There are 7 aspects to a profitable financial life that require planning for our retirement. These 7 aspects can be summarized into Four Categories; Investment Planning, Tax Planning, Retirement Planning and Estate Planning.
All of our investment decisions should either directly or indirectly involve one of the 7 aspects of financial planning. Our retirement goals will be focused around some or all of these aspects because they are all areas of our lives that we have to consider when making changes. Whenever we make a financial decision such as selling a home or buying an investment, we have to consider the tax implications of our financial choices.
Every time we change to a new financial stage in our lives we should consider these 7 aspects of financial planning, but they are especially important in retirement planning because this is when we stop accumulating assets. During retirement we start to liquidate our assets and live off of our accumulated wealth.
The 7 Aspects of Financial Planning
- Our Home. We have to consider if we are going to maintain our current home, downgrade to a smaller home, or if we would like to buy a second home such as a cottage or a winter home in warmer climate. All of these decisions have financial implications that require planning.
- Providing for our Family. We may have someone living with us who is financially dependent on us such as a child, a grandchild, or a parent. We may also want to plan to provide for the financial needs (education) of a family member who is not living with us.
- Our Personal Legacy. Estate Planning is a very important part of any financial plan or retirement plan. I know it is not pleasant, but we have to decide what will happen to our money after we are gone. Does it go to our spouse? Will we gift it to a charity? These are all questions that we need to ask ourselves.
- Our Work Life. If we are eligible, we may want to plan for an early retirement. Maybe we will leave our full time job and decide to continue working part time. Maybe we will change our field of work or start our own part time business. Maybe we will volunteer.
- Self Employed Business. If we own our own business we may want to sell the business and stay on as a consultant. It is often very difficult for self employed people who have built a business from the ground up to fully retire. The options of selling our business or winding it down and closing the business should be explored in more detail with a tax consultant.
- Our Health. We have to be prepared for retirement both physically and mentally. We have to be financially prepared for our special medical needs as well as the possibility of moving into an assisted living residence.
- Lifestyle. This may be the root of all retirement plans. Every decision we make and every goal that we plan for revolves around the lifestyle that we want to have in retirement. We need to determine how we will spend our time during retirement.
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