The Financial Stages of Life

By Helen Hogan, CFP

Abraham Lincoln once remarked, “If I had six days to chop down a tree, I would spend five sharpening my ax.” This quotation can be related to many things, but it is particularly true when it comes to planning and preparation for daily life, especially in the areas of finance and retirement planning.

In this breakdown of the stages of life, you will probably find similarities to your own. Knowing which stage you are in or are approaching can help you to make appropriate plans.

Foundation years: In this stage, many people begin assuming debt in order to acquire a lifestyle.  Some are still paying off school loans or helping a spouse pay off theirs, and some may still be furthering their education. At the same time, many may be trying to save for a first home. During this stage, it is generally important to protect income, start saving and begin planning to accumulate some liquid dollars. This is a good time to plan for an insurance program which may include life and disability insurance.

Accumulation years: Many people are beginning to establish themselves financially during the accumulation years. While some still have debt, many have also acquired some assets. Rent payments have usually been exchanged for a mortgage and equity is being built. This tends to be a good time to consider supplementing existing retirement arrangements, perhaps with a tax-deferred annuity (TDA), IRA (Traditional or Roth), etc. If children are in the picture and saving hasn’t been started, it may be time to think about saving for their college education. This is generally also a good time to learn about stocks, bonds, and mutual funds as planning tools.

Preservation years: Many begin to be concerned about keeping income at or near the same level after retirement. Generally, the mortgage is or is almost paid off and children are out of school; this becomes the time when many are finally able to put away extra dollars. It is time to learn about retirement options and consider taking advantage of the catch-up provisions provided by retirement programs. Many also begin to think about long-term care as a future need.

Pass the torch: Generally, people find that they have been successful in preparing for retirement and have accumulated some assets. This becomes the time to consider how to pass these assets on to the next generation. At this stage, information on trusts, power of attorney, charitable bequests and survivorship life insurance may be of interest.

While the world of finance is complex, good information and education is needed to make good decisions. With a little effort and research, you can be the principal guiding force behind your financial plan. Insurance agents, stockbrokers and financial planners can assist you with information, but in the end, the decisions are up to you. Achieving financial security is a process and there is no better time to start than now. Regardless of your current financial stage, take the time to be sure that you move forward with a sharpened ax.

Helen Hogan is a certified financial planner and the owner of Hogan Wealth Planning, LLC in Red Bank, NJ. She specializes in providing financial planning to professional couples and individuals. Helen can be reached at 908-359-6902 or Visit for more information.

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