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Life Stages & Financial Planning
Learn Why You Should Understand Your Financial Life Stage

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Learn Why It Is Important To Know What Stage You Are At In Your Life

Did you know that by gaining a keen understanding of your life stage you can more effectively direct your future and affect the outcome of your and your family's future?   It is important that you come up with an investment strategy—early in your lifetime!

With any investment strategy you must consider:

  • Your time horizon
  • Your risk-tolerance level
  • Your tax implications

It is important that you choose an investment strategy at the earliest time possible during your lifetime to maximize the effect of compounding, spread out your risk over a longer time period—and minimize your current and future tax situation.

In the paragraphs that follow we will go into detail of how you can more effectively use the “Life Stages of Financial Planning” to your and your family’s benefit!

Formative & Young Adult Stage:

During your Formative & Young Adult Years you may not have a good working knowledge of how finances really work and that can lead to confusion for some.

The key point you must realize is that the earlier you start investing—the longer the time horizon you have to make the “time value of money" (compounding) work for you!

If you begin working as a teen or in your early twenties you can use a variety of investment vehicles to take you where you need or want to be.

You can choose to invest in an IRA at this time or if your employer offers a 401k with a match—that would be a good choice.

If you are in position to contribute up to the match you should do so—you would then want to contribute to an IRA—either ROTH or Traditional—depending on your income, whether you and/or spouse were eligible and your future goals.

Your formative and young adult (early 20’s) years are also a great time to consult a financial planner or the time to seriously educate yourself on personal finance—and how credit and finances really work.

The earlier in your financial life stage that you start the process the more successful you can be in the future as far as attaining your goals.

Your formative and young adult years is a time when you can invest more aggressively because you have a longer time before retirement and the investment will grow tax free (tax is deferred until withdrawal/retirement) if inside of a retirement account.

If you start investing just $2,000 annually from the time you are 16 up until age 65—you could easily accumulate over half-a-million dollars by age 65 assuming a modest amount of annual return.

If you are now reading this article and you find yourself in this life stage—make it a point to be “proactive now” in your approach to retirement.

You don’t want to put yourself or your family at risk financially by not having a properly funded retirement in the future—due to lack of appropriate action during your formative and young adult years.

Asset Accumulation Stage:

During your asset accumulation years you would begin acquiring additional assets (assets other than retirement) as you would now be in your late 20’s or older.

You may be just starting a family and you would have additional responsibilities—than when you were at the formative and young adult stage.

You would now continue to build on your retirement investment strategy, possibly purchase your first home, and possibly start a family.

You would want to consider starting a college savings plan.

If you failed to properly invest during your young adult and formative years—you would now want to focus on doing that with even more sincerity and effort.

With pensions of the baby-boom generation now the exception and not the norm—you want to ensure that you and your spouse have enough funds during your retirement years to live at the level that you desire.

Because you are in your peak earning years ( mid 20's to late 40's) you want to properly plan for emergencies and life events.

It is imperative that you have a properly funded emergency fund, you are on track to reach your retirement “number”you have a plan for college funding for your kid’s education and you use your purchasing power wisely.

You want to make sure that your insurance coverage (life, health, auto, disability, umbrella etc.) and your estate planning/wills have been properly addressed.

Conservation/Protection Stage:

During the conservation/preservation stage you are normally in your early 40’s to late 50's and you are at the point where you want to preserve all that you have accomplished.

At this time you would want to really focus and see if you are realistically on target to meet the goals that you had set during the earlier life stages.

Questions that you must ask and get the correct answer to are

  • Are we on track to reach our retirement goals
  • Do we need to re-balance our portfolio and/or invest elsewhere
  • Do we have a need for Long-Term Care (LTC) insurance
  • Are we maximizing our current tax position
  • Are we on track to reach our college savings goal for our kids or grand-kids

Distribution/Gifting Stage:

During the "distribution/gifting stage" (50’s and beyond—but could be in your 40’s if you did the right things early) you may have to care for your kids as well as your parents (sandwich generation) and it could cause difficulty for some.

That is why it is imperative that those who are reading this article and are in the formative/young adult stage or the asset accumulation stage—utilize their best effort at saving now (based on your financial ability to do so) so that you can avoid putting yourself and your family in a difficult financial position in the future.

If you have started early and have been aggressively investing over the years you could find yourself in the position where you could retire early and/or fund your kids and parents obligations in an appropriate manner—and still have enough income coming in to outlast your lifetime.

You would want to know at this stage if you had a need for Long-Term Care (LTC) insurance by analyzing your expected retirement account balance and seeing if you could self-fund your long-term care costs—or if you had a need to purchase LTC insurance.

If you were behind on your retirement account goals you could also contribute an increasing amount—as the IRS has catch-up provisions for those age 50 and up.

As you start drawing on your retirement and other accounts you would then begin investing some of your funds in more liquid assets that offer more safety—such as certificates of deposit (CD’s) and money market accounts to meet your anticipated living expenses.

Your investments would be more of a conservative nature at this stage and you would want to review your estate planning/will(s) on a consistent basis at this point.

Final Thoughts on Life Stages & Financial Planning

The earlier in your life that you make a serious attempt to understand your credit and finances the more effective you can be at meeting your future goals.

Starting early and saving on a consistent basis is more effective than starting late or investing in a haphazard manner.

You must always strive to invest in a consistent manner where you can get returns that are realistic and will provide you the ability to live at the level that you desire during your retirement years.

Make it a point to earn enough during "all of your life stages" so that you can enjoy life to the fullest—and also contribute to your retirement and other accounts at the appropriate levels.

Always keep in mind that you can be in various life stages at the same time—but at differing degrees in each stage.

Always remember that if you have the right income and an appropriate plan you can make your retirement dreams come true, however—generally speaking, the later that you get started the more difficult the goal of attaining your retirement goals become.

It is important that you get started today so that positive momentum can begin to go your way.

We wish you untold success in your financial and retirement future!

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About This Article:


The above article was written by Thomas (TJ) UnderwoodThomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia. 

He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and  Managing & Improving Your Credit & Finances for this MILLENNIUM.

In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.

He is the creator of where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. 

He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind"  and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.

You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.  You can also get highly relevant tips on "living your life more abundantly" and link to and possibly earn revenue by logging on to

He is also an IRS registered tax planning professional with over 30 years of tax experience and can be reached at:



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