Financial Plan

Financial Plan

description: Build or update a comprehensive financial plan covering retirement projections, education funding, estate planning, and cash flow analysis. Use for new client onboarding, annual plan reviews, or scenario modeling. Triggers on "financial plan", "retirement plan", "can I retire", "education funding", "estate plan", "cash flow analysis", or "plan update".

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:

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:

Step 6: Recommendations

Prioritized action items:

1. Savings rate changes
2. Asset allocation adjustments
3. Tax optimization (Roth conversions, tax-loss harvesting, asset location)
4. Insurance gaps to fill
5. Estate document updates
6. 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