Planning is a process. Part of the process is review. Huge drops in the markets and sideways movements or even declines in investment portfolio balances were probably not the assumptions that were used in your original planning, it is safe to say. What seemed like a secure retirement, an assumed future education fund balance, a carefully planned gift, or a long-term-care insurance decision must be reviewed when markets go sideways or down. Maybe things are okay; maybe they are not. Better find out.
A planning review looks like this. You go back to your analysis and projections and examine all assumptions. If your planning involved spreadsheeting, what rate of return did you use? For example, if you have been heavily weighted in what used to be successful S&P 500 stocks, your returns have been horrible recently. In 2000 the S&P was down 10%. So far this year it is down 4%. Correct me if I’m wrong. This was not your plan! So you need to review the decision about the asset classes and sectors used in your model. Are you properly diversified for this market? Are S&P 500 stocks really appropriate for a retirement portfolio in the amounts you are holding them? If you hold them in taxable mutual funds, are you concerned about capital gains taxes which you have had to pay even though you are losing money? At high portfolio rates of return, retirement felt secure. How about now?
When markets turn, reassessment of expenses is also natural. What about your current living expenses? Have they been higher than you thought that they would be? What will inflation be if energy prices continue to increase? Will inflation at a higher-than-expected rate for a few years affect your lifestyle? How? Should you adjust your living expenses? Have you already done so? What is a conservative rate of expenses to project? Will a new tax law help you? Will your estate planning documents need revision?
Life planning, such as for a long, successful retirement, is like a sailing voyage to a distant port. If you plan to sail to Mallorca, Spain, from Ocean City, Maryland, a course of 90 degrees east is good enough to get you on your way. In both cases, you would have spent some time preparing and provisioning for your adventure. You may have thought that your provisions were ample for your voyage, but now that you are under way it’s time to check the charts, the winds, the compass, and the radio and talk to the old hands. Fortunately, we live in a time when it is possible to get pretty good data and you can even hire an experienced on-board pilot to help you safely navigate deep waters and rough seas. Call us and we’ll help you check both your course and provisions. We’ll review all assumptions and balances and see where they are now leading us. A little midcourse correction may be prudent. Let’s see.
To begin the process of financial plan review using our help, just pick up the phone. We’ll discuss the project and the cost before you need to make any decisions. But don’t procrastinate. In the immortal words of Bo Jackson, “Just do it.”