The four seasons of financial planning

As the summer comes to an end and we head into the fall, a parallel can be drawn between the seasons of weather and the seasons of money. Just as you have spring, summer, fall and winter, there are four financial seasons of life that include accumulation, preservation, distribution and succession. Approaching your finances with these four seasons in mind can help to keep you on track toward reaching your long-term financial goals.

“Accumulation” season is when you work hard, save and invest to grow your nest egg. The “preservation” season is the time to protect your life savings so you can count on it in retirement. The following season, “distribution,” is where you structure your life savings to provide an income to last throughout your retirement years. The fourth and final financial season is “succession,” the time when your remaining life savings is passed on to your loved ones, in the most tax efficient manner.

Understanding the basic principles of the four “financial seasons” of life can help define where you are today and the steps you will need to take in the future. Knowing specifically how to handle your money from “season to season” will ultimately determine whether you meet or exceed your long-term financial goals.

Below are key financial planning tips to guide you through the four seasons of your financial life:

1) Accumulation Season – ages 20 to 55

This is typically the longest financial season and the time spent accumulating wealth sets the foundation for your entire life. It’s important during this stage to set your financial goals and save and invest consistently. Take advantage of employer sponsored retirement plans, open a brokerage account and work to keep unnecessary fees and taxes to a minimum. Do everything you can to save, grow and keep more of your hard-earned savings for the following seasons.

2) Preservation Season – ages 55 to 65

During this time, it’s key to protect the money you’ve worked so hard to accumulate so you can count on it in retirement. In order to successfully preserve your assets during this season, you should begin assessing your risk tolerance. Typically, people who fall within this age bracket need to become more conservative with their investment dollars. Seek safer alternatives that still provide a rate of return. You may also want to look at your fee structure from investments in your portfolio as well and see where you can transition some of your more expensive investments to less expensive alternatives.

3) Distribution Season – ages 65+

Sufficient income planning is the most important consideration of this season, as you determine how to make the most of your financial savings. It’s important to consider your tax liabilities in retirement and the order from which you withdraw from your retirement savings. Many people are fortunate to have a 20 to 30 year retirement, so your life savings will need to be structured to provide you a reliable income stream to last the duration of your retirement years.

4) Succession Season – after your death

What do you want to happen to the remainder of your life savings after your passing? Without proper planning, it can go to taxes and fees rather than to your intended heirs. Your legacy will depend on how well you planned your finances in each of the previous seasons as well as what estate planning you have prepared in advance.

Each financial season builds on the one before it, with a successful retirement hopefully waiting for you in the end. By planning each season carefully, in advance, it can help you get the most out of your financial life.

This information is for educational purposes and should not be considered specific financial, tax or legal advice. Always consult with a qualified advisor regarding your individual circumstances. Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Adviser.

Brad Zucker, RFC® is the president of Safe Money Advisors, Inc., a Las Vegas-based independent financial advisory firm. He blogs on personal finance every Monday for the RJ. For more information visit www.SafeMoneyAdvisorsNV.com or connect with him via Facebook and LinkedIn.