We view the financial planning process in a nutshell: Identifying where you want to go, where you are now, and creating an efficient path to get you from here to there. I believe there are three main stages of a person’s financial life:

    The accumulation phasetypically spans many years, during which families are formed, assets are acquired, and one or both spouses advance in their careers. The investment strategy during this phase has the advantage of longer time horizons, which may allow for greater risk tolerance and higher expected returns. However, if the objective at this stage is overly conservative, the opportunity to capitalize on the market rewards for long-term investing may be lost.

The distribution stage generally begins at retirement, and I consider this stage to be the most challenging, as it requires a delicate balancing act between all phases of the financial cycle. There’s still a need to accumulate wealth, identify the most efficient tax distribution strategies, and preserve wealth. But as we move farther along the financial life cycle, risk factors change – once retirement begins, income may be reduced, sometimes significantly. Time horizons are becoming increasingly shorter, and concerns about liquidity and inflation are intensifying.

The preservation phase is generally associated with much lower risk tolerances due to shorter time horizons. The emphasis for those in this stage is usually keeping what they have to fulfill family transfer goals and ensuring sufficient income for possible longer life expectancies.

Goals are the driving force behind a financial plan. Your goals today may or may not be the same ones you have in the future. There’s a strong probability that they will change to some degree. But specific goals, such as essential living expenses and health care, will be constantly needed throughout your lifetime. Other goals that are considered not minimum essentials can be included in your plan, and the analysis will be performed to quantify each goal – “how much will it cost.” It is only after assigning numbers to the goals that we can make informed choices regarding modifications (such as reducing the goal cost or eliminating it)