The True Price Tag of Putting Off Financial Planning

Have you ever come across the saying “If you fail to plan, you plan to fail”? This question is particularly true for your finances. Many people struggle to know where to begin the process, and organizing their finances can often feel daunting. We understand.

However, just because it feels complex or confusing doesn’t mean it should be brushed aside. Postponing financial planning can result in big costs—in terms of time, effort, and finances. If you’ve been delaying creating a financial plan, you might be losing out on potential savings. Explore these five reasons why it’s important to stop avoiding a plan and take action for your future today.

1. You’re Probably Not Saving As Much As You Should

The first reason you shouldn’t put off financial planning is that you’re probably not saving as much as you should. That’s not to say that the savings you do have shouldn’t be celebrated. But no matter the amount you have, you need to be sure it will be enough.

If you plan to retire in your mid-60s, your retirement savings may need to carry you through 30-plus years. Not to mention rising inflation that will decrease the value of your savings over time and the additional expenses you will likely encounter along the way. A study by Vanguard estimated that the median retirement savings of Americans ages 55-64 is $71,168, yet the average retirement cost is nearly $78,079 per year! This means many individuals don’t have enough retirement savings to cover even a year’s worth of expenses.

A sound strategy to avoid running out of money in retirement is to work with a financial professional to understand what your savings can handle. Contrary to popular belief, you cannot use a multiple of your annual income to determine how much to save. This is why it’s so crucial to plan ahead. The sooner you understand your need, the more options you will have and the easier your goals will be to accomplish.

2. Healthcare Costs Are on the Rise

If you’ve ever held a hefty medical bill in your hand, you aren’t alone. Healthcare costs in America are among the highest in the world. And as you age, you will likely require more healthcare services. According to the Fidelity Retiree Health Care Cost Estimate, the average couple at age 65 will need about $315,000 saved to cover healthcare costs in retirement. Most people don’t even have that much in their retirement accounts to live on, let alone cover medical costs.

Given the events of the past few years and continuing inflation, it’s more important than ever to start preparing for the ever-increasing cost of care. The longer you wait, the fewer options you’ll have. Working with an experienced professional can help you evaluate your options and build a long-term plan for healthcare.

3. Tax Strategies Take Multiple Years to Implement

Another reason not to put off financial planning is that if you don’t start early, you’ll miss out on several tax strategies that take years to implement, including:

Tax-Advantaged Retirement Savings

If you’re in a high tax bracket, being able to save for retirement with pre-tax dollars is a great advantage because pre-tax contributions reduce your taxable income and ultimately reduce the amount of taxes you owe. This strategy could save you thousands of dollars in taxes each year. The earlier you start, the more you’ll save over the course of your career.

Roth Conversions

Roth conversions help to increase your retirement savings and decrease your long-term tax liability by transferring funds from a pre-tax retirement vehicle (traditional IRA) to an after-tax account (Roth IRA). This allows your money to grow tax-free for as long as you’d like, and required minimum distributions (RMDs) are avoided as well.

Withdrawal Strategies

When it comes to withdrawing from your retirement accounts, how you take your distributions can make all the difference. Each retirement asset (employer-sponsored accounts, Social Security, traditional IRAs, etc.) has different tax characteristics. Creating a withdrawal strategy can help lower your tax burden by structuring withdrawals from each income source in a tax-efficient way.

To properly implement these strategies and more, a long-term understanding of your full financial picture is required. Putting off financial planning can leave you stuck with a huge tax bill that could have been avoided.

4. Take Advantage of Compound Interest

Just as saving early allows you to potentially take advantage of tax savings over time, there is a compound effect that occurs with the money that is invested as well. The money contributed to your retirement account each year can grow exponentially over time, but the key part of that equation is time.

If you wait to invest, you may be missing out on growth year after year, and the resulting loss of earnings can be substantial. Not to mention the potential for loss when you try to invest yourself without the proper advice and guidance of a professional. We’ve found that many clients are often invested too conservatively and miss out on the opportunity for significant growth in even just a slightly riskier portfolio.

5. Financial Planning Can Alleviate Stress

Do you feel 100% confident about the myriad of financial choices you make day in and day out? Have you encountered more complexity as your assets have grown? Partnering with a financial professional can help alleviate the stress and anxiety that comes from trying to figure out your finances.

Think about all the time you spend worrying over finances and whether you are saving enough money. Are those thoughts preventing you from making great memories and actually living your life? For many of our clients, the answer is yes. But it doesn’t have to be that way.

Financial planning can help alleviate the stress that comes from not knowing where you stand or how to achieve your goals. It can provide clarity by defining a path from point A to point B and allowing you to get the most out of your life along the way.

We’re Here to Assist

As you’ve seen from these points, there are many benefits to getting a financial plan in place sooner rather than later. Whether you’re aiming for long-term goals, such as buying a house, planning a wedding, or saving for retirement, collaborating with a professional may help increase the likelihood of success.

At Infiniti Wealth Management, we offer personalized, risk-managed portfolios designed to streamline the process of selecting and implementing a custom investment strategy. This way, you can feel confident about your financial future and focus on enjoying life. Take the first step by reaching out to us at 845-278-8638 or send us a message to set up a complimentary consultation.