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Source: Social Security Administration via Facebook.

Americans know they should be saving early and often for retirement, but their intentions aren't necessarily translating into bottom-line results.

Last year, Financial Finesse released a study that examined the overall state of Americans' retirement preparedness. The primary finding was that very few people describe themselves as being "on track" to reach their retirement goals. Although the percentage of respondents who described themselves as on track rose to 19.7% in 2013 from 16.6% in 2011, this still means 80% of respondents are, in some way, coming up short. That's a terrifyingly large figure!

Three things all successful financial plans should have
While there are multiple reasons why Americans are coming up short in the savings department, most of them can be traced back to an insufficient financial plan. Just as the name implies, a financial plan is your blueprint for success. It marks down all the tangible and intangible things you need to do in order to live the way you want come retirement.

The way I see it, there are three things that every successful financial plan possesses: measurable written goals, a distribution plan, and a wealth transfer blueprint.

1. Measurable written goals
When I worked in the retail industry, one of my first lessons involved goal-setting -- specifically the SMART strategy of goal setting. SMART stands for:

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time frame

The SMART strategy involves formulating clearly defined goals so you can easily measure progress. Writing your goals down can be especially important, as a study from Dr. Gail Matthews at Dominican University in California showed that people who wrote down their goals were 42% more likely to achieve them compared to people who didn't write down their goals.

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Source: Social Security Administration via Facebook.

Here's how the SMART method can help you formulate your financial plan:

  • Specific: Your plan should be specific in that it contains a concrete retirement number, and perhaps an age by which you'd like to reach that retirement figure.
  • Measurable: Your financial plan should have a game plan that allows you to measure your progress so that adjustments can be made as necessary. Remember that our paths to retirement are rarely straight lines, so we need to be able to adjust as we deal with complications -- like buying a home or paying for college. Also, keep in mind that you can't win all the time (e.g., there will be down years in the stock market), but that shouldn't deter you from sticking with your plan over the long term.
  • Attainable: Your plan should be realistic and achievable. There's nothing wrong with wanting $1 billion in 10 years, but the chances of that happening are probably very low. Instead, set a reasonable target that can be adjusted when you reach it in either the short- or long-term. Author Tom Corley, who is an expert in examining the traits of self-made millionaires, notes that a majority of self-made millionaires need more than three decades to amass $1 million in wealth.
  • Relevant: Your goals should matter to you, because goals that excite you are ones that you're more likely to strive for. If traveling the world for a year in retirement is a goal, and you know you'll need "X" amount of dollars to make that happen, then you're more likely to formulate a plan and stick to it in order to make your dream a reality. Find out what makes you passionate about retirement and stick to it.
  • Time frame: Lastly, have a pretty specific time frame in mind when creating your financial plan. As noted above, your path to retirement will likely encounter a number of twists and turns which might alter your time frame, but it's important to have markers along the road with which to measure your progress.

2. A clear distribution plan
Once you have clearly written, measurable goals, the next step in crafting the perfect financial plan is creating a well-defined distribution plan for your money during retirement.

A recent study from Pentegra Retirement Services of 1,530 people, all of whom are still working, showed that a whopping 56% don't have distribution plans for accessing their money once they retire. That's a big problem, because retirees without distribution plans may wind up paying far more in taxes than they need to. Even worse, without a distribution plan retirees may not correctly space out their withdrawals and could burn through their nest eggs too quickly.

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Source: Social Security Administration via Facebook.

So how should you formulate your distribution plan? To begin with, write it down! If you write your plan down you'll be more likely to stick to it come retirement.

Another important step for pre-retirees is to make a gradual transition from working life to retired life. It's possible that your monthly Social Security and retirement/investment income may not be on par with what you brought in every month when you were working. Some retirees struggle to adjust when their incomes suddenly drop upon retirement. Make a concerted effort to live on a reduced budget months, or even years, prior to retirement so you're ready when you officially make the transition.

Also, look for ways to make regular retirement account withdrawals that can also minimize your tax liability. For example, a Roth IRA allows your money to grow completely free of taxation as long as you don't make any unqualified withdrawals before age 59-1/2 and the money you contribute stays invested for a minimum of five years.

Additionally, a Roth IRA has no minimum required distribution. This means you can allow your money to continue to compound if you won't need it right away, unlike a Traditional IRA, which requires a minimum withdrawal to be taken annually starting at age 70. You can also continue to contribute a Roth IRA past the age of 70.

3. A wealth transfer plan upon your passing
Lastly, a strong financial plan will contain a blueprint for what should happen to your wealth once you've passed on.

Source: Flickr user Mark Moz.

If your estate winds up going through probate, the outcome is anyone's guess -- and there are often fees and taxes galore during the process that could deny your loved ones a notable percentage of the wealth you built up over your lifetime. Instead, the best financial plans have a will or trust in place that help preserve accumulated wealth and act as guides for how much your designated beneficiaries should receive, and when they should receive it.

A will goes into effect once a person has passed away, and it tends to cover the distribution of the entirety of a person's assets (money, property, you name it!), as well as name guardians for your children should you have any. On the other hand, a trust  typically focuses on one primary asset (e.g., a life insurance policy) rather than the full gamut of assets that a will may cover.

Trusts fall into two categories: either revocable or irrevocable. An irrevocable trust is one in which the assets are no longer yours, and any changes you wish to make have to be approved by the beneficiary. The upside is that irrevocable trusts aren't subject to estate taxes. A revocable trust allows to you retain control of your assets and make changes at any time, but you'll lose the tax benefits since these assets are included in your estate for federal estate-tax purposes. 

In addition to the possible tax savings associated with a wealth transfer plan, you can ensure that your wishes are met by setting up distributions to loved ones at regular intervals or when they hit certain ages. Doing so can ensure a teenager or young adult doesn't blow his or her inheritance on something silly. Spacing out their inheritance over many years allows their own financial wisdom to build, putting them on the right track to retirement.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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