THE GOAL OF WEALTH ACCUMULATION

Neal A. Deutsch, CFP^®

Published in Rivertown Journal, November 2010

As we go through life, we are taught to save. From a simple savings account to our 401(k) or pension plan, our goal of saving is to accumulate wealth for a goal to be attained later in life.

Some goals are small: a TV, stereo or a computer. Some may be a bit bigger: a car, second home or the ultimate goal of retirement. Regardless of why we are saving, to save without a goal is much like getting in the car and driving without a planned destination: you may drive all day, but you will never get there- if you don't know where "there" is.

Regardless of what you are saving for, all goals in accumulating wealth contain the following in the formula:

Contribution amount:
How much are you putting away? Are you increasing the contribution annually to allow for inflation? Have you allowed for the savings amount in your monthly or annual budget? Regardless of where you are saving, whether in your retirement plan or savings, it's still saving. Be aware that if you are saving in your retirement plan though, you can't tap on it until you are past age 59 ½, and will pay full taxation of all of your withdrawals. Try to divide your savings vehicles.

Rate of return:
In calculating the growth of your contributions to attain your goals, what is the growth rate of the investments? Have you allowed for taxation? Are you being reasonable and relatively consistent with market returns? Is the declared rate of return in line with your risk tolerances: if you are a "sleep at night investor", are you using Atlantic City rates for a return rate? Be reasonable with yourself and your projections.

Time frame:
How long are you giving for the two above components to grow? Are you using simple or compounded rates of growth? They say that compounding is the 8th wonder of the world: we'll let you rate that! Be flexible and reasonable with your timeframe, and don't forget to take into account life happenings that may alter your timeframe or schedule, such as college payments for your kids, inheritances, and the occasional 100 million dollar lottery winning (OK, that was a feelgood thought…back to reality!)

The overall goal:
If you don't quite make the accumulation goal, can it be adjusted? Can it be altered along the way? Can you change your goal readily to suit your changing lifestyle? Smaller house, less vacations, etc.

Remember to be pliable in your goal setting, and be ready to bend if need be. To be too rigid may lead you to a failure to meet your goal, or a deep disappointment. We are constantly helping folks find and define their ultimate goals and setting a plan to achieve them.

They don't always go exactly as planned because a little thing called "life" tends to get in the way! Be fair, be light and be able to adjust as need be. In any case, save, save, save!

If hearing from me once a month isn’t enough, come visit me in our new blog site at www.chestnutblog.com.  If you think I’ve got pearls of wisdom here…you ain’t read nothin’ yet! See you there!

Neal A. Deutsch is a Certified Financial Planner^™  & Registered Securities Principal, offering securities through First Allied Securities, Inc., member FINRA/SIPC.  Neal is President of Chestnut Investment Group in Suffern, NY, helping people with financial planning since 1984. Please feel free to call Neal at (845)369-0016 or email him with your questions at neald@chestnutinvestment.com.

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