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Why You Need A Different Financial Plan At Different Stages

As you age, you transition into a different financial stage. Knowing about the two different financial stages and preparing for possible financial plan changes can help in various ways. It would help to have a different financial adviser for both stages. 

Changes in financial plans are common. As you age, your financial goals and needs change, which is why your financial plans and advisers must change too. We review why different stages require a different financial game plan and advisers.  

Understanding the Two Financial Stages of Life  

Two stages matter the most when dividing life into different financial stages: the accumulation and distribution stages.  

Accumulation Stage  

When you’re in your youth, let’s say at 35, you’re still accumulating wealth through various means. This time’s perfect for collecting wealth and investing money for big returns.  

Distribution Stage 

This later stage, around the age of 65, is when the goal is to preserve your wealth instead of investing it. You aren’t looking for risky bets as your savings become your main income source.  

Why You Need a Different Financial Plan at Different Stages 

Your goals during different financial stages of life shift due to your needs. Here’s why you need a different financial plan at both these stages to pursue wealth successfully.  

You Can Take Big Risks During the Accumulation Stage 

In your youth, a market blow won’t hurt your portfolio for two main reasons:  

  • You have enough time to recover from the loss 
  • You can use a market crash as an opportunity to buy more stocks at cheaper rates 

During this stage, your financial adviser will push you to take risky bets as their payoff increases. You can become relentless in this money game and chase it to stash it for the future. The main focus is accumulation; therefore, all the advice concerns money making.  

You Have a Pay Check to Rely on During the Accumulation Stage 

Another massive advantage during the accumulation stage is the paycheck. Since you rely on your paycheck to support your living, such as paying bills, etc., you don’t spend your saved income. Your savings remain intact for your retirement.  

The Income Methods Shift in Distribution Stage  

In contrast to the accumulation stage, the distribution stage is relatively different, especially with the income source. The three main possible income sources during this stage are as follows:  

  • Pension 
  • Annuities 
  • Social Security 

The limited income sources present a real challenge during the distribution stage. Your focus shifts from earning to saving through tax-efficient plans and strategies.  

How to Choose the Right Adviser for Yourself During Both Stages 

The need for a different financial adviser in both financial stages of your life is due to different financial goals. For many people, this shift arises during the late 50s as they move toward their distribution stage.  

Here are a few tips on choosing the right adviser for yourself:  

  • Ask your fellow age group for recommendations. Since they’re in your age group, they’ll likely have similar goals as yours and have a financial adviser in mind.  
  • Interview the financial adviser and take time to know them. You’ll be sharing valuable information with your adviser. Therefore, choosing someone reliable is essential.  
  • Let your prospective financial adviser know you and understand your needs. They can make valuable recommendations if they aren’t well-versed in your financial assets. 

Final Thoughts 

You will outgrow your financial plan as you age. However, staying ahead of the curve by making necessary decisions forehand can assist you in changing your strategies and lifestyle. It would help if you also had a different financial adviser for each stage, so be prepared for some shifts as you age.  

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