5 High Net Worth Retirement Planning Mistakes…and How to Avoid Them

Mistake # 1 – Negligent Investment Management

Wealthy individuals may have a lot of money, but they often lack control over where it is invested – and this can cost them in the long-term. A well-diversified portfolio is optimized to achieve the best possible return with the least amount of risk to weather the storms of both up and down markets.

Do you know the expected return of your assets?

Are you taking too little or too much risk?

Hiring a financial planner to manage your assets based on your goals and objectives enables you to create a plan designed to work towards your long-term goals. Please click here to book a financial planning meeting.

Mistake # 2 – Neglecting tax diversification

Tax now, tax later or tax never? Which one will help you reach your retirement goals? A lot of retirees are surprised when they turn 70½ and start taking their withdrawals, only to discover that their tax bill gets a whole lot higher. That’s because the money they take out of their retirement accounts for living expenses is treated as federal taxable income, and they are often taxed at their highest tax bracket. IRAs and 401(k)s might enable you to save on taxes during the contribution phase, but you end up paying a hefty sum in your retirement years when you withdraw.

A more tax-efficient solution is investing in vehicles like Roth IRAs, Roth 401(k)s, and Insurance products that allow you to enjoy a valuable stream of tax-free income when you’re retired. Please click here to book a financial planning meeting to create a tax-diversified portfolio that positions you best for retirement.

Mistake # 3 – Clinging to Traditional Strategies

When planning for retirement there are more options than just 401(k)s, IRAs, and Roths. Wealthy investors might want to include alternative investment products into the mix to take advantage of extra benefits, such as:

  • Stop Loss Guarantees. Through indexed products, for example, your portfolio will participate in up markets, but not go below zero. With a ceiling of 12% and a floor of 0%, your assets might deliver a better overall return than if you over expose yourself completely in the market without these limits. For example, the historical average of the S&P500 from 2000 to 2015 was only 4.06% for an investor who started with $100,000, because of the 37% drop in the S&P500 in 2008.*
  • Tax-Free Withdrawals. Alternative investments can offer tax-free growth and tax-free withdrawals. You could possibly earn several hundred thousands of dollars more, if you pay tax upfront and then enjoy life-long tax-free withdrawals.
  • Flexibility for Your Money. Alternative investments allow wealthy individuals more flexibility in terms of how much you can take out and when. Some products have no IRS penalty to access funds before age 59 ½, you have the option to use funds for college education, and there’s no IRS requirement to withdraw funds at age 70 ½.

Please click here to book a financial planning meeting to learn about alternative investment options that might suit your needs.

Mistake #4 – Underestimating Longevity

Statistics show that people are living longer, but most people are not financially preparing for it. If you’re planning to live to 85, but you make it to age 95, you’re going to come up short in your savings. But if you plan for 95 and live till 85, however, you will live comfortably and have something left to pass on. Please click here to book a meeting so we can create a retirement plan that incorporates a long-life scenario.

Mistake #5 – No Second Opinion

If you are not certain that your financial planner is adding value to your financial investments, or if you haven’t had a financial review in the last twelve months, then you should seriously consider a Portfolio Second Opinion. Regardless of whether you decide to switch advisors or not, getting a Second Portfolio Opinion enables you to find out if there are opportunities to position your investments and savings in an efficient way as opposed to just leaving things as they are. Being armed with more information and a greater understanding of your goals and potential outcome, increases your confidence that your financial plan is on target.

I hope this article has helped you to become aware of the common mistakes that wealthy people make. If you are looking for a fee-only financial planner, book a consultation meeting with me. I would be delighted to help you work towards your financial goals and find the best solutions for you.

*Sources: Yahoo! Finance GSPC Historical Prices and StandardAndPoors.com. This historical performance of the S&P 500® is not intended as an indication of its future performance and is not guaranteed.

Integrated Life and Financial Planning does not offer legal or tax advice. This material is not intended to replace the advice of a qualified tax advisor or attorney. Please consult legal or tax professionals for specific information regarding your individual situation.

“No theory, strategy or Asset Allocation assures success or protects against loss. This material is for general information only and is not intended to provide specific advice or recommendations for any individual.  To determine what appropriate for you, consult a qualified professional.”

Tax Now, Tax Later or Tax Never? Which one will help you reach your retirement goals?

 

A lot of retirees are surprised when they turn 70½ and start taking their withdrawals, only to discover that their tax bill gets a whole lot higher. That’s because the money they take out of their retirement accounts for living expenses is treated as federal taxable income, and they are often taxed at their highest tax bracket.

Income taxes, in fact, can be your single largest expense in retirement.    

In a state of shock, retirees say: “Why didn’t we plan for this?”

This is why I am always touting the necessity of hiring a Financial Planner.  Most people are not aware of the financial consequences of their withdrawals.  

A tax-efficient plan from the start positions you for optimal growth and tax-free withdrawals in the future.  

People who don’t plan often regret it. So, read through this overview, and then book me for a meeting so that we can build a tax-diversified retirement portfolio.

Tax NOW:  Investment Accounts, Bank Accounts

Investments that have a tax consequence “now” or at least before you retire, include (stocks, bonds, mutual funds, etc.).  If you hold them for more than a year, you’ll pay the long-term capital gains rate —which ranges from 0% to 20% depending on what tax bracket you’re in — on any gain you have.  If you hold your investments for less than a year, you’ll pay the equivalent of your income tax rate on your gains (short-term capital gains).  

Tax LATER: IRAs, 401(k)s, 403(b)s

These vehicles offer the ability to make contributions that are fully tax-deductible.   In other words, if you contribute $5,000 to a Traditional IRA in 2017, you will be able to subtract $5,000 from your taxable income when you file your taxes early next year. This results in a smaller tax bill right now. However, there are NO tax benefits when you withdraw.  You’ll pay taxes later at your highest tax bracket in retirement.

Tax NEVER: Roth IRAs, Roth 401(k)s, Insurance

With a Roth 401(k), Roth IRA you make your contributions with after-tax dollars, so there’s no upfront tax deduction, but you enjoy a valuable stream of tax-free income when you’re retired.

There are also a variety of insurance products that allow for tax-free growth and tax-free withdrawals that can be well-suited for investors who are making maximum contributions to their 401K.

Bottom Line – Get A Tax-Efficient Retirement Financial Plan Today

Whenever you are dealing with taxes, it makes sense to talk to an advisor who can devise solutions that meet your particular goals and your specific situation.   The goal is to grow your portfolio to meet your retirement goals and to take advantage of tax breaks so you have greater cash-flow in retirement.  

Let’s find out which is the best strategy for you.  Book a meeting today.

Integrated Life and Financial Planning does not offer legal or tax advice. This material is not intended to replace the advice of a qualified tax advisor or attorney. Please consult legal or tax professionals for specific information regarding your individual situation.

“No theory, strategy or Asset Allocation assures success or protects against loss. This material is for general information only and is not intended to provide specific advice or recommendations for any individual.  To determine what appropriate for you, consult a qualified professional.”

Are you taking too much risk?

Are you concerned that your portfolio is taking too much risk?  Or that your investments are positioned so conservatively that your money has little or no chance to grow?

The dilemma is real.

Just look at the historical fluctuations from 2000 to 2015 in the graph below.

1Sources: Yahoo! Finance GSPC Historical Prices and StandardAndPoors.com. This historical performance of the S&P 500® is not intended as an indication of its future performance and is not guaranteed.

Durham, NC Financial Advisor

Durham, NC Financial Advisor

 

No investor wants to hear that their portfolio has dropped 37% like it did for the S&P 500 in 2008.  And they don’t want their money earning less than 1% in a CD when the S&P 500 shot up 32% like it did in 2013.

So, What’s the Solution? 2

The solution is an investment that participates in an up market, and at the same time protects you from market losses.  

Do You Want to Find Out if This Is Right for You?

If you would like to get more information on how you might benefit from adding such an investment to your portfolio, please fill which is accessible via the link below. I will then create a customized report that takes your own unique situation into account. 2

 

Apply Here

 

Thank you for your interest.

(Whether it is tax free or taxable)

Maxing out retirement contributions? Do you understand the taxation when you take withdrawals?

A lot people who are maxing out their 401k plan each year think this is a smart choice because they are making tax-deferred contributions.  But what they are not realizing is that even if that saves them a few thousand dollars each year during the contribution phase, it doesn’t offset the huge tax consequence that they end up paying each year on the withdrawals, because people are taxed at their highest tax bracket in retirement. 

Just look at the example below of an individual in the 25% tax bracket who contributes $10,000 annually for 15 years into a tax-deferred asset like 401(k) or IRA with a 7% net annual growth rate.  They save $37,500 in taxes during the accumulation phase, but end up paying a whopping $151,890 during the withdrawal phase.

Durham, NC Financial Advisor

Durham, NC Financial Advisor

This hypothetical example does not consider every product or feature of tax-deferred accounts and is for illustrative purposes only. It should not be deemed a representation of past or future results, and is no guarantee of return or future performance. This information is not intended to provide tax, legal or investment advice. Be sure to speak with qualified professionals before making any decisions about your personal situation. 

I have a solution that does the reverse!

Imagine paying the taxes in the contributions phase. (Last circle in the first row: $ 37,000, or $2,500 per year for the first 15 years.)

And avoiding the hefty taxation in the withdrawal phase. (Last circle in row 2: $ 151,890, or $5,063 per year for 30 years!)

Please fill out this questionnaire to see if you might benefit from this type of plan.  If your situation indicates you might benefit, I will contact you to set up an appointment so you can see the numbers based on your specific situation, and I can answer any questions you may have. No obligation, No pressure, Just Information for your consideration.

 

Is 4.0% average growth enough to power your retirement?

Do you know how much money you’ll need to retire comfortably?

Do you know what kind of investment return you need to get you to that amount?

Not a lot of people do the calculations – and lose money due to poor planning.

It’s not enough to just invest in your 401K and hope that you will have enough money saved up by the time you retire.

You need to determine how much money you need at retirement, and then position your portfolio to achieve the return that will move you toward that goal.

The Return was 4.06%

As you can see from the graphic below, there are some growth periods in which the stock market goes up 32% (like it did in 2013) and other years where it drops 37% (as it did in 2008).

Due to the volatility of the stock market, the historical average from 2000 to 2015 ends up being a measly 4.06% for an investor who started with $100,000.

Durham, NC Financial Advisor

Durham, NC Financial Advisor

1Sources: Yahoo! Finance GSPC Historical Prices and StandardAndPoors.com. This historical performance of the S&P 500® is not intended as an indication of its future performance and is not guaranteed.

But, the Return is Actually EVEN LESS THAN 4%

To make matters worse, it is actually less than 4.0% because you have to subtract the 1½ % to 2% a year in expenses for your 401(k) or IRA, and subtract the tax you pay on the gains or the income if taken from your retirement account or IRA.

So if you are the guy or gal in this scenario, it’s possible you’ve netted fairly little this century. 

What’s the Solution? 2

One potential solution is an investment that participates in an up market, and at the same time protects you from market losses

Well how does that work you might ask!!!

Do You Want to Find Out if This Is Right for You?

If you would like to get more information on this type of investment plan please fill out the form which is linked below so I can share more information with you. 2

2Integrated Life and Financial Planning does not offer legal or tax advice. This material is not intended to replace the advice of a qualified tax advisor or attorney. Please consult legal or tax professionals for specific information regarding your individual situation.

“No theory, strategy or Asset Allocation assures success or protects against loss. This material is for general information only and is not intended to provide specific advice or recommendations for any individual.  To determine what appropriate for you, consult a qualified professional.”

Is it time to look at some alternatives to your bond holdings?

Just in case you have not noticed, the interest rates YOU receive on various investments like money market, Cds, bonds etc. have been at historic lows for quite some time.

 

Here is a chart to illustrate:

I have managed investment portfolios for over 20 years now. I am a strict adherent to “Modern Portfolio Theory” or Asset Allocation modeling** for this entire time.

If you would like to read more about this approach to management you can refer to a few pages on my website, or just Google the terms.

Asset Allocation & Investment Planning
The Importance of Asset Allocation

(This second link takes you to my video library. Once there click on the video with this name. Second row down, right hand side.)

With rates being so low, the performance of bonds over the next few years becomes a question many are wondering about.

 

As a refresher, in general when interest rates rise, the value of bonds will decline.

 

 

Just remember the teeter totter, or seesaw you played on as a kid:

 

He is bond values, She is interest rates!

In response to this, I have been engaged in research into potential substitutions for some part of the bond holdings in my asset allocation models.

The criteria for theses substitutions would include:

• Downside protection during stock market declines.
• Reasonable probability of consistent returns above current bond rates.
• Comfort with the idea of maintaining these holdings for the intermediate to long term.

I have identified, and am now recommending these substitutions to my current clients.

If you would like to learn more, ask questions, and see if these solutions might be appropriate for some portion of your portfolio, feel free to use the link below to set a time for a no obligation, exploratory phone call.

Set a phone appointment

 

I will look forward to talking soon!

 

Jerry Bergner, AAMS CMFC

 

**”No theory, strategy or Asset Allocation assures success or protects against loss. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. To determine what appropriate for you, consult a qualified professional.”

“Securities offered through SCF Securities Inc., Member FINRA/SIPC. Investment advisory services offered through SCF Investment Advisors Inc. SCF Investment Advisors
155 East Shaw Avenue • Suite #102 Fresno, California 93710-7619 • (800) 955-2517 • Fax (559) 456- 6109. Neither SCF Securities Inc. nor SCF Investment Advisors Inc. are affiliated with Integrated Life and Financial Planning.”

 

Creating Tax Efficient Cash Flow

Investors are usually quite eager to learn about the next big investment opportunity out there to increase their total portfolio return, however, they are often less enthusiastic about making an effort to minimize their tax bite. There’s money to be made by taking advantage of tax avoidance strategies. So that you don’t overlook any opportunities for improving your bottom line, here are a few simple tax principles that can help save you money.

Tax Tips for the Individual Investor

Investors are usually quite eager to learn about the next big investment opportunity out there to increase their total portfolio return, however, they are often less enthusiastic about making an effort to minimize their tax bite. There’s money to be made by taking advantage of tax avoidance strategies. So that you don’t overlook any opportunities for improving your bottom line, here are a few simple tax principles that can help save you money.

6 Strategies for Tax-Efficient Investing

It’s tax season again and this often prompts a variety of feelings including procrastination and intimidation. It’s no fun knowing that after factoring in federal income and capital gains taxes, the alternative minimum tax, and any applicable state and local taxes, your investments’ returns in any given year may be reduced significantly.

But for some people, tax time can actually be a very happy time. That’s because they have put into place some effective strategies to decrease their income tax bite.

Here are several Strategies & Tips to potentially help lower your tax bill.

Durham NC Financial Planner

5 Benefits to Getting a Portfolio Second Opinion from a Financial Planner

Do you worry about your current or future financial situation? Perhaps you have these questions float through your mind periodically:

Will my money last as long as I do?
Will I have enough to live comfortably?
Should I be doing something different with my investments to improve my outlook?
Do I have the right advisor to help me achieve my goals?
Should I get a second opinion from a financial planner to see if my investments are positioned correctly to achieve my goals?