Financial Planning Framework Rev John D Peterson CFP

Financial Planning Framework Rev. John D. Peterson CFP®, Ch. FC®, CASL®

What is Financial Planning? Financial planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, saving for children or grandchildren’s education, travel, philanthropy, retirement, having fun, anything. (CFP Board Website)

What is Financial Planning? Financial planning is the long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. Financial planning is a process, not a product (FPA website).

What is Financial Planning? • Income tax planning, retirement planning, estate planning, investment planning, asset allocation planning, and risk management planning • Creating order out of chaos

Retirement Planning: Three Stages of Retirement • Go-Go: Retirees maintain lifestyle, travel; they do not consider themselves old. • Slow-Go: Between the ages of 70 -84, experiencing physical changes, 20 percent to 30 percent budget decline. • No-Go: 85+, significant changes in lifestyle generally brought on by health issues.

Goal Based Financial Planning • Start with what you value o Financial security o Lifestyle o Travel o Giving o Legacy § Inheritance to children, grandchildren, great- grandchildren § Bequest or planned gift to church/qualified charity o Etc.

Build A Values Ladder • Financial security/independence o Sufficient income for retirement o Medical care/longterm care o Meaningful work • Maximize assets o Asset preservation o Financial assistance to family/others • Legacy planning

Establish Your Financial Goals • Specific • Measurable • Accountable • Realistic • Timed

Cash Flow: An Alternative to Goal Based Financial Planning Wage Replacement Ratio: Percentage of current net income that you need to “replace” at retirement in order to meet your expected retirement expenses

Create Your Basic Documents • Statement of financial position • Cash flow statement • Budget • Estate plan o End-of-life planning guide from FUMF § Record keeping § Contacts, accounts, etc.

Pre-Retirement Financial Considerations • Establish cash reserve (emergency fund) • Risk mitigation — cover your sssets o Life insurance o Homeowners, renters and auto insurance o Longterm care insurance o Estate transfer documents o Durable power of attorney o Health care surrogate o Health care directive: living will

Do I Have Enough to Retire?

How Much Do You Need To Save Each Year For Retirement? • Current Projections: • 25% of annual income from pension • + 40% of annual income from Social Security • = 65% of annual income • An additional 35 + - percent of annual income is needed to fund retirement to maintain your current lifestyle

Threats to a Secure Retirement • Debt******* • Poor investment practices • Poor distribution management (tax planning) • Single again • Trying to go it alone

Selecting a Financial Planner Two of the most common are: • Certified Financial Planner (CFP) o Awarded by the Certified Financial Planner Board of Standards Inc. in Denver Colorado • Chartered Financial Consultant (Ch. FC) o Awarded by the American College of Bryn Mawr in Pennsylvania

Ernst and Young (EY) • Financial planning provided by Wespath Benefits and Investments • No cost to clergy and their families • Confidential consultation • Valuable second opinion • Considers all assets and cash flows, not limited to United Methodist pension/savings/benefits • Contact information: 1 -800 -360 -2539

Other Available Resources • Certified Financial Planner Board of Standards, www. cfp. net • Financial Planning Association, www. fpanet. org • National Association of Personal Financial Advisors, www. napfa. org

Other Available Resources • Conference Office of Financial Services • GCFA Tax Packet (www. gcfa. org) • Information on housing allowances and other tax issues for clergy • IRS Publication 517 • Social Security and other information for members of clergy and religious workers • Florida United Methodist Foundation

Not to Plan is to Plan! “The man who achieves makes many mistakes, but he never makes the biggest mistake of all — doing nothing. ” — Benjamin Franklin