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Follow on Google News | Financial Advisor in Salt Lake City, Utah Illustrates Why a Financial Plan is CriticalHow Net Worth Advisory Group utilizes retirement planning tools to ensure our clients are on pace to live the retirement they envision. Clients and planners can then follow the strategies and schedule determined to best accomplish the goal.
One term you should hear your financial advisor say frequently is "conservative." Putting It All Together How do these factors come together to create a valuable tool for the client? Let's assume the clients are 55 years old, plan to retire by 65, and would like to maintain their standard of living during retirement which requires $60,000 per year. The clients expect a total of approximately $40,000 per year in Social Security payments, so they will need the inflation-adjusted equivalent of $20,000 per year to meet their needs. These clients have a strong history of saving, and have already accumulated a nest egg of $300,000 between their IRAs and 401(k)s. These are the facts. At this point, conservative assumptions need to be made. Even though the stock market has averaged a rate of return of 10% over the last 100 years, an experienced financial planner might assume the clients can achieve an 8% return until retirement, and a 6% return during retirement (as the clients age, the portfolio should become more conservative, lowing both the risk and return of the investment). Additionally, the planner might assume inflation will average 3% per year (average over the last 100 years). Finally, although the 55 year old clients are statistically likely to live until age 90, the planner will assume they will live to age 95 --after all, the goal is to not run out of money! Using these inputs we run a Monte Carlo analysis which runs thousands of simulations to determine the chances the clients will have assets to support themselves until death. The analysis indicates that the clients only have a 35% chance of not outliving their money. However, we can now create a schedule for retirement contributions that will increase the clients' odds of success. For instance, if the clients contribute $5,000 to an IRA each year until retirement, the chance of not outliving their assets increases to 87%. Moreover, we can now start asking questions such as "What if the clients wants to retire early?" Our retirement plan indicates that if the clients contribute $12,000 per year to their retirement accounts, they can successfully retire at age 63, or contribute $18,000 per year to retire at 62. How We Can Help This is an example of how Net Worth Advisory Group utilizes retirement planning tools to ensure our clients are on pace to live the retirement they envision. Together, the clients and planners can then follow the strategies and schedule determined to best accomplish the goal. This process is then repeated every six months to reflect changing circumstances in the market and changes in life. Frequently updating the financial plan maximizes the probability the client's goals will be achieved. For more information, visit http://www.utahfinancialadvisor.blogspot.com. About Mr. Jefferies Lon Jefferies is an investment advisor representative with Net Worth Advisory Group, a fee-only financial planning firm in Salt Lake City, Utah. He is a member of the National Association of Personal Financial Advisors (NAPFA) and a candidate for CFP™ certification. He possesses an MBA and bachelor's degrees in Finance and Marketing from the University of Utah. Lon writes articles for local magazines such as Business Connect and Utah Business Magazine, and he consistently contributes articles to online magazines such as FIGuide.com and FILife.com (by The Wall Street Journal). Additionally, Lon is a platinum expert author at EzineArticles.com. Lon has been quoted nationally in publications such as the NY Times and Investment News. Contact Info View Lon's blog at http://www.utahfinancialadvisor.blogspot.com, and visit Net Worth Advisory Group's home page at http://networthadvice.com. Lon can be emailed at lon@networthadvice.com, or phoned at (801) 566-0740. # # # Fee-Only Financial Planner Net Worth Advisory Group 6975 Union Park Center, Suite 465 Midvale, UT 84047 End
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