The Stages of Your Financial Life

There are broadly speaking two stages in our financial lives. Common sense and our own experience tell us that the goals and priorities that we have financially are different when we are younger than when we are older. The approach you take with your money ought to reflect those changing objectives.

Accumulation Stage

The first financial stage of our lives is the Accumulation Stage. It is typically the time between when we are starting out at 18 years age and when we begin to seriously consider retirement at around 55 years of age. In this financial stage, you are probably not taking money out of the “piggy bank” for income, but rather are putting money in it for the time in the future when you will need it. During these years, your goals often revolve around providing for a growing family, paying on your mortgage, having enough life insurance if you don’t live long enough to put your children through college and a big enough college savings plan if you do. You might be more aggressive with your long term retirement savings during this time period because you have a long time for your savings to recover before retirement should there be a big market downturn. At this time in your life, “R.O.I.” means to you “Return On Investment.”

Preservation and Distribution Stage

This is the time in your life usually around the age of 55 when you begin to more seriously consider retirement and taking money out of the “piggy bank” that you have been accumulating. Life is different for you now and so are your financial priorities. The children are grown and the retirement you have been planning for is close at hand. Your goals now can begin to be a bit more about you and the things you have always wanted to do but didn’t have the time for. You probably at this point have a sense that you want to take a safer approach to your money, with stability, predictability and peace of mind becoming more and more important. At this time in your life, “R.O.I.” means to you “Reliability Of Income.”

Notice:  This is not intended as tax, investment or legal advice. Consult a tax, legal or financial professional as to the applicability of any financial, tax or legal strategy for you.