I live a short car ride away from an off-leash dog park that sits on the windy shores of Puget Sound here in the Pacific Northwest.  When I am not throwing sticks or managing my rambunctious young pooch Toby and his more responsible older sister Phoebe, I often find myself reflecting on my family, my work and my career.  Since turning 50 in August, I have spent more of this time reflecting on finances while I breathe the salty air and gaze at the distant Olympic Mountains.  While I give considerable thought to my finances, I spend more and more time thinking about the finances of others.  This article provides a high-level look at the financial phases of life and what we should be thinking about as we set our sights on the summit.

Surveying the Mountain and Staging the Climb:  Foundation Building and Early Accumulation

We have three teenagers in our household.  One of them began her college career last month from the comfort of her bedroom.  Her college career is not off to the raucous start most of us envision when kids embrace university life.  There are no parties or late-night philosophical conversations with new friends. However, there are still classes to attend and there are tuition bills to be paid.

It is around this age that most people develop attitudes toward spending and saving that impact them throughout their lives.  Important decisions about debt, lifestyle and saving begin for most folks after they graduate high school.  Whether young adults attend college or launch their careers right out of high school, they begin making decisions related to:

• Managing debt (college loans, buying a car)
• Budgeting (living within their means)
• Saving and investing (“paying themselves first” through automated savings, rainy day fund)
• Protecting income and assets with insurance (health, auto, renters and disability insurance)

For their survival (and their happiness) it is critical young adults develop a thoughtful, pragmatic approach to dealing with money.  It is essential they learn that financial goals are met through hard work, constrained spending, diligent saving and smart investing.  Doing so while they are single and have limited responsibilities will make it easier as their lives become more complicated.

The Climb:  Prime Accumulation and Life Expansion

The importance of developing sound money management skills and a sound philosophy around money in early adulthood becomes increasingly important as people embark on the climb, because this transition can happen without conscious awareness.  One day a person is a twentysomething working long days, enjoying extended weekends traveling with friends and moving through life on cruise control.  The next thing they know they are in a long-term relationship, buying a home and considering starting a family.  Their income grows, but so do their responsibilities.  They must continue to manage debt, live within their means, save, invest and insure.  However, many must then add to their list of obligations:

• Co-manage financial and non-financial demands of a family
• Save for college
• Help aging parents
• Enlist professional help for:
  • Taxes
  • Comprehensive financial planning and investment management
  • Insurance (types of insurance addressed before plus life insurance)
  • Estate planning (Wills, powers of attorney and healthcare directives)

People rely on the financial muscle memory developed while they were surveying the mountain and staging the climb as they work through the alternately wonderful and bewildering challenges of the climb.  They help their children prepare to thrive in a complicated world while at the same time acknowledging their mortality and that of their parents.  They buy life insurance and have Wills drafted.  They help their parents negotiate the realities of aging with dignity.  All the while they fully engage in their careers and they stare retirement in the eye.

Reaching the Summit:  Retirement and Wealth Distribution

Reaching the summit includes the last few years of “full” employment and retirement.  It is a period during which people shift from reliance on vocational income to reliance on retirement assets and alternative income streams like pensions and Social Security benefits.  Stress from strenuous work weeks is replaced by concerns about health, family and the sustainability of financial resources.

While retirement looks very different to people, preparation for a financially successful retirement involves many of the same activities.  Whether it is a “feet-up” retirement or a shift from a stressful career job to a more altruistic (often lower-paying) pursuit, nearly every successful retirement involves careful planning, disciplined saving, prudent investing and a realistic distribution plan.  Crucial tasks for people in or approaching retirement include:

• Creating or updating a detailed financial plan that provides visibility for cash flow that incorporates reasonable spending, an appropriate rate of return and results in a strong likelihood of success.
• Reviewing asset allocation and making appropriate changes to investment portfolios to be sure the asset mix is appropriate given risk tolerance and time horizon.
• Articulating a legacy. Whether a person wants to leave money, leave a mark or both, retirement is the time to be sure wishes have been expressed and memorialized.
• Minimizing stress, staying healthy and embracing life. Executing a successful retirement is the culmination of a lifetime of hard work and sacrifices.   

How Can Private Ocean Help You Reach Your Summit?

Our team at Private Ocean is dedicated to helping people navigate the endless switchbacks and altitude changes that impact their financial journeys.  Our range of services is broad.  Among the services we provide our clients are:

• Creation of comprehensive financial plans using state of the art modeling tools
• Management of socially conscious investment portfolios with an eye to low expenses and tax efficiency
• Design and implementation of detailed income distribution plans for clients transitioning out of the workforce
• Development of tailored stock option strategies

Contact us and one of our advisors can help you with your climb – no matter where you are on life’s journey.