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How to Set Long-Term Financial Goals

How to Set Long-Term Financial Goals

Setting long-term financial goals is a necessary component to ensuring stability for you and your family. Without clear goals, it becomes easy to overspend, under-save, or miss out on other financial opportunities. 

Whether you’re looking to buy a house, plan for retirement, pay off large debts, or a combination of all three, you need achievable long-term goals to get you there. The earlier you identify and start planning for your goals, the more likely you are to reach them.

Key takeaways

  • Long-term goals are necessary tools for reaching financial milestones.
  • The SMART method is the best way to break down your goals into achievable steps.
  • Even if you must readjust your goals later in life, starting to plan as early as your 20s is best.

What are long-term financial goals?

Long-term financial goals are those set for five or more years in the future to ensure financial prosperity. These goals include planning for retirement, creating generational wealth, establishing an estate plan, or paying off a large debt, such as a mortgage or student loans. 

How do short-term financial goals differ from long-term financial goals?

Short-term financial goals are those you can achieve in a more imminent period, usually within a year. These can include creating a budget, paying off smaller debts or establishing an emergency fund. While you may also be contributing to long-term goals at the same time, short-term goals differ in that they are completed in a much quicker timeframe. 

Long-term financial goal considerations by age

Time is your biggest asset when it comes to long-term financial goals. The earlier you begin, the easier they will be to achieve. However, it is never too late, and your goals may need to be adjusted over time. Below are considerations for long-term goals based on age.

Long-Term financial goals in your 20s

Generally, your early 20s are the very beginning of your independent financial journey. Knowing where to begin and what goals to set can be challenging. You don’t have to have it all figured out. This is the best time to start learning and taking small steps towards securing your financial future. 

Your 20s are a good time to:

  • Begin retirement planning by opening a retirement account and calculating approximate retirement needs. 
  • Start saving for a down payment.
  • Pay off small debts.
  • Set goals for career advancement.

Even though retirement might feel a lifetime away, it’s best to start preparing early to maximize savings and reduce stress down the road.

Long-term financial goals in your 30s

Your 30s are a time when many settle into their careers and make higher-than-entry-level wages. Ideally, increased financial security will allow you to feel comfortable in working towards long-term goals. 

At this age, goals may include:

  • Paying off student loans.
  • Setting a retirement age.
  • Improving credit score.
  • Continuing or increasing retirement savings contributions.

With a stronger understanding of your aspirations and adult needs, your 30s are a good time to solidify and work towards long-term goals.

Long-term financial goals in your 40s

Life is full of responsibilities in your 40s, from asset ownership to a growing family. Many people review their long-term goals at this time and adjust them for changing needs. 

At this stage, consider:

  • Paying off any remaining non-mortgage debts.
  • Maximizing your earning potential.
  • If you have children, investing in your child’s college fund.

Due to life circumstances and changes, many people at this age take the time to reassess their long-term goals to ensure they still align with their needs. If so, this is a good time to make any adjustments.

Long-term financial goals in your 50s & 60s

At this stage, you are approaching retirement age and should begin to see your long-term goals come to fruition. This is the time to focus on achieving the end stages of your goals and maximizing resources. 

Goals at this age include:

  • Becoming entirely debt-free.
  • Reevaluating your estate plan, including your last will and testament. 
  • Planning for long-term care in old age.
  • Ensuring your lifestyle is sustainable through your planned retirement income.

Why are long-term financial goals important?

Long-term goals are important to avoid stress later in life and ensure you are prepared for retirement and old age. For example, income from Social Security is usually insufficient and must be supplemented with other income. Without long-term financial goals, you could be left without enough money to sustain your lifestyle during retirement.

Tips for setting financial goals (SMART)

Setting goals is one thing; how to actually achieve them is another. According to a poll by NerdWallet, while 9 in 10 Americans (90%) said they set financial goals for 2025, 45% of those goal setters said they either “aren’t on track to hit their biggest money goal or they aren’t sure.”

The SMART method is a framework that can help make long-term goals less daunting. SMART stands for specific, measurable, achievable, relevant, and time-bound. 

For example, if your goal is to buy a house, how will you get there? Creating a SMART goal can help. Rather than just saying “I want to buy a house,” the SMART approach would be “I will buy a house with a $42,000 down payment by saving $700 a month for the next five years.” 

Bottom line

Long-term goals are necessary for ensuring financial security throughout life, but figuring out how to achieve them can be daunting. Horizons Wealth Management’s financial planning and retirement planning services can help you understand, plan for, and achieve your long-term goals.

Long-Term Financial Goals FAQ

What is an example of a long-term financial goal?

A common long-term financial goal is having enough money for a down payment on a house. Others include saving for a child’s college education or saving a certain amount of money for retirement.

What is the first step in creating a successful long-term financial goal?

Use the SMART method. Rather than setting goals with vague objectives, SMART goals require you to break down the process. When you have a clear intention and steps for how you’ll get there, your goals become much easier to achieve. 

Can an investment manager help my long-term financial goals?

Yes, an investment manager can help you reach your long-term goals. They can provide you with individualized strategies that work for your financial needs. 

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Is Social Security Running Out?

Senior woman with dog

Social Security represents an important source of income for millions of Americans who paid into the system during their working years. Despite contributing thousands of dollars to the program on average, many people have concerns about the future of the Social Security Administration. Estimates from the SSA itself suggest the trust funds used for benefits payments could be depleted as early as 2033 unless changes are made to the program’s funding structure.

Key Takeaways

  • Social Security is a program that uses taxes to fund a benefits program for individuals who contributed to the program during their working years.
  • Two trust funds hold the funds raised through these taxes, but they are estimated to be depleted by around 2033.
  • The government has acted decisively in the past to make the necessary changes to keep Social Security afloat.
  • Social Security should be just one part of your overall retirement plan, alongside investments, savings and lifestyle changes.

How Does Social Security Work?

Social Security is a taxpayer-funded program designed to supplement income for retired individuals and certain other groups. A great number of American workers—184 million people, according to the Social Security Administration—pay taxes into the Social Security system which funds benefits for current Social Security recipients. When those workers retire or otherwise qualify for Social Security themselves, they will receive benefits equal to a percentage of the amount they contributed in taxes.

While many people think of Social Security as a benefit entirely for retired individuals, that’s not the only group receiving regular benefits from the SSA. Other recipients of Social Security benefits include:

  • People with qualifying disabilities
  • Spouses and children of workers who died
  • Dependent parents of workers who died
  • Spouses and children of Social Security recipients

Is Social Security Running out of Money?

To understand the current state of Social Security, it’s essential first to comprehend how your Social Security taxes are allocated to current beneficiaries.

The tax money collected for Social Security is distributed into one of two trust funds—the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. The funds are then used to pay benefits to their corresponding recipients, with any leftover money invested by the government.

According to estimates released by the SSA, these trust funds are shrinking and could reasonably be expected to be depleted entirely within approximately 15 years. If these trust funds are depleted, the annual income from taxes would only be sufficient to cover 79 percent of the total benefits needed.

If nothing is done to prevent this from happening, Social Security beneficiaries may see a decrease in the percentage of their contributions returned as benefits drop. Benefits would be lower, but they would not disappear entirely. 

It’s also important to note that the trust funds have come close to depletion in the past, but the government has successfully intervened to prevent it. In 1982, Congress was forced to enact emergency legislation to prevent the collapse of the OASI fund. The crisis was averted, and better funding mechanisms were created for the fund to reduce the likelihood of a future crash.

While it is still unclear if or how the federal government might intervene on Social Security’s behalf, even in the worst-case scenario, recipients would still receive a return of some percentage of their investment into the program.

How to Financially Plan Around Social Security?

Regardless of whether or not the Social Security trust fund remains financially solvent, it’s important to have a healthy investment portfolio to prepare you for retirement. Many financial planners recommend aiming for 80 percent of your pre-retirement income from a combination of investments, savings, and Social Security benefits. For the average earner, Social Security benefits are typically between 40 and 50 percent of pre-retirement income.

Many types of investments can help you navigate your retirement more comfortably.

Set up a retirement fund

A retirement fund is a long-term investment account designed to provide certain tax benefits if the money is left untouched for a specified period. They can be created by people of any age, and are a very common tool for those wishing to invest in their retirement.

Max out 401K employer Contributions

Many companies offer matching funds for employee contributions to a 401K retirement account. These accounts function in a similar way to retirement funds, but employers will match employees’ investments up to a certain amount from each paycheck. These matching funds are paid in addition to your paycheck, and it’s a good idea to invest at least enough to reach your employer’s maximum contribution.

Open an IRA

An individual retirement account, or IRA, is another type of account set up to maximize tax benefits for long-term investments. Taxes aren’t paid on funds invested in an IRA at the time they’re placed in the account, making them an appealing target for investment.

Leverage Health Savings Accounts (HSAs)

Medical expenses can be significant at any age, and as you near retirement age, you might find yourself needing to increase your spending on healthcare. An HSA allows for tax-free contributions and growth while the funds are in your account, and those funds can be spent tax-free if they are used for qualifying healthcare products and services.

Lower Housing and Living Expenses, If Possible

Many people find themselves downsizing from much larger homes as they near retirement age. As children grow up and move out, a smaller, lower-upkeep residence becomes appealing to many people. Reducing your footprint, and thereby your costs, is a great way to supplement your savings and investments as you enter retirement. Lower overhead means the percentage of pre-retirement income necessary to sustain your lifestyle stays low as well.

Bottom Line

While there do appear to be some changes on the horizon for Social Security, there’s no need to panic about an unexpected loss of benefits for future recipients. Even without government action, the program will still be able to operate at around 80 percent capacity. With appropriate government intervention, the program can remain totally solvent and continue supporting retired workers, disabled individuals and many other people and families for years to come.

No matter what happens to the SSA, it’s smart to maintain a balanced set of investments as you plan your retirement. Social Security is a crucial component of the retirement puzzle for many individuals, but it should never be viewed as the sole source of income for retirees. 

Horizons Wealth Management can help you with your financial future, even if Social Security is a bit tumultuous. Schedule a call today and start planning for your retirement.

Social Security FAQ

H3: What happens if Social Security runs out of money?

If the Social Security trust funds run out of money, benefits will likely be reduced to match the level of funds coming into the program from taxes. The SSA estimates it could operate Social Security at around 80 percent capacity if this were to happen.

At what age do you get 100% of your Social Security?

You will receive the full amount of your Social Security benefits if you begin drawing them after you reach the full retirement age. This age has increased slightly over time, but is currently 67 years old.

 Do RMDs Affect Social Security?

Required minimum distributions don’t directly impact your Social Security benefits, but they can affect your tax liability. The amount of taxes you must pay on your benefits is determined by your income bracket, and RMDs are treated as income for tax purposes. If your RMD increases your tax bracket, you might have to pay more taxes on your SSA benefits.

How do I know if I’m ready to retire?

Retirement looks different for everyone, and the age at which you’re able to stop working is largely dependent on your pre-retirement income, your overhead, savings and investments. Many planners recommend creating a strategy to access around 80 percent of your pre-retirement income, but this number can be much lower or higher for certain individuals.

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What Fantasy Football Can Teach You About Investing

If you’re like me, you recently drafted players for your Fantasy Football team. As you sat online with thousands of other fans and fanatics scattered nationwide, chatting about and nabbing the best running backs, quarterback and kickers for your imaginary team, you may feel you learn little about investing. Wrong call.

Fantasy Football is a billion dollar business that has more to do with investing than you might think.  The thought process involved with picking and managing your team can be similar to investing in your 401(k).

Here are mistakes to avoid on the make-believe gridiron and in our very real stock market.

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Is It Time To Make Changes to Your Investment Portfolio?

The stock market has taken us for an emotional ride during the past couple of months, and you may be asking yourself if you should make changes to your investment portfolio.  While changing strategies can be a good idea, it’s better to base those decisions on analysis and in the context of your long-term investment plan rather than on emotion.  Before changing your investments, consider whether or not your response is an overreaction to the news.

It is always good to review your portfolio on a quarterly or annual basis to make sure you are on track to reach your goals.

Click here for the questions you should ask yourself when thinking about making changes to your investments.

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How to Keep This Crazy Stock Market From Driving You Nuts

So, how do you stop the market from making you crazy?

The current market is a reminder that days sometimes feel long, while years pass quickly. Don’t confuse that feeling and make long-term moves based on what’s happening on any given day. That’s how years pass and you wind up short of your goals, when the odds were in your favor that staying the course would have paid off.

Read more by clicking here.

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Survival Tips for Bear Markets

What is a bear market?  Bear markets are normal, but not predominant.  Statistically, we are overdue. The most recent bear market ended in March 2009 — more than six years ago.

Learn how to survive the Bear Markets here.

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In Your 20s? 30s? 40s? 50s? 60s? The Best Financial Goals for Every Age

We’ve devised a little roadmap of goals that everyone can follow to make sure they are meeting the right financial goals for their age.  Of course, you can accomplish any of these goals sooner, but this is a good general map of where you should be at any given age:

Learn more here.

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6 ‘Must’ Things To Have Before You Turn 40

Thus they say “life begins at 40.” It is true in a sense that most people should be stable, ideally, in all aspects of their life when they turn 40—the “prime” stage in a person’s life.

It is when you are 40 when you can do and be in your greatest potential—and at least, have already achieved the following:

Click here to learn the 6 “Must” Things To Have Before You Turn 40…

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Should I Pay Off My Debt or Start Investing?

Should I pay off my debt or start investing? This question, perhaps more than any other, has plagued investors for generations. Ironically, it is one that can be easily decided by using a bit of simple math.

Read more here.

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Warren Buffett and Bill Gates Agree – This Factor Was Most Important for their Success

Warren Buffett, Steve Jobs, and Bill Gates have all attributed their success to one factor. In fact, this one trait is behind the success of all people that have performed massively better than the average person.

Click here to find out what the trait is and how you can put it into practice in your own life and investing.

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