

4. Incorporate Estate Planning

No financial plan is truly complete without an estate plan. Some people think that they don’t need one or that estate planning is only for the very wealthy. However, anyone who has specific plans for their assets after they leave this world needs an estate plan. Everything you own—your house, your car, your possessions, and your money—is part of your estate, and you need to plan for what happens to your estate when you pass away.

A carefully prepared estate plan can help ensure the financial security of your loved ones, minimize taxes and fees on your estate, and make the process of distributing your assets to your heirs much simpler.

Get Your Financial Plan in Order

If you don’t currently have a plan for retirement, or if upon further review your current plan doesn’t have these four financial planning components, then it may be a wise decision to take the time to talk to a financial advisor.

And remember: It isn’t enough to simply incorporate these elements into your financial plan—you’ll also need to review them on a regular basis to ensure your needs are met as your life changes. A financial plan isn’t set-it-and-forget-it; it’s an evolving strategy that is meant to adapt to your changing circumstances and retirement goals.


This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Jacqueline Ampe

Jacqueline Ampe

Senior Vice President, Financial Advisor

CFP®, Series 6, 7, 22 & 63 Securities Registrations,1 Series 65 Advisory Registration,† Insurance License Jackie’s broad base of knowledge and over 20 years of industry experience add value to the team’s ability to provide excellent advice to clients throughout the comprehensive planning process. As a Certified Retirement Counselor®, Jackie helps clients develop a retirement plan they can rely on for a healthier, happier and more productive retirement. In her...Read More