Berdon Blogs

T&E TALK:  Common Mistakes That Can Derail Your Financial Planning (Part 1)

Posted by Scott T. Ditman, CPA/PFS on Aug 1, 2016 11:00:00 AM
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In working on financial plans for nearly three decades, I’ve found that people can often overlook aspects that are fundamental to a comfortable retirement. This week and next, I am going to touch on four key areas that don’t get the attention they deserve: cash flow, the stock market, insurance, and estate planning.

The cash flow you enjoy today is unlikely to be the same down the road.  Equally important, your needs change — often without warning, as in a major illness. It is vital to come to grips with your spending habits as they are today while you are still working and accumulating wealth. From this starting point, you and your advisors need to factor in likely cash flow post-retirement, and what you expect and want in order to maintain the lifestyle you plan on having. This analysis is tempered by your expected post-retirement income and planning for major life expenses such as healthcare costs, vacation homes, gifting to children and grandchildren, and weddings, to name just a few.

Once you have a clearer picture of your cash flow needs in your golden years, you will be in a better position to know what can and cannot be.

Another factor that frequently gets short shrift is the impact of market forces. Do not forget the Great Recession of 2007-2009 when the skilled and unskilled in market issues learned lessons in financial planning and humility. Always guard against euphoria when the bulls are running and a panic-fueled sell-off during a downturn. Balancing risk with reward is a perpetual challenge and one that must evolve as your life progresses. If you are a risk-taker, be prepared to deal with potential negative consequences. If you are very conservative, be prepared to get by with less.  Another common error ignoring the performance of investment assets not managed or overseen by you such as your 401(k) plan.

Absolutely key is choosing an investment advisor who understands your family situation and your short- and long-term goals and can help you plan accordingly. This individual should serve as your strategist who works with your other advisors (accountants, attorneys) to see that all of the components of your overall financial plan are coordinated. This person should be someone with whom you are in touch frequently and who carefully explains their suggestions in light of your circumstances and goals. 

In my next blog I will look at insurance issues and estate planning documents.

If you have any questions about these topics or your overall estate planning, contact me at SDitman@berdonllp.com or your Berdon advisor.

Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, New York Accountants, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.

Topics: T&E TALK

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