If you have a written financial plan that was customized specifically for you after many hours of interaction with your financial planner, you are well ahead of your peers in the wealth management department.
If you cannot recall the last time you have reviewed, updated or edited this plan, you are underutilizing your well-spent money and time. The big question is, should your plan be re-done? How often should your plan be updated? Is it worth the money to engage your planner to update it?
Here are a few key things to consider that help answer these important questions:
First, every year you should review your current plan with your advisor/planner no matter what. There are a few reasons to do this. First, you want to see if you are on track towards your goals, whatever those goals may be. As they say, if you don’t measure it, it didn’t happen. Second, things in your life or the external world may have changed that may require tweaking your plan. These things could be minor like a small raise giving you more cash to invest, could change how much you invest. They could be major like a tax code change that alters certain assumptions. Finally, mistakes do happen and either you the client or your planner could have omitted a key fact, or missed something respectively and now a year later it could affect the plan.
Currently, we are in market turmoil for both the stock markets and interest rates and these two facts should cause everyone with a financial plan to carefully review your plan. More broadly, any kind of significant macro event, either bad or good, is cause to review your financial plan. For example, recently the famous and widely adopted “4%” rule of the safe amount of your assets that can be taken each year was revised by its author. For anyone in retirement, that should trigger a review of your plan to see what impact this new thinking has on you. Wars, inflation, crashes, booms, the rare Insurance Carrier default and other large-scale events are times to stop and review that plan. Each of the aforementioned events can have big impacts on your plan, be it savings levels, retirement dates, estate plans and much more.
Life changes that are significant nearly always require a review and updating and perhaps re-working of a financial plan. Calamitous events such as the death of a spouse, a terminal illness diagnosis or losing a lawsuit are on the negative side of the list of personal changes. On the positive side, a new child, the sale of a business, a financial windfall or change of career will also generate the need to examine the critical document that maps your future finances.
Is It Worth it?
The short answer, yes. The last thing you want is to have spent thousands of dollars, or even hundreds, on a plan that falls short because some new event was not taken into account, so it is worth a few hundred dollars or more to update that plan. Usually what is at stake is worth multiples what you paid for the plan in the first place.
Financial plans are not static documents mean to gather dust and blindly follow for years without review. They are moment in time plans that take into account the best possible information at the time coupled with assumptions of the time. Both types of information can and often do change, and given this reality the plan needs to revisited for your financial well-being.
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