As one of the first do-it-yourself (DIY) shows over 40 years ago, “This Old House” focused on home renovations and improvements. Today, there are dozens of DIY shows and dedicated networks to watch renovations and new home construction. One constant in every show, whether a home is being modernized or built from scratch, is that a stable foundation is essential. If it is cracked or needs major repairs, the cost of the renovation could be exponential. When there is a sound foundation, the home will last a lifetime.
The same is true for one’s financial future. The main components of a strong foundation should include a financial plan covering short, medium, and long-term goals; adequate savings; a trust and estate plan; insurance coverage; and retirement planning. Not all bases are the same and it is going to look different at various stages of life.
During the early years, a slab foundation is suitable; poured in one single piece, less expensive and quick to construct. This includes an emergency fund, term life insurance, and a budget to stay on top of expenses. If your budget allows, it is also a great time to start a ROTH IRA.
The years of raising a family mirrors a home with a crawlspace (stem wall) foundation, providing easy access to plumbing and wiring, which is popular in earthquake prone areas. A living trust, emergency fund, sufficient life insurance, contributing to your employer retirement plan or an IRA and college savings plans are fundamental during this phase.
If retirement is 15 to 20 years away, a basement foundation is desirable. While constructed to be resistant to fire and extreme weather, this base adds underground living space and storage. Accumulation of assets, maxing out retirement plan contributions, and proper investment allocation are a significant part of this stage. In addition, long-term care insurance and social security options should also play a part in the financial planning process.
In retirement, reverting back to a concrete slab foundation may be desirable. Most common in warm weather climates, this type of home may be a vacation or second home or one for downsizing further into in retirement.
Through the years, continuously staying on a plan, adjusting your foundation where needed, and focusing on financial freedom in retirement will sustain a lifetime and beyond–allowing the final phase of wealth transfer to your loved ones.
If the ocean is the foundation…the world is your oyster.
Michele Sarna is a certified financial planner™ with Beacon Pointe Advisors and can be reached at (760) 932.0930 or email@example.com.
Provided as information only and should not be considered investment, tax, or legal advice or a recommendation to buy or sell any type of investments. Asset Allocation, portfolio diversification, and risk strategies cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Form ADV contains important information about Beacon Pointe Advisors, LLC, and may be viewed at: adviserinfo.sec.gov.