Financial Boot Camp Series: Financial Planning is Key to Maintaining Long-Term Balance for Retirement Planning

Recent financial markets have certainly been a roller coaster ride for investors, with the S&P 500 falling 30% in 22 trading days in March, subsequently having its best month since 1987 in April.  Historically, these violent market swings have created a lot of uncertainty and anxiety for investors, particularly for those investors operating without a well thought-out, long-term financial plan. Citizen’s Financial Group notes that while investors with an established plan report a higher level of confidence (87%) and overall positive outlook for their financial security (75%), only 55% of investors have a plan in place commonly citing fear as their biggest barrier.   When advising clients for the long term, initial and on-going financial planning and analysis is a critical component of our service model, particularly during volatile markets. In this article, we explore what is a financial plan, how we construct a financial plan with clients, and how we utilize that plan to advise clients.

When developing an initial financial plan for clients, our process consists of a thorough review of their personal balance sheet. This includes an accounting for all of their assets including brokerage and retirement investments, cash holdings, business interests, real estate, life insurance, and any debts such as mortgages and other liabilities. In addition, we review their monthly cash flow for current monthly spending and savings, as well as desired future spending in retirement and other key long-term financial goals (i.e. inheritance to children, charitable donations, etc.).

This initial balance sheet and cash flow assessment is utilized to make forward projections of a client’s financial future under various scenarios (i.e. future investment rates of return, retirement ages, spending levels, etc.) with a focus on desired future spending levels. Spending as a percentage of a client’s investment portfolio is a key barometer when assessing the likelihood of the lifetime longevity of a client’s assets. Industry studies note a 4% withdrawal rate as having a high probability of being sustainable for the duration of one’s lifetime. 

Per J.P. Morgan data, the average household spending rate for 65-74 year-old individuals is $68K and declines to $54K for individuals over 75 years old with the decline in spending attributed to lower transportation, entertainment, and shopping expenses later in life.Using a spending amount of $68K, along with the average 2020 Social Security benefit of $18K per Social Security Administration, we illustrate the 4% spending principle below at various portfolio sizes.  (For more information on Social Security, please reference my colleague Victoria Roger’s article, "I Want Mine, but When? Social Security Claiming").

As you can see, a reasonable spending level, including Social Security for an investment portfolio ranging from $1M to $3M using the 4% withdrawal rate, implies a spending range of $58k to $138K.


Investment Portfolio Balance $ 1,000,000 $ 2,000,000 $ 3,000,000
Income from Portfolio (4% withdrawal rate) $ 40,000 $ 80,000 $ 120,000
Average Social Security Income (2020) $ 18,000 $ 18,000 $ 18,000
Gross Annual Income $ 58,000 $ 98,000 $ 138,000


For the reader, we kept the planning variables very simple. In practice, we factor in other financial variables such as cost-of-living inflation, portfolio turnover and associated tax costs, taxation and timing of withdrawals from brokerage and tax-deferred accounts, respectively, and other unique client financial variables. 

As one can appreciate, a financial plan developed as noted above quickly becomes customized to that client’s unique financial circumstances and is a key resource when advising clients. As a simple example of how we utilize a financial plan to advise clients, let’s assume we are working with John and Jane Doe and the following financial assets, desired spending, and retirement goals:

  • Current aggregate investment balance of $500K
  • Spend $70K per year in retirement with expected future Social Security benefit of $25K at age 66 
  • Both want to work another 5 years and retire at age 66 

In constructing John and Jane’s financial plan, we assessed their current balance sheet and monthly cash flow, and most importantly projected forward their financial picture under conservative investment return, taxation, and spending assumptions. During the projection process, we mutually agreed to the following key financial decisions:

  • Monthly savings over the next 5 years until retirement
  • Construction of an investment portfolio that has a high probability of achieving their long-term financial goals, while ensuring an asset allocation that they can “stomach” during periods of high uncertainty and volatility 
  • Maximum tax efficiency, evaluating when to claim Social Security, when to begin distributions from tax deferred accounts, and if there may be future opportunities for a Roth IRA conversion

After deciding on these initial key financial decisions, we periodically re-evaluate John and Jane’s financial variables as their financial plan unfolds for any potential adjustments to the plan.

Capital markets are likely to continue to be volatile as the Coronavirus and its associated financial impact unfolds. However, as we have illustrated in our experience working with clients, a detailed financial plan should serve as the roadmap to achieving one’s long-term financial goals without veering off track due to any near-term market volatility.

Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training. / (4% withdrawal – page 24 / Average Spending – page 21)

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2023 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
2024 Cost-of-Living Adjustments for Retirement Plans and IRAs
Dumb Money: An Honest Review of the Film Adaptation of the GameStop Short Squeeze
Incentive Compensation for Construction Industry Employers
Erroneous IRS Form 8955-SSA Penalty Notices
IRS Extends Roth Catch-Up Contribution Effective Date
Are Your Digital Assets Lost Forever?
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.