A complete financial plan should address: (1) current and projected cash flow; (2) retirement readiness with multi-scenario projections; (3) tax strategy across federal, Illinois, and estate tax dimensions; (4) estate planning including will, trust, and beneficiary review; (5) insurance review (life, disability, long-term care, property); (6) investment policy and portfolio review; and (7) risk management. A plan that addresses only investments isn't a financial plan, it's a portfolio recommendation.
Many people who have 'a financial plan' actually have an investment portfolio with a target asset allocation. That's an important component but a small slice of what financial planning should cover. A complete plan starts with cash flow: what does the household actually spend, how is that spending categorized, and how does it change in retirement? Most people significantly under- or over-estimate their actual spending without tracking it for at least 12 months. The retirement plan can't be accurate if the spending number is wrong.
The retirement projection should run multiple scenarios, different retirement dates, Social Security claiming ages, market return assumptions, longevity assumptions, and major one-time events (home sale, health event, gift to children). A single 'monte carlo simulation showing 87% probability of success' isn't a plan. The right output shows how the plan performs across realistic ranges of outcomes and identifies the levers that most improve outcomes (working another year, delaying SS, reducing housing cost, etc.).
Tax strategy crosses multiple time horizons: current-year planning (charitable giving, capital gains harvesting, retirement plan contributions), retirement-year planning (Roth conversion windows, distribution sequencing, IRMAA management), and estate planning (Illinois estate tax, federal estate tax, gifting strategies, generation-skipping). Tax decisions made in isolation often work against each other, a plan should coordinate across all of these.
Estate planning, insurance review, and investment policy each deserve their own deep attention. Estate documents should be reviewed every 3-5 years and after any major life event. Insurance coverage should be reviewed annually, life insurance needs change as wealth grows, long-term care planning needs change with age and health, property and umbrella coverage needs change with asset levels. Investment policy should be documented in writing so decisions can be evaluated against the policy rather than reinvented every market cycle.
Key facts
- Components: cash flow, retirement projection, tax strategy, estate planning, insurance review, investment policy, risk management
- Cash flow accuracy: requires 12+ months of actual spending tracking, not estimates
- Retirement projection: should include multiple scenarios across SS claiming ages, market returns, longevity, and major events
- Tax planning: spans current year, retirement years, and estate planning, must be coordinated
- Document review frequency: estate documents every 3-5 years; insurance annually; investment policy as conditions change
- Investment policy statement: written document defining allocation targets, rebalancing rules, and risk parameters
How often should a financial plan be reviewed?
Comprehensive review: annually. Quick check-in: quarterly. Major life event review: any time a significant change occurs (job change, marriage, divorce, death of family member, large inheritance, sale of business, major health event, change in tax law). Most plans go stale within 18-24 months without active updates, markets move, tax laws change, family circumstances change, and assumptions made years ago no longer reflect current reality. The discipline of annual review is one of the highest-ROI activities in financial planning, even when nothing major has changed, it forces a fresh look at assumptions that may have quietly become wrong.
What's the difference between a financial plan and a financial advisor?
A financial plan is a written document with analysis, projections, and recommendations addressing your full financial picture. A financial advisor is a person (and firm) you engage to provide ongoing advice, sometimes including planning, sometimes only investment management. The two often go together but aren't the same thing. Some advisors charge for plans separately from ongoing investment management; others bundle planning into their overall fee. The key question to ask: 'Do you provide written planning advice across all dimensions of my finances, or do you primarily manage investments?' Both can be valuable, but they're different services.
