Council Post: Mitigating Risk In Your Financial Plan

- Advertisement -

Daniel is the owner of M. Machnik Willis & Machnik Financial Services,

- Advertisement -

“The best plans of rats and men often go awry,” or so we’re told. Part of being prepared for the future requires anticipating what might go awry and setting a safety net to protect against potential risks. This is true in many areas of life but is vitally important in financial planning.

Risk management is a fundamental component of training. When you work with professional partners who have the CFP designation, you can rest assured that they understand how to analyze your exposure to risks and provide solutions to prepare for the unknown. When your financial plan doesn’t account for possible scenarios in advance—whether it’s the death of a spouse, a debilitating health condition or the loss of a primary source of income—you can quickly lose track of your once-achievable financial goals. can.

- Advertisement -

Here are four categories to consider when mitigating risk in your financial planning.

life insurance

Life insurance is essential for planning for the future, yet many people make the mistake of assuming that their employer-provided policy is sufficient. Life insurance protects your family’s source of income if anything happens to you. However, employer policies are not portable if you change jobs and do not always provide enough death benefits to maintain your family’s standard of living.

I encourage clients to consider getting a life insurance policy when they are young and healthy (it can help to lock in health rates for variable term policies) to ensure that the coverage is suitable for their needs. Enough is enough and don’t ignore the not working spouse. Outside the house. As you age, you may no longer need life insurance for the primary purpose of life insurance to supplement lost income for your loved ones, but these policies have flexible uses that benefit all stages of life.

long term care insurance

Health care costs will be a major expense during retirement for most Americans, and 69% will need it. long term care For an average of three years, according to the Administration for Community Living. Not planning ahead for this expense can have a significant impact on the wealth you leave for loved ones after you leave. If you’re between 40 and 60 and you’re still healthy, consider getting a quote on long-term care insurance to help secure your financial future.

Guaranteed Income with Annuity

Annuities can help protect you from risks by stabilizing your retirement income while other resources are in flux. These products can offer guaranteed, regular payouts in exchange for a long-term contract with the insurance company to invest your money. Depending on your financial goals and other resources, annuities can provide you with more peace of mind. There are different contribution and distribution options, fixed and variable options, as well as costs, terms and taxes to consider. It is best to discuss this product with a financial advisor who is well versed in tax knowledge.

business risk assessment

Risk mitigation is also important for business owners, but there are additional complications when estimating exposure for your company. Cash flow, operational efficiency and a solid business strategy are central to running a profitable company, and of course, you may need insurance policies for general liability and to protect your commercial property or other assets. However, most of the risk for businesses comes in the form of people, purchases, taxes and profit plans.

What taxation and accounting requirements go with your specific entity structure? Do you have a buy/sell agreement or a fixed succession plan? There are potential financial risks associated with the loss of a key employee, but there can also be opportunities to provide non-qualified benefits for business owners and key executives. A little proactive planning can ensure that you have thought through what happens in each possible scenario and ultimately protect your business for years to come.

Entrepreneurs must understand that financial risk management is an ongoing process. Regular Assessments can identify risks specific to your business. Prioritize those risks and develop strategies to avoid or manage them.

take the next step

Discussions about risk mitigation can be unpleasant, but a financial plan that lacks such considerations can be disastrous. Life’s uncertainties are widespread, and many of them can threaten your and your family’s financial security. You are not prepared for the future if you have not planned for what could happen.

The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice related to your specific situation.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. am i eligible?

Credit: /

- Advertisement -

Recent Articles

Related Stories