Why You Need a Financial Plan – Even If You Don’t Plan to Retire

20 Jun 2024

Financial planning is often synonymous with retirement preparation. However, it remains crucial even if you don’t plan on retiring or foresee a traditional retirement. A comprehensive financial plan not only prepares you for retirement but can provide a higher sense of financial confidence throughout your life. Here’s why financial planning is essential, even if you don’t plan on retiring.

Handling Life’s Unexpected Events:

Life is unpredictable, and having a robust financial plan can provide a safety net against unforeseen circumstances such as health emergencies, job loss, or economic downturns. According to the Employee Benefit Research Institute (EBRI) 2023 Retirement Confidence Survey, 44% of workers and 50% of retirees expressed concerns about their ability to cover unexpected medical expenses (EBRI, 2023).

Managing Debt:

Effective financial planning helps manage and reduce debt, which can otherwise be a significant burden. The average American household with debt owes $145,000, including mortgages, credit cards, auto loans, and student loans (Federal Reserve, 2023). A solid plan can prioritize debt repayment and avoid financial stress.

Saving for Major Life Goals:

Financial planning is crucial for saving towards major life goals such as buying a home, funding children’s education, or starting a business. According to the College Board, the average annual cost of a private college education in the 2023-2024 academic year is $54,880 (College Board, 2023). Planning helps ensure you can meet these expenses without jeopardizing your financial health.

Building Wealth:

Consistent saving and investing are key components of financial planning that help build wealth over time. A disciplined approach to investing, utilizing tax-advantaged accounts like IRAs and 401(k)s, can significantly enhance your financial position. The average 401(k) balance for individuals aged 50-59 is $174,100, highlighting the importance of long-term savings (Fidelity, 2023).

Reducing Financial Stress:

Financial planning alleviates stress by providing a clear picture of your financial health and future. According to the American Psychological Association, 72% of Americans report feeling stressed about money at least some of the time (APA, 2023). A well-structured plan can mitigate these concerns by offering control and foresight over your financial situation.

Pursuing Financial Independence:

A comprehensive financial plan can help you remain financially independent, reducing reliance on others or government support. The Social Security Administration reports that 50% of married couples and 70% of single retirees rely on Social Security for at least half of their income (SSA, 2023). Financial independence means maintaining your standard of living and meeting expenses comfortably.

Preparing for Unforeseen Retirement

Many people may need to retire earlier than expected due to health issues or disability. The EBRI survey indicates that 32% of retirees left the workforce earlier than planned due to health problems or disabilities (EBRI, 2023). Financial planning can help you are prepare for such eventualities, even if retirement wasn’t initially on your agenda.

Additionally, the job market is dynamic, and career disruptions can occur due to layoffs, company closures, or industry changes. The COVID-19 pandemic exemplified how quickly and unexpectedly the employment landscape can shift. Planning ahead helps cushion against such shocks and provides alternative financial strategies.

Conclusion

Even if you don’t plan on a traditional retirement, financial planning remains indispensable. It provides a safety net for unexpected events, helps achieve major life goals, and provides a greater sense of financial confidence. Proactive financial planning is not just about preparing for retirement but about securing a stable and prosperous future.

Important Information: 

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss.

Data Sources:

• Employee Benefit Research Institute. (2023). 2023 Retirement Confidence Survey. 
• Federal Reserve. (2023). Report on the Economic Well-Being of U.S. Households. 
• College Board. (2023). Trends in College Pricing 2023. 
• Fidelity. (2023). How America Saves. 
• American Psychological Association. (2023). 
• Social Security Administration. (2023).