Retirement Planning in Grapevine, TX for High-Net-Worth Individuals
Retirement planning can be daunting if you aren’t sure where to start. Between managing corporate compensation benefits, tax planning strategies, charitable giving, protecting your wealth, and estate planning, sorting through the various intricacies of retirement planning is no small feat.
As a successful high-net-worth individual, you should know the various strategies available to manage your wealth when planning for retirement. In the sections below, we examine key concepts that executives, successful business owners, and high-net-worth individuals should become familiar with when planning for retirement.
This article explains the following:
Why is retirement planning important?
Does your employer-sponsored retirement plan accurately reflect your risk profile?
How inflation impacts retirement planning
The importance of rebalancing & diversifying your portfolio
Strategizing your personal & business taxes
Optimize your retirement planning with experience
The phrase “retirement planning” may seem straightforward, but—especially for the financially independent—preparing an optimal lifestyle in your golden years can involve more moving parts than you might expect.
Retirement planning is something high-net-worth individuals, corporate executives, and business owners should consider pursuing to live a comfortable lifestyle once they retire. This can include developing savings strategies such as minimizing tax obligations or diversifying investments to manage risk appropriately.
The goal is to have sufficient monetary resources so you don’t outlive your money in retirement. The process of designing an actionable plan begins with understanding both the expenses and the assets at your disposal and setting financial goals so you can evaluate if you are on track to meet those goals.
Whether you are heading in the right direction or need to make some adjustments, formulating a savings and investment strategy that aligns with your financial goals to help grow and protect your wealth will reinforce your plan. Analyzing your current finances helps you understand how much you will need and when you will need it.
However, because life is full of surprises, a thorough plan factors in contingencies and potential changes to the economic environment (such as inflation and market volatility). We use a simulation known as a Monte Carlo analysis which uses your personal financial goals and resources to run 1,000 hypothetical scenarios to determine your probability of successfully meeting your goals. This type of sophisticated model varies the timing and severity of factors that could impact your investments such as the timing of market returns and inflation.
Planning and use of financial planning software makes it easier to allow for proper contingencies in the event of unforeseen life-changing circumstances (ranging from divorce, loss of a spouse, health issues, and so on) and can assist you with increasing your probability of successfully not outliving your money
Unsurprisingly, high-net-worth individuals and corporate executives are investing more in employer-sponsored retirement plans to build upon and protect their financial future. However, staying informed of the ever-changing wealth management landscape is important to maximize your potential benefits.
With new strategies and approaches being introduced all the time, you should regularly review your employer-sponsored retirement plan to ensure it is up-to-date and has appropriate allocations in place based on your retirement goals and risk appetite. During times of market volatility, allocations can quickly become unbalanced with investments that have performed well occupying a significantly larger portion of your portfolio than your target allocation which can introduce risk beyond that with which you're comfortable. With the market's turbulence throughout 2022, it is more important than ever to pay close attention to your own 401(k) allocations to ensure you aren’t inadvertently taking on more risk.
The larger your retirement plan balances, the more significant the impacts of not rebalancing will be. Among other possible benefits, it may make it easier to reduce the impact of potential downturns due to inflation or continued volatile bear markets.
Unfortunately, even for high-level executives and successful entrepreneurs, enjoying a comfortable lifestyle today may not guarantee an equally comfortable lifestyle in the future. However, to maximize your peace of mind, consider hiring a financial professional who can review your entire financial picture to assist you in managing your employer-sponsored retirement account.
Maximizing your employer-sponsored retirement plan contributions is one of the most important steps you can take as a high-net-worth individual toward achieving true financial independence.
Committing to increasing contributions early in your career could mean more money in your account when you are ready to retire.
Even if you’re already financially independent, you need to take today’s economic climate seriously. You cannot afford to ignore it without risking the financial nest egg you’ve worked so hard to create.
Rising inflation can have a huge impact on your purchasing power, as it directly affects the value of your money. In fact, it is one of the most important factors for high-net-worth individuals and corporate executives to incorporate into their retirement planning.
Inflation can significantly erode away your wealth, making it more difficult for retirement savings to last throughout your retirement years. Over time, savings may be worth far less than initially anticipated due to higher prices associated with inflation. Long-term investments are the only way to keep pace with the high cost of living during retirement.
This means that even if you have large sums of money in the bank, inflation can drastically reduce your purchasing power at any given moment. As a result, you must use careful strategies to compensate for the impact of inflation over time.
Especially during economic uncertainty, maintaining consistent growth and shielding your investment portfolio from significant losses is more important than ever. Consider working with an experienced wealth manager in Grapevine, TX, like Waterworth Wealth Advisors.
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As market volatility and inflation continue to impact near-term stock performance, shrewd investors can look to maximize their long-term returns through strategic asset allocation. Rebalancing and diversifying your portfolio are vital to staying competitive in today’s often-changing financial markets.
Let’s look at both fundamentals:
- Diversifying your portfolio is spreading your investments across asset types; such as stocks, bonds, mutual funds, and real estate; to reduce the risk of heavy reliance on one particular area. By taking advantage of these opportunities in differing markets, you get greater access to successful investment strategies, potentially lowering your risk. This is why diversification matters to high-net-worth individuals.
- Rebalancing your portfolio periodically reviews and realigns how much you have invested across various asset classes. The idea isn’t to make knee-jerk changes every time you read a troubling news headline. Instead, we consider what’s likeliest to do well over time. From there, careful, often minor adjustments can be made to keep you on a course toward your financial goals.
As markets constantly fluctuate, keeping your portfolio balanced ensures you remain aligned with your goals. Maintaining a diversified portfolio, as well, can contribute to better long-term stability among your assets. However, these aren’t the only tools we have available.
Another staple of our investment management may be surprisingly simple. Consistent, long-term investing can be an invaluable wealth-generating tool. When you have diversified over a wide range of assets, the next most vital ingredient is often patience. You can potentially protect your wealth through turbulent markets and benefit when markets are on the rise again by simply staying the course.
Even if you are confident about your current investment selection, changes in regulations or other external factors can quickly impact their performance. You’re unlikely to regret ensuring that your portfolio is well diversified to reduce the impact of those changes. Today’s supply chain issues alone can create unexpected drops in otherwise-promising companies’ stock values.
Diversification is an essential tool for protecting your equity against unforeseen economic turbulence. It tends to help secure greater wealth over time, as well.
Believe it or not, at the same time, and despite market volatility, it is still possible to generate steady gains. For example, keeping a close eye on the movements of both domestic and international markets can lead to the identification of investment opportunities. An experienced financial advisor can make it easier to identify them.
Tax planning is taking advantage of available deductions, credits, and investments that can minimize the amount they owe in taxes. When done effectively, it can maximize your savings across your personal and business ventures in the process, offering savings for both the current tax year and subsequent tax-savings down the road. Nevertheless, high-net-worth individuals need to be both proactive and strategic about it.
First, incorporating a well-thought-out tax strategy into your financial plan can help ensure that you are obtaining all the necessary benefits available—while avoiding any unwelcome payment or penalty surprises at tax time. With the right mindset and forward-thinking, affluent individuals can stay ahead of the game and ensure they are in the best spot to take advantage of financial opportunities for themselves and their families.
The second reason why successful individuals are a favored target of the IRS for audits. In other words, trying to do everything at the last minute can yield mistakes and poke a financial bear that’s best left alone. Instead, take some time before April arrives to review your financial strategies and ensure that you comply with applicable tax laws and regulations.
Generally speaking, the most effective tax-planning strategies are long-term. Put another way, your most significant potential savings are only obtainable over years or decades, not within a single tax year. This makes tax-free, and tax-deferred savings accounts, such as those the IRS allows in preparation for retirement, extremely useful.
However, we aren’t allowed to pay into them indefinitely. Required Minimum Distributions (RMDs) are withdrawals that the IRS requires retirees to make from their retirement accounts each year. Typically, people in the higher tax brackets must take RMDs from their retirement accounts once they reach age 73.
Investors who have amassed relatively large retirement account balances may want to consider a Roth conversion strategy. When you convert from a traditional IRA or 401(k) account to a Roth, you effectively decrease the size of your RMDs. As a result, you have more control over the amount of taxable income you take each year during your retirement while potentially decreasing the cumulative amount of taxes you pay on those retirement assets.
Tax loss harvesting is another ideal tool for affluent individuals looking to ease the pain of their RMDs while preserving as much of their wealth as possible. The process involves identifying investments in taxable accounts that are losing value—and then selling them at a loss to generate tax savings.
This strategy can work to offset your taxable gains by deducting the losses from the taxes you owe on those gains. It reduces the overall taxable income, meaning that it can lower your income tax liability for that year. Additionally, it can reduce the general cost necessary to satisfy an RMD, allowing you to invest in your portfolio's other, more high-growth-potential areas..
Working with a professional can make navigating these steps far easier. Utilizing the services of Waterworth Wealth advisors can result in even more sophisticated methods for lowering your tax liability while potentially increasing your take-home savings.
With an experienced professional’s assistance, your retirement planning can be optimized for maximum benefit. A seasoned wealth advisor will provide analysis and advice that target your financial needs and goals, helping to maximize the return on your investments.
Sometimes, advisors charge by completely different standards from one another. For instance, fee-only financial advisors bill clients a flat fee or an hourly fee for services rendered. Commission-based financial advisors, meanwhile, receive payment through the sale of products such as insurance and investments.
Additionally, note their credentials. An Accredited Investment Fiduciary (AIF) is a professional designation demonstrating extensive training and studies for providing clients with full fiduciary financial advice and services. AIF professionals are dedicated to providing sound planning, risk management, and retirement consulting.
They must also adhere to comprehensive procedures for overseeing the activities of registered advisers, financial advisors, insurance companies, and brokers. In addition, they must adhere strictly to their fiduciary duty, which requires them to act solely in the best interest of the client.
The more wealth you build, the greater your need for advanced financial solutions to manage your investments and assets. Waterworth Wealth Advisors specializes in concierge retirement planning, tax management strategies, and long-term, market-savvy investing strategies.
We’re ready to be your wealth advisors in Grapevine. Contact us to schedule an appointment.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward-looking and should not be viewed as an indication of future results.
Converting a traditional IRA to a Roth IRA is a taxable event and could result in additional impacts to your personal tax situation, including the taxation of current social security benefit payments. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.