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If you have been contributing to your 401(k) or similar plan at work, you may think that you have a financial plan in place. But that’s not the case. A financial plan is more than a retirement account, it’s a comprehensive outline of your finances, including both short-term goals like vacations, and long-term goals like retirement.

Elements of a Financial Plan

A financial plan is a written document, usually created by a financial advisor for a specific client. It is designed to be comprehensive and it starts by spelling out each of your financial goals, their respective timelines, and the action steps needed to attain them.

A good financial plan involves a thorough evaluation of your current financial situation—including your income, spending, debt, insurance, investments, and savings—as well as your financial desires for the future, such as purchasing a home, sending your kids to college, or retiring early. It starts with a calculation of your current net worth and cash flow, and tracks your progress over time as you advance toward your goals.

The financial plan includes all of your family members and provisions for their financial security, such as life insurance to protect them in the event of untimely death or disability. It also includes a plan for your desired retirement age and the estimated assets you will need to have accumulated in order to achieve your vision for your retirement lifestyle.

A fluid document that requires ongoing review at least annually, if not more often, your financial plan changes through time as goals are achieved and family dynamics alter.

Investment Strategies

When it comes to investments, putting money away in your 401(k) or similar workplace retirement plan is always advised, especially contributing the amount that will get you a full company matching amount. But you may want help to ensure you have selected the 401(k) plan options that match your risk tolerance level and your time horizon to retirement, and that’s where a financial advisor can come in.

You may also want to invest in other opportunities outside the 401(k) and begin the process of creating your own balanced portfolio of diversified assets.

Remember, in general as you get closer to retirement age, you should begin taking steps to reduce investment risk in your portfolio. Protection and security become more important, because you no longer have the luxury of decades to wait for markets (and your investments) to come back up after a period of volatility or stock market correction.

Tax Strategies

Another part of a comprehensive financial plan includes tax planning. A financial advisor in conjunction with a tax professional can uncover tax strategies that may reduce your tax burden, staying on top of new tax laws which may apply to you. Each year there may be tax opportunities with your investments like tax-loss harvesting to take advantage of stocks in your portfolio which may have dropped in value, allowing you to write off some losses. For the long-term, there are other tax strategies which may help.

Your financial plan will also encompass the transfer tax-advantaged wealth to your spouse, children, grandchildren, or other heirs after your passing. A financial advisor will encourage you to create a legal estate plan as part of the financial planning process.

Distribution Strategies

When you ultimately do retire, it’s important to understand that you may have to take RMDs (required minimum distributions) mandated by the IRS if you own non-Roth or traditional 401(k) or IRA accounts. RMDs mean you must withdraw a certain percentage every year and pay taxes on withdrawals starting at age 73. Some people find that due to RMDs, they have to pay higher taxes than they thought during retirement.

By creating a retirement distribution strategy as part of your financial plan, you may be able to reduce taxes and end up with more spendable assets in retirement. A financial advisor may recommend that you move some of the money you hold in traditional, taxable accounts over into after-tax retirement vehicles like Roth accounts when it makes sense for you. You can do this without tax penalty after age 59-1/2, but you will have to pay ordinary income taxes in the year that you complete any conversion from taxable into non-taxable retirement accounts.

Or you may want to start contributing to a Roth 401(k) instead of a traditional 401(k) at your workplace now—but remember, this shift may mean you have to pay more taxes now.

The goal of a distribution strategy as part of your financial plan is to reduce overall taxes and ensure that you have the money needed to fund your retirement lifestyle without running out of money prematurely. There is a lot of complex math involved in assessing what might be best for you, and it’s advisable to work with an advisor who understands all of the ramifications of your particular situation.

Solution: Establish a Financial Plan Now

Developing your customized financial plan and managing your diversified portfolio of assets can help you get and stay on track in achieving your goals. At Prime Capital Investment Advisors North Texas, we are here to help.

Please give us a call at (214) 765-5092.



Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite#150, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”).


777 International Parkway, Suite 180
Flower Mound, TX 75022
(214) 765-5092