Planning for Retirement? How to Map Out Your Financial Goals

Sorting out your financial priorities is one of the first steps toward helping you create a successful retirement plan. By setting goals and time horizons now, you can develop realistic action plans that will help you make progress.

Here’s how to get started. Take a sheet of paper (or create a computer file) and divide it into three columns, with the headings shown below. List your goals, placing each one in the appropriate time horizon. We’ve included some examples to get you thinking.

SHORT-TERM GOALS (within 5 years)

Take a vacation
Save for down payment on house
Buy a new car
Build an emergency fund

MEDIUM-TERM GOALS (5 to 10 years away)

Go back to school
Start a business
Pay for child’s college education
Remodel your house
Buy a vacation home

LONG-TERM GOALS (10 or more years away)

Retire before age 65 (or full ret. age)
Buy retirement property
Support aging parent
Help children with down payment on home

Next, rank the goals in each list according to their priority for you. Now estimate the potential cost of each goal and determine how much money you already have that can be allocated to it. Then ask yourself:

  • How much more do you need to save to reach your goals?
  • Are you on track, or do you need to create a more effective savings plan?

Keeping a steady eye on all your goals

Short-term, medium-term and long-term financial goals each require different approaches to saving and investing.

  • The longer your time horizon, the more investment risk you can afford to take for potentially higher returns over the long run. Why? Because riskier investments such as stocks have the long-term potential to earn more money.
  • For short-term goals, less-risky investments might be a good strategy since you may not want to risk a sharp drop in value right before you need the money. However, if you invest all of your assets in conservative investments, you may sacrifice long-term goals and the higher potential returns offered by more aggressive (riskier) investments.

Spread the wealth

Most people save and invest for more than one type of goal at a time. It’s important to figure out how much of your savings to invest in which types of securities, depending on their risk level, your financial situation and the time horizon of your specific goals. The goal is to balance the returns you’d like to receive with a level of risk you are comfortable taking on.

Keep your Goals and Time Horizons Map handy so you can refer back to it and check your progress.

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2021-122884  Exp. 7/23