FINANCIAL PLANNING

Have you ever tried to take a vacation without planning? Ever tried to hold an event without planning all the details? Without a plan for these events, you may end up without a place to stay or enough food for your guests. Planning is important in many aspects of life, including your finances.

WHAT IS PLANNING?

The definition of planning is deciding on and arranging in advance. It is never too early to begin planning for things such as a home purchase, education expenses for you or family members, retirement, long term care, or estate concerns. Financial planning provides you a detailed map for achieving your goals. It can also provide guidance on the types of investments, ways to protect assets, and the amount of risk needed to reach those goals. So how do you get started?

Getting Started

The first thing is to determine your goals. Ask yourself:

• WHAT DO I WANT TO ACHIEVE?

• WHAT IS THE TIMELINE FOR EACH GOAL?

• WHAT IS THE COST?

• WHAT FUNDS DO I ALREADY HAVE AVAILABLE TO HELP ME REACH MY GOALS?

Write down the answers and be specific and realistic. Next, determine if additional funds are required to meet your goals. If so, where will those funds come from?

Then you need to decide how to invest the funds for each goal. Shorter term goals (less than five years) would be invested more conservatively, whereas longer term goals (10 years or longer) could possibly take on additional risk given the longer time frame to allow the funds to grow. Finally, evaluate your goals on a regular basis and when special circumstances arise, such as a career or family change, a financial windfall, unexpected expenses, economic events, or health issues. Reviewing your goals regularly will help you determine the amount of investment risk you should be taking as well as help you stay on track with other financial decisions.

Retirement Planning

By working with a financial advisor to create a financial road map (which is specific to your goals and risk tolerance), you will find answers to many of the following questions:

• HOW MUCH DO I NEED TO SAVE TO HAVE THE RETIREMENT LIFESTYLE I ENVISION?

• HOW WILL MY FAMILY BE PROTECTED IF SOMETHING HAPPENS TO ME?

• AM I TAKING ON TOO MUCH INVESTMENT RISK BASED ON MY GOALS?

• WH AT IS THE BEST WAY TO GENERATE RETIREMENT INCOME FROM MY INVESTMENTS?

• H OW DO I TRANSFER ASSETS MOST EFFICIENTLY?

To start creating your retirement plan, you need to estimate your retirement needs. There are several ways to do this. The most common way is to estimate your retirement need as a percentage of your current income. The problem with this method is it doesn’t account for changes to your specific situation, such as increased travel, additional health care expenses, or hobbies you want to maintain for the remaining years of your life.

A more accurate method of calculating your expenses is to prepare an estimated budget for the future. Including costs, such as:

FOOD AND CLOTHING

HOUSING

UTILITIES

TRANSPORTATION

INSURANCES

HEALTH CARE TAXES DEBTS EDUCATION

(children or grandchildren)

GIFTS

(charitable and personal)

SAVINGS RECREATION

(travel, dining out, hobbies, leisure activities)

MISCELLANEOUS ITEMS (pets, memberships, personal grooming, etc.)

These are just a few examples of the expenses you may have; there may be others specific to your situation. You may also have some expenses that will change as you move through retirement. For instance, you may pay off a loan soon after retirement, you may have higher travel expenses in the earlier years of retirement, or your health care costs may be higher in later years of retirement. These should all be accounted for. Build in a cushion; now is not the time to be conservative with your estimates.

After you have an idea of what your retirement expenses will be, you need to consider the effect inflation will have on your plan. The Consumer Price Index (CPI-U) is data published by the Bureau of Labor Statistics, which tracks the rate of inflation. Over the last 20 years, inflation has averaged approximately 2 percent per year1. Inflation can make a significant change to your estimated expenses.

Now that you have an idea of how much money you will need each year, determine when you want to retire and estimate how long you will be retired. Determine the year (or age) you want to retire and then estimate your life expectancy. There are numerous tools to assist in determining life expectancy, including government statistics, life insurance tables, or a life expectancy calculator. A life expectancy calculator is the most specific — it uses age, gender, race, health, lifestyle, occupation, and family history to give you an estimated life expectancy. In keeping with being conservative, it is best to assume you will live longer than expected.

Next, determine what sources of retirement income you have. There can be several places where you might receive income during retirement. A pension plan offered by either a current employer or a previous employer, 401k/403b, other employer retirement plans, IRAs, annuities, investments, income from working during retirement, and/or Social Security. You can check your estimated benefit by logging on to www.SSA.gov.

Once you have determined the difference between your retirement costs and your income sources, what do you do if there is a gap? There are several ways to reduce or eliminate the gap, such as cutting current expenses and saving more towards retirement. You could reallocate assets to investments that have the potential for higher returns, but keep in mind higher potential returns often mean a chance of greater risk of losses. You can lower your income expectations in retirement, review the list of expenses, and see if there are things you can reduce, like travel and entertainment. Other options could include working part time or consider delaying retirement for a few years.

The final step in retirement planning is to monitor and update your plan each year if you have a significant change in your life. Establishing and maintaining a financial plan is critical to achieving your goals.

1650 Crooked Oak Drive, Ste 100 • Lancaster, PA 17601 www.MeyerLePrell.com • 717-519-4193

[1] Calculated from Consumer Price Index (CPI-U) data published by the Bureau of Labor Statistics, January 2022

This is being provided solely for informational and illustrative purposes, it is not an offer to sell or a solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable but is not guaranteed as to accuracy or completeness. Neither Janney Montgomery Scott LLC nor its Financial Advisors give tax, legal, or accounting advice. Please consult with the appropriate professional for advice concerning your particular circumstances. For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.