financial-plan

What this skill does

# Financial Plan

## Workflow

### Step 1: Client Profile

Gather or confirm:
- **Demographics**: Age, spouse age, dependents, life expectancy assumptions
- **Employment**: Current income, expected raises, retirement age target
- **Accounts**: All investment accounts with balances and asset allocation
- **Income sources**: Salary, bonuses, rental income, Social Security estimates, pensions
- **Expenses**: Current annual spending, expected changes (mortgage payoff, kids' independence)
- **Liabilities**: Mortgage, student loans, other debt
- **Insurance**: Life, disability, LTC, health
- **Estate**: Wills, trusts, beneficiary designations, gifting strategy

### Step 2: Cash Flow Analysis

Build annual cash flow projections:

| Year | Age | Gross Income | Taxes | Living Expenses | Savings | Net Cash Flow |
|------|-----|-------------|-------|-----------------|---------|--------------|
| | | | | | | |

Key inputs:
- Inflation rate assumption (typically 2.5-3%)
- Tax rate (marginal and effective)
- Savings rate and where savings are directed (pre-tax, Roth, taxable)

### Step 3: Retirement Projections

**Accumulation Phase:**
- Current portfolio value
- Annual contributions (401k, IRA, taxable)
- Expected return by asset class
- Monte Carlo simulation: probability of success at various spending levels

**Distribution Phase:**
- Required annual spending in retirement (today's dollars → inflation-adjusted)
- Social Security start age and benefit
- Pension income (if any)
- Portfolio withdrawal rate and sequence
- Required Minimum Distributions (RMDs)

**Key Output:**
- Projected portfolio value at retirement
- Sustainable withdrawal rate
- Probability of not running out of money (target >85%)
- "What if" scenarios: retire early, market downturn, higher spending

### Step 4: Goal-Specific Analysis

#### Education Funding
- Children's ages and target college start
- Current 529 balances
- Target funding level (public vs. private, 4-year vs. graduate)
- Required monthly savings to reach goal
- Financial aid considerations

#### Estate Planning
- Current estate value and projected growth
- Estate tax exposure (federal and state)
- Trust structures in place
- Gifting strategy (annual exclusion, lifetime exemption usage)
- Charitable giving plans
- Beneficiary review

#### Risk Management
- Life insurance needs analysis (income replacement, debt payoff, education funding)
- Disability insurance adequacy
- Long-term care planning
- Umbrella liability coverage

### Step 5: Scenario Modeling

Run key scenarios:

| Scenario | Probability of Success | Portfolio at 90 | Notes |
|----------|----------------------|-----------------|-------|
| Base case | | | |
| Retire 2 years early | | | |
| 20% market drop in Year 1 | | | |
| Higher spending (+20%) | | | |
| One spouse lives to 95 | | | |
| Long-term care event | | | |

### Step 6: Recommendations

Prioritized action items:
1. Savings rate changes
2. Asset allocation adjustments
3. Tax optimization (Roth conversions, tax-loss harvesting, asset location)
4. Insurance gaps to fill
5. Estate document updates
6. Beneficiary designation review

### Step 7: Output

- Financial plan document (Word/PDF, 15-25 pages)
- Cash flow projection spreadsheet (Excel)
- Retirement projection charts
- Goal funding analysis
- Scenario comparison table
- Action item checklist

## Important Notes

- Financial plans are living documents — review and update annually or after major life events
- Be conservative with return assumptions — overestimating returns gives false confidence
- Tax planning is as important as investment returns — model tax implications of every recommendation
- Social Security timing is a major lever — model start ages of 62, 67, and 70
- Always stress-test the plan — a plan that only works in the base case isn't a good plan
- Compliance: ensure recommendations align with suitability/fiduciary standards