ahang1598 Financial Plan
Workflow
Step 1: Client Profile
Gather or confirm:
- Demographics: Age, spouse age, dependents, life expectancy assumptions
- Employment: Current income, expected raises, retirement age target
- Accounts: All investment accounts with balances and asset allocation
- Income sources: Salary, bonuses, rental income, Social Security estimates, pensions
- Expenses: Current annual spending, expected changes (mortgage payoff, kids' independence)
- Liabilities: Mortgage, student loans, other debt
- Insurance: Life, disability, LTC, health
- Estate: Wills, trusts, beneficiary designations, gifting strategy
Step 2: Cash Flow Analysis
Build annual cash flow projections:
| Year | Age | Gross Income | Taxes | Living Expenses | Savings | Net Cash Flow |
|---|---|---|---|---|---|---|
Key inputs:
- Inflation rate assumption (typically 2.5-3%)
- Tax rate (marginal and effective)
- Savings rate and where savings are directed (pre-tax, Roth, taxable)
Step 3: Retirement Projections
Accumulation Phase:
- Current portfolio value
- Annual contributions (401k, IRA, taxable)
- Expected return by asset class
- Monte Carlo simulation: probability of success at various spending levels
Distribution Phase:
- Required annual spending in retirement (today's dollars → inflation-adjusted)
- Social Security start age and benefit
- Pension income (if any)
- Portfolio withdrawal rate and sequence
- Required Minimum Distributions (RMDs)
Key Output:
- Projected portfolio value at retirement
- Sustainable withdrawal rate
- Probability of not running out of money (target >85%)
- "What if" scenarios: retire early, market downturn, higher spending
Step 4: Goal-Specific Analysis
Education Funding
- Children's ages and target college start
- Current 529 balances
- Target funding level (public vs. private, 4-year vs. graduate)
- Required monthly savings to reach goal
- Financial aid considerations
Estate Planning
- Current estate value and projected growth
- Estate tax exposure (federal and state)
- Trust structures in place
- Gifting strategy (annual exclusion, lifetime exemption usage)
- Charitable giving plans
- Beneficiary review
Risk Management
- Life insurance needs analysis (income replacement, debt payoff, education funding)
- Disability insurance adequacy
- Long-term care planning
- Umbrella liability coverage
Step 5: Scenario Modeling
Run key scenarios:
| Scenario | Probability of Success | Portfolio at 90 | Notes |
|---|---|---|---|
| Base case | |||
| Retire 2 years early | |||
| 20% market drop in Year 1 | |||
| Higher spending (+20%) | |||
| One spouse lives to 95 | |||
| Long-term care event |
Step 6: Recommendations
Prioritized action items:
- Savings rate changes
- Asset allocation adjustments
- Tax optimization (Roth conversions, tax-loss harvesting, asset location)
- Insurance gaps to fill
- Estate document updates
- Beneficiary designation review
Step 7: Output
- Financial plan document (Word/PDF, 15-25 pages)
- Cash flow projection spreadsheet (Excel)
- Retirement projection charts
- Goal funding analysis
- Scenario comparison table
- Action item checklist
Important Notes
- Financial plans are living documents — review and update annually or after major life events
- Be conservative with return assumptions — overestimating returns gives false confidence
- Tax planning is as important as investment returns — model tax implications of every recommendation
- Social Security timing is a major lever — model start ages of 62, 67, and 70
- Always stress-test the plan — a plan that only works in the base case isn't a good plan
- Compliance: ensure recommendations align with suitability/fiduciary standards