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LDAwealth managementChad Olivier, CFP ®Wealth Consultant/LPL Branch Manager, The Olivier Group, L.L.C.The Stages of Financial Planning: Part 2In the Fall Journal, we discussed that financially, yourlife can be broken down into four basic stages: TheEarly Starter, The Prime Timer, The Pre-retiree, and TheRetiree. After the first two stages, you should have builtup savings, fully funded your retirement each year, andestablished your insurance safety nets, as well as laid thefoundation for your estate. Now let’s take a look at thesteps you should take to prepare for retirement.Stage 3: Pre-retiree (10 Years beforeRetirement)The Pre-retirees are truly getting ready for theday when they will stop working and phase intoretirement. Planning is crucial. Within five years of theofficial date, a more conservative investment allocationshould be adopted. Beyond investment allocations, arefour main aspects of planning for Pre-retirees:How much money do you really need inretirement?The Pre-retiree has a good idea of how much incomeis currently needed to support their lifestyle, but howdoes that number equate for retirement? First, you needto know exactly what and how retirement will look foryou and your family. Start by asking a few questions:1) What will an ordinary day in retirement look like?2) What would you like to accomplish in retirement?3) How much Social Security income will you haveand are there any other income sources?4) How will you pay for your medical expenses,including medication?5) Do you have a current budget?After answering these questions, you should have anidea of how much income will be needed. Keep in mindthat the price of goods gets more expensive because ofinflation. As a result, an inflationary rate of 2 to 3% peryear should be added on the retirement income amount.At the pre-retiree stage it is important to find all ofthe possible ways to put away and save for retirement.Look for ways to maximize your contributions tocompany retirement plans. The 401(k) Profit SharingPlan will allow for a maximum total amount, withemployer contributions and profit plan contributions,of $49,000 for 2009 (if over 50 years old, add $5,500catch-up for a total of $54,500). A Defined BenefitPension Plan would allow for additional contributionsup to $195,000. All of the contributions would bedeductible from gross income and could help give aneeded boost to your retirement nest egg.How much debt should you carry in retirement?This is a great question and a good game plan isneeded in order to answer it. To take pressure off ofyour retirement income, it is best to have as little debtas possible. Your mortgage should be paid off, but ifit is not and you have more than 10 years left on themortgage, you should do an accelerated payoff plan.Any other debt needs to be looked at carefully to see ifit makes sense to bring it into retirement with you.What type of insurance will you need?The goal is to find yourself debt free and have asubstantial retirement investment portfolio (one thatcan easily yield you 3.5 to 4% return) to cover yourfamily’s income needs. If this is the case, as your fixedterminsurance policies expire, then there would notbe a need to continue them. At this time, long-termcare insurance should be considered. Long-term careinsurance can be viewed as a necessity for those whohave assets to protect or who want to avoid becominga financial burden to their families. When it comes tofinancial planning, you always plan for the worst andhope for the best.What changes should be made to an estate plan?Your wills need to be looked at and adjusted toreflect your current situation. The proper trusts shouldbe established to take advantage of the unified credit22 LDA Journal