The financial industry talks about retirement plans all of the time. But what is a retirement plan? Some believe that it’s nothing more than a portfolio of investments. Others take a more romanticized view, claiming that  a retirement plan is about their family and how to protect it during retirement and once they have passed away. Another definition of a retirement plan centers around future adventures and experiences that you might have after you leave work behind. 

Investopedia defines a retirement plan as a set of retirement income goals, and what’s needed to achieve those goals. Retirement planning includes: identifying income sources, sizing up expenses, implementing a savings program, and managing assets and risk. Future cash flow is estimated to gauge whether the retirement income goal is possible.

Based on the above “official definition,” people may argue that a retirement plan is solely about investments. Our belief at Osiwala Financial Group (OFG) is that all of the previously mentioned definitions are accurate. We believe that your goals are the most critical part of the plan. The money part is how you achieve those goals. While the financial aspect is certainly important, without the goal, what’s the purpose of money?

That being said, for the next few weeks, we will focus on the retirement plan’s financial part. 

Five Types of Financial Plans

Believe it or not, there are several different types of financial plans, but here are the most common ones our OFG advisors see. There are five different financial plans that our advisors run across.

  1. No financial plan
  2. The ”set it and forget it” financial plan
  3. The average financial plan
  4. The do it yourself (DIY) financial plan
  5. The comprehensive financial plan


No Financial Plan

Believe it or not, some people are getting close to their retirement date and they still do not have a financial plan. But is not having a financial plan really a plan? At best, this strategy creates a plan of hope. However, this is one pattern that OFG advisors see pretty often. People think they cannot retire until their Full Retirement Age (FRA) because that is when they will receive the maximum Social Security benefit. While that fact is true, creating a plan gives you the best chance of retiring earlier. And in the end, if you continue working until your FRA or later, you’ll still have your retirement savings to spend or pass to your heirs.

When it comes to financial planning, the earlier you begin,the better. Don’t fall into the trap of putting it off because you have 20-25 years to save. That line of thinking is what causes pre-retirees to get into trouble. Those individuals believe that by postponing Social Security for as long as possible, they’ll receive the maximum benefit, covering all their retirement expenses. But will delaying Social Security be the best solution at that particular stage in life? Additionally, if you don’t have a background in understanding the nuances of Social Security, you could leave a lot of money on the table.

If you have a plan of hope (no plan), the one question OFG advisors will ask is: Without a financial plan, how will you know what you can and can’t do in retirement? Will you be able to achieve your goals? If you don’t know the answer to that question, this may rob you of the most precious commodity we all have:time.

What if you don’t have a financial plan but have done a great job saving your money? That’s great, but what about everything else? And I’m not just referring to tax planning, Social Security, insurance, and estate planning. How and in what order will you withdraw your money? What about taxes? Will it affect your Medicare costs? You should consider several different factors that dictate when you retire and how you should remove the funds when needed. 

Is your retirement plan a plan of hope? If so, you don’t have a retirement plan, and the main issue is that without a retirement program in place, there is an increased risk that you won’t cover your own needs. Errors in retirement usually equate to costly mistakes. But if you haven’t retired yet, it may not be too late. Start building your plan using the same software that OFG advisors use. There’s no cost or obligation. Click HERE, enter your information, and learn alongside an OFG advisor what your future looks like and if changes need to be made to achieve your retirement goals. Next week, we’ll focus on the second financial plan: Set It and Forget It.