Author: Gene Gard

Trust the Process

Post author By Gene Gard
Post date November 29, 2023

Get around FOMO with some thoughtful planning. (Photo: Pierre Bamin | Unsplash)

*We’re reprinting this column from June 2021 because FOMO is still a thing and because you can still get around it with some thoughtful planning.

One of the most frustrating things about investing can be FOMO — fear of missing out. Most new investors pick their positions by looking at the highest returns in previous periods and buying whatever did the best. Then they engage in an unfortunate game of leapfrog, getting drawn in by the next hot investment after it’s already gone up.

This outcome-oriented thinking not only produces poor returns; it’s also extremely discouraging. It’s the reason that after a setback, investors often start thinking about the markets as an unreliable casino and hang onto their cash, to their long-term detriment. In a way, capital markets are a casino — but the rare one that is in your favor in the long run.

Nobody can guess what will happen this month or year, but if history is any guide, it’s hard to be worse off in the markets as the years turn into decades and the growing earning power of thriving companies begins to manifest in your account.

It’s all about your mindset. Here are three simple statements that process-oriented — and successful — long-term investors tend to believe:

1. For any set of stocks or funds, just one will perform the best over any given period, and sometimes even the best one will go down.

2. Despite statement number 1, investors should stay invested and diversified through good markets and bad, even though much or all of their portfolio will miss that one best thing. They should not chase extreme performance no matter how tempting it may be.

3. Looking backward, investors shouldn’t regret number 2, even if they had a good guess about what would do best or if they see questionable choices of irresponsible investors rewarded with huge windfall profits.

While it’s difficult not to wish for a windfall, here are a few ideas that might help you avoid short-term regret once you’ve made the correct long-term choices:

• Understand that the market outcome for a given period is just one of countless ways things could have turned out. A more conservative allocation might annoy you when everything is going up, but when things go wrong it can be a lifesaver. You never know, in advance, what will go wrong in the economy (Covid-19 anyone?).

• To jump in and out of speculative bets successfully, you have to nail the timing perfectly, twice. You have to get in near the bottom and get back out at or near the top. Getting either decision right is hard. Getting both right is almost impossible. No matter what they say, your friends or people you read on the internet are not consistently successful at this in the long-term.

• The kinds of investments that are likely to double or triple in a short time are also usually the kind that can go to zero very quickly. Believe it or not, if you can just average 20 percent returns a year, in the long run you will be one of the best investors in the world. There’s no reason to swing for the fences all the time.

• Your investments are irreplaceable once you reach a certain career stage and age. A 20-year-old could lose their life savings on a speculative stock and make the money back in a matter of months. A 60-year-old looking at retirement would dramatically impair their lifestyle if they lost a big chunk of their nest egg. There’s just not enough time to accumulate money and get it working in the market to ever recover past a certain point.

Most new investors think the outcome is all that matters and compare their results to the hottest stocks and benchmarks to inevitable disappointment. A process-oriented investor can be confident they made good choices before even seeing the results. A process-oriented investing mindset can help you with the most important thing — staying in the race.

Gene Gard, CFA, CFP, CFT-I, is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

Tags Finance, FOMO, process-oriented investment

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How to Prevent Fraud at Your Business

Post author By Gene Gard
Post date November 22, 2023

Be alert to workplace fraud. (Photo: Growtika | Unsplash)

November 12th to 18th marked the 22nd anniversary of International Fraud Awareness Week. Effectively preventing fraud in your organization takes everyone doing their part to establish an open culture of awareness and security. Although fraud prevention should be a year-round priority, the week is a great reminder of the prevalence of workplace fraud, the many forms it comes in, and how many times it still goes unaccounted for. With the right tools and guidelines, you can keep your business safe and shielded from fraudulent activities.

To commemorate International Fraud Awareness Week, let’s take a look at three essential practices that can help combat workplace fraud minimize future risks.

Updated Training

Ongoing anti-fraud training is needed to keep employees educated and aware of new threats. When was the last time your fraud awareness training was updated? The landscape for fraud is constantly evolving along with technology. Easy and effective practices that can help prevent fraud include strong internal controls, fraud hotline reporting tools, annual training for all employees on fraud risks, and easily accessible trends and resources.

Fraud Ethics at the Top

Fraud ethics should start at the top of your organization. Is the tone at the leadership level one of honesty and integrity? Would your top management do the right thing if no one was looking? Indicators of effective guidance include instilling code of ethics policies, communicating those policies to the entire organization, and having an open-door policy and reporting mechanism, such as an internal fraud hotline, for all employees to report potential fraud and/or fraud risks. An independent assessment of your organization’s culture toward fraud and ethics policies is a great way to evaluate where you stand and where improvements can be made.

Strong Internal Controls

Internal controls are another important component to minimizing fraud risks. Strong internal controls can be achieved in a number of ways, but common methods include establishing a code of conduct, regularly performing audits, and ensuring management is involved where needed. It’s also a great idea to have a checks and balances system across key work processes or roles who handle sensitive information. The most susceptible areas of your business to keep an eye on are cash receipts, inventory, new vendors, and payroll. No singular team member in these areas should own the entire process of a crucial task — there should always be an opportunity for other team members to assess and review work if suspicious activity arises.

Making fraud prevention a business priority doesn’t have to be intimidating, nor does it mean creating a whistleblower culture in the workplace. At the end of the day, it comes down to ensuring your employees and business are safe and that team members not only feel empowered to speak up if needed but also have the tools to do so.

Gene Gard, CFA, CFP, CFT-I, is a Partner and Private Wealth Manager with Creative Planning. Creative Planning is one of the nation’s largest Registered Investment Advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

Tags Finance, fraud, fraud prevention

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Is Now the Time to Buy a House?

Post author By Gene Gard
Post date November 15, 2023

If you’ve been thinking of buying a home, you’re likely aware of how volatile the housing market has been over the last few years. From soaring home prices during the Covid pandemic to rapidly rising interest rates and competitive bidding wars over new listings, it’s been a challenging time to enter the housing market.

So, when, if ever, is a good time to buy a house? The answer depends primarily on your personal financial situation and future goals. Following are some important considerations that can help you determine the right time to buy a house.

1. Long-term plans

Are you ready to commit to your current location for the long term? If you foresee a move in the near future, now may not be the right time to buy a home. It’s wise to approach a home purchase as a long-term commitment for several reasons.

• Commissions and closing costs — Because you pay real estate commissions and mortgage closing costs each time you buy or sell a home, it’s wise to put off buying until you’re relatively sure you won’t be moving anytime soon.

• Capital gains taxes — If your home appreciates in value and you sell it within two years of buying it, you may be subject to significant capital gains taxes.

• Appreciation — If you sell before your home has a chance to appreciate in value, you may not have enough equity to cover the costs of selling and buying a new home.

2. Mortgage rates and market conditions

As of October 27, 2023, the average rate for a 30-year fixed mortgage is 8.09 percent. That equates to a $2,590 monthly payment if you borrow $350,000 for your home purchase. Whatever the price of your desired home, it’s important to ensure you’re comfortable making your monthly payment over the long term.

Deciding on the timing of your home purchase depends a lot on your local housing market, as real estate conditions vary widely between different cities. It’s important to consider both market values and inventory to determine whether now’s a good time to buy in your location.

3. Down payment and closing costs

Before buying a home, it’s important to ensure you have enough assets for a down payment, mortgage closing costs, moving expenses, any necessary renovations, furniture, etc. While each mortgage lender has different down payment requirements, the more you put down, the lower your monthly payment will be.

4. Savings

Homeownership is a big financial responsibility. Before purchasing a home, make sure you have adequate emergency savings to cover unexpected home expenses, such as a new furnace or roof. It’s wise to have at least three to six months of living expenses saved in a semi-liquid account for easy access. Before purchasing a home, be sure to recalculate your monthly expenses to include the monthly costs of owning your home, and save enough in your emergency fund to cover these expenses.

5. Debt

When determining whether you’re eligible for a mortgage, lenders typically look at your debt-to-income ratio (DTI). This is the percentage of your monthly gross income that you can reasonably put toward your mortgage payment. It includes factors such as housing costs, student loan balances, credit card debt, and other types of debt. Most lenders prefer borrowers have a DTI of less than 36 percent, but the lower your DTI, the better chance you have of being approved for a favorable interest rate.

If you have significant outstanding debt, now may not be a great time to purchase a home. Focus on paying off that debt to put yourself in a better financial position.

6. Credit score

Before purchasing a home, it’s also important to make sure you have a strong credit score. Lenders typically offer better mortgage rates to borrowers with credit scores of 740 or greater. Although you may be approved for a mortgage with a lower score, you’ll likely need to pay a higher interest rate. If you have a low credit score, it may make sense to wait on your home purchase until you can boost your credit.

Gene Gard, CFA, CFP®, CFT-I™, is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

Tags Finance, housing market

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Financial Literacy for Children

Post author By Gene Gard
Post date November 8, 2023

It’s no secret that many adults struggle with financial literacy. In fact, according to a recent study, only 57 percent of adults exhibit traits of financial literacy. From taking on too much debt to failing to save for retirement to not understanding the importance of risk diversification, many adults are unable to achieve their financial goals simply due to a lack of financial education.

Unfortunately, few schools teach basic concepts of personal financial management, so it falls on parents and grandparents to educate the next generation. How can you ensure the children in your life are prepared for financial success? The following tips can help you teach your kids basic financial concepts to help them successfully navigate their finances as adults.

1. Start early.

The sooner you start teaching your children concepts of prudent financial management, the better. Introduce basic concepts like earning, saving, and spending wisely at a young age. Teach them the value of money and the importance of delayed gratification. Instilling these fundamental principles early on lays the groundwork for sound financial decision-making later in life.

2. Lead by example.

Children learn by observing, so modeling good financial habits is essential. Discuss your financial decisions with your children or grandchildren, explaining your reasons behind them. Show them how you pay bills, save for the future, and prioritize purchases according to your values. Your positive example will have a lasting impact on your children’s financial behavior.

3. Teach budgeting.

Budgeting is a vital financial skill that many adults don’t fully grasp. Teach your children how to create a budget by allocating their income/allowance into different categories, such as saving, spending, and giving. Encourage them to track their expenses, prioritize their spending and saving, and regularly review their progress toward their goals. Help your teenagers open and manage bank accounts. Introduce them to the basics of building good credit.

4. Encourage saving and goal setting.

Teaching children the importance of saving from an early age gives them a better chance of achieving their financial goals as adults. As an alternative to buying your children the latest toy or clothing item, teach them how to save for it. Consider setting a plan to meet them halfway as an incentive. Discuss how much the item costs and strategies for setting aside a portion of their weekly allowance toward that purchase. This lesson will foster discipline, teach the importance of long-term planning, and give your child a sense of pride and accomplishment when they can finally make that big purchase.

5. Foster entrepreneurship.

Nurture an entrepreneurial mindset in your child or grandchild by encouraging creativity and critical thinking. Help them explore a wide range of interests and hobbies and talk about potential business opportunities. Discuss various money-making ventures, such as starting a small business, freelancing, or selling crafts online. By fostering an entrepreneurial spirit, you can instill a sense of independence, resourcefulness, self-confidence, and financial resilience.

6. Offer resources.

Provide children with age-appropriate books, articles, and online resources that reinforce the financial concepts and skills you’re teaching (creativeplanning.com/insights is a great place to start). Please encourage them to ask questions and discuss money matters. As teenagers, consider enrolling them in a personal finance course. The more children understand about personal finance, the better equipped they’ll be to make sound financial decisions as adults.

Tags Finance, financial literacy

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Year-End Financial Checklist

Post author By Gene Gard
Post date November 1, 2023

As pumpkin-spiced lattes turn to eggnog and falling leaves turn to falling snow, it’s once again time to check in on your finances to ensure you’re on track to meet your goals moving forward. Following are 11 important financial steps to take before 2023 turns to 2024.

1. Review your financial plan.

Consider how any changes in your life or goals over the last year may impact your plan. Work with your wealth manager to make any necessary adjustments.

2. Maximize your retirement contributions.

If you’re in a position to do so, consider maxing out your 401k and IRA contributions prior to year-end. The 2023 401k contribution limit is $22,500 (plus a $7,500 catch-up contribution for those age 50 and older), and the IRA contribution limit is $6,500 (plus a $1,000 catch-up contribution for those age 50 and older).

As a reminder, contributions to employer-sponsored plans must be made by December 31st, and contributions to an IRA must be made by April 15, 2024.

3. Take steps to lower your tax liabilities.

Your wealth manager can help you identify opportunities to lower your tax bill by taking advantage of year-end tax-loss harvesting, asset location strategies, charitable giving, and more.

4. Rebalance your investment portfolio.

If you haven’t done so in a while, now may be the time to rebalance your investments to your original (or an updated) asset allocation. This can help lock in investment gains from top sectors and ensure your portfolio remains in line with your objectives and risk tolerance.

5. Finalize year-end charitable donations.

A great way to lower your taxable income in a given year is through charitable donations. If your 2023 income was higher than normal, it may make sense to initiate a donor-advised fund (DAF). A DAF allows you to receive an immediate charitable tax deduction in the current year (by filing an itemized return) while having the flexibility to make donations from the DAF to your favorite charities at a later date.

6. Review your existing insurance coverage and risk management needs.

Consider any changes in your life and financial situation that may warrant additional insurance coverage. Did you have a baby? Get married? Start a business? Get divorced? Your wealth manager can help you determine whether it makes sense to enhance your current level of coverage.

7. Reevaluate your healthcare coverage.

Have any changes occurred in your life or health that may necessitate a change in your healthcare coverage? If so, take advantage of your employer’s open enrollment period to make any necessary adjustments to your healthcare coverage.

Now’s also the time to elect any contributions you’d like to make to a health savings account (HSA) or flexible spending account (FSA).

Speaking of FSAs, if you have any unused funds in your FSA, make a plan to spend them on qualified medical expenses before year-end, or you risk losing them.

8. Check in on your emergency fund.

If you dipped into your emergency savings in 2023, now’s the time to rebuild it. We recommend maintaining three to six months of expenses in a liquid account to help cover any unexpected expenses.

9. Review estate planning documents.

If you haven’t yet implemented estate planning documents, it’s important to do so immediately, regardless of your age. If it’s been a while since you reviewed your existing estate plan, schedule a call with your wealth manager and estate planning attorney to revisit your documents and ensure they remain aligned with your wishes.

10. Review beneficiary designations.

Remember that beneficiary designations can supersede your will and trust directives, which is why it’s important to regularly review all designations to ensure they remain in line with your estate planning objectives.

11. Check your credit report.

Each of the major credit bureaus allows consumers to access one free report each year. Use this opportunity to double check your credit score and identify any unexpected errors.

Tags Finance, financial plan, Year-End Financial Checklist

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Eight Open Enrollment Mistakes

Post author By Gene Gard
Post date October 25, 2023

Give benefits a thorough review. (Photo: Alexandr Podvalny | Unsplash)

Welcome to fall, the season of changing leaves, falling temperatures, and, of course, open enrollment for employer benefits. Open enrollment is the period of time when eligible employees can enroll or make changes to their employer-sponsored benefits.

Unless you experience a qualifying life event, such as getting married or having a baby, open enrollment is the only time of year to make changes to your insurance coverage and spending account contributions. That’s why it’s important to carefully review all options and select benefits that make sense for your particular situation.

Following are eight common open enrollment mistakes to avoid.

1. Failing to review all options

Many employers offer multiple types and levels of health, life, and disability insurance coverage. Be sure to review all options available to you and select coverage levels that make sense for your personal life and financial situation. Your wealth manager can help you evaluate your options and select appropriate levels of coverage.

2. Overlooking plan changes

Don’t assume this year’s coverage is the same as last year’s. Both employers and insurers can change plan details, such as coverage levels, premiums, in-network providers, and out-of-pocket costs. That’s why it’s important to carefully review all plan documents for updates.

3. Forgetting to consider how your life has changed

It’s important to reevaluate your benefits in light of any major life events that occurred over the past year, such as marriage, divorce, the birth of a child, etc. Failing to account for these important changes may leave you underinsured or lead to higher-than-necessary costs.

4. Selecting the wrong type of health insurance coverage

Many health insurance plans offer different levels of coverage. Selecting the wrong level may result in insufficient coverage or require you to pay higher premiums than necessary.

5. Missing out on employer matching contributions

If your employer offers a 401(k) match, make sure you’re contributing enough to take full advantage of this money.

6. Overlooking the benefits of flexible spending accounts (FSAs) and health savings accounts (HSAs)

FSAs and HSAs offer a tax-advantaged way to save for qualified medical expenses. Take time to understand how these plans work, the differences between the two plan types, and how you can maximize your contributions.

7. Failing to update beneficiaries

If you have employer-sponsored life insurance or retirement accounts, it’s important to regularly review your beneficiary designations to ensure they continue to reflect your wishes as your life evolves over time.

8. Procrastinating

Waiting until the last minute to enroll in benefits can lead to rushed decisions and missed opportunities. Begin the open enrollment process as soon as possible, and work with your wealth manager to ensure your benefit elections are in line with your overall financial plan and long-term goals.

Tags employer-sponsored benefits, Finance, Open Enrollment

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7 Tips to Pay Yourself in Retirement

Post author By Gene Gard
Post date October 18, 2023

For most soon-to-be retirees, the idea of no longer receiving a paycheck and relying on savings and retirement income to make ends meet is scary. With proper planning and strategy, you can create your own retirement “paycheck” using various sources of retirement income. The following tips can help you get started.

1. Understand your current financial situation.

The first step in establishing a retirement paycheck is to gain a full understanding of your current financial situation, including your savings, investments, potential Social Security benefits, pension benefits, and any additional sources of income you expect to receive during retirement.

2. Estimate your monthly expenses.

Once you understand your current financial situation, the next step is to determine how much you’ll need to spend each month based on your desired retirement lifestyle. This will include your required monthly expenses like the cost of housing, healthcare, transportation, food, etc. Additionally, you’ll want to include discretionary spending (“the fun stuff”), such as travel, entertainment, and hobbies. You should also consider if there are any large purchases you hope to make in retirement, such as a second home, a boat, new cars, big trips, gifting to family members, etc.

3. Identify any potential income gaps.

Compare your expected retirement income sources to your estimated expenses. Do you have enough to pay for your desired lifestyle? If not, you’ll need to review your monthly spending expectations, focusing on the amount, timing, and/or frequency of your discretionary spending and big-ticket purchases. Alternatively, identify additional sources of retirement income (e.g. part-time work) to bridge the gap.

4. Implement a strategic withdrawal strategy.

A tax-efficient, strategic withdrawal strategy can provide a steady stream of monthly income and help ensure you don’t outlive your assets. If you have retirement accounts with different tax characteristics (taxable, tax-deferred, tax-exempt, etc.), you’ll likely have flexibility to minimize your tax obligations while optimizing your monthly income.

The benefit of following a disciplined withdrawal strategy is that you can monitor your ongoing expenditures, making changes as needed to ensure you don’t spend more than you can afford in any given year. This practice can help you maintain adequate assets to last a lifetime, regardless of market volatility.

5. Maintain an emergency fund.

Once you retire and say goodbye to your earned income stream, the first priority is to fund and maintain an emergency fund for unexpected expenses. This fund should be prioritized above all other savings and helps ensure you don’t need to dip into retirement savings or sell investments at inopportune times to pay for unforeseen expenses.

6. Plan for healthcare and long-term care expenses.

We can all count on healthcare expenses at some point in our lives. It’s imperative to have a plan to cover the possibility of increased healthcare needs in retirement. While there are many ways to account for these expenses, retirees should consider supplemental health insurance, use of tax advantaged health savings accounts (pre-retirement), and whether long-term care insurance is appropriate to help protect their retirement savings from unexpected medical expenses.

7. Incorporate Social Security planning.

It’s important to carefully consider the timing of your Social Security benefits in order to maximize the amount you’ll receive over your lifetime. Filing for benefits early means you’ll start receiving payments earlier but at a reduced monthly amount. On the other hand, delaying until age 70 to begin taking benefits means you’ll receive an increased monthly payment, growing at 8 percent per year following your full retirement age through age 70.

You and your wealth manager can determine a Social Security timing strategy that makes sense given your personal financial situation, benefit options, and retirement goals.

Tags finances, retirement

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Six Financial Challenges for Couples with an Age Gap

Post author By Gene Gard
Post date October 11, 2023

Financial planning is never easy, but couples with a significant age gap face additional complexities due to differences in retirement eligibility dates, life expectancies, health issues, income needs, and more.

Following are six challenges for couples with a significant age difference, as well as strategies to help you navigate them.

1. Staggered retirement dates

Couples with a significant age gap may find themselves juggling different retirement dates. The older spouse may be ready to retire while the younger spouse is still enjoying prime earning years. The key to solving this challenge? Don’t even try!

From a financial perspective, there can be significant advantages to staggering your retirement dates. For example, the working spouse may be able to maintain employer-sponsored health insurance until both partners are eligible for Medicare. And any earnings that continue to come into the household can reduce the need to draw from retirement assets, therefore preserving the couple’s retirement savings.

Of course, if the lifestyle challenges of having one working spouse and one retired spouse are too much, consider a compromise. Perhaps the older spouse takes a part-time job for a few years and the younger spouse wraps up their career a few years earlier than originally planned.

2. Timing Social Security

Properly planning for Social Security is especially critical for couples with an age gap because the younger spouse has the potential to live significantly longer than the older spouse. This means the younger spouse may need to rely on a survivor benefit for an extended period of time.

If the older spouse is the primary earner, it may make sense for him/her to delay taking benefits until age 70. Doing so allows the Social Security benefits to grow by 8 percent each year, which can also result in a higher survivor benefit for the younger spouse.

In contrast, it may make sense for the younger spouse to begin receiving Social Security benefits as soon as possible, even if that means taking reduced benefits beginning at age 62. By doing so, the couple can receive as many years as possible of the younger spouse’s benefits. Then, when the older spouse passes away, the younger spouse may be eligible to receive survivor benefits at the older spouse’s higher rate.

3. Investment allocation

Typically as you near retirement, you begin to shift your investments from a growth-oriented strategy to a more income-oriented strategy. However, if there’s a significant age gap between you and your spouse, it may make sense to maintain a slightly more aggressive portfolio than your same-aged friends.

Remaining more aggressive provides your investments with additional time to stretch and grow, which will hopefully protect the income needs of the younger spouse later in life. And, because the younger spouse has a longer time horizon, he/she may have a better opportunity to recover from market volatility, should the value of your investments decline.

4. Life insurance

It often makes sense for an older spouse to implement a permanent life insurance policy that pays a tax-free death benefit to the younger spouse. Some policies even offer a rider to help pay for the costs of long-term care, which can take some pressure off the younger spouse, should the older spouse face health issues later in life.

5. Pension payments

If the older spouse is eligible to receive pension payments, it may make sense to elect a joint-and-survivor payout option. While this practice typically reduces the amount of the monthly payment to the household, it also helps ensure the younger spouse can continue receiving payments for the rest of his/her life, even after the older spouse passes away.

6. Estate planning

Estate planning for couples with an age gap can be especially complex. It’s important to take steps to ensure the younger spouse will continue to be financially secure following the older spouse’s death. Work with your wealth manager and estate planning attorney to implement the necessary documents, including wills, trusts, financial powers of attorney, and healthcare powers of attorney. This will help ensure both spouse’s wishes are properly reflected in your estate plan.

Tags age gap couple, Finance, financial planning

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How to Cover Retirement Living Expenses

Post author By Gene Gard
Post date October 4, 2023

Congratulations! After years of planning and saving, you’re finally nearing retirement! This stage in life comes with a mix of emotions, but with planning, you can turn your savings into a source of income to cover your living expenses. Here are four tips to help you plan for income in retirement.

1. Make a plan.

The first step is to have a comprehensive financial plan. A custom financial plan serves as a blueprint to inform your financial decision-making and ensure all aspects of your financial life are working together to achieve your goals.

A solid plan puts you in control of your financial future and provides you with the confidence of knowing you have a plan to generate retirement income.

2. Properly structure your portfolio.

One of the best ways to generate income in retirement is by striking a balance between short- and long-term investments.

We typically recommend maintaining three to five years of living expenses in a short-term, semi-liquid investment account. A mix of bond funds typically works well, as it provides capital for opportunistic rebalancing as well as a monthly income. Having a short-term allocation to bonds can prevent you from being forced to sell out to equities at a loss when markets are low.

It’s also important to continue growing your assets throughout retirement in order to help offset inflation and ensure you have enough income to last. We often recommend investing any assets not necessary to fund short-term needs in a diversified portfolio that focuses on growth and inflation protection. While this portfolio should be in line with your overall risk tolerance and investment objectives, it can be invested in riskier assets than your short-term account. Throughout retirement, you can identify opportune times to transfer assets from your long-term savings to your short-term savings in a tax-efficient manner.

3. Implement a tax-efficient withdrawal strategy.

Ideally, you’ve been saving in multiple accounts with different tax treatments, such as traditional IRAs, Roth IRAs, 401ks, and taxable accounts. If so, you may have an opportunity to maximize your retirement income by strategically withdrawing from different accounts in different circumstances. We call this tax diversification.

• Taxable (non-retirement) accounts: These accounts offer the benefits of tax-loss harvesting and have fewer restrictions on contribution amounts as well as fewer distribution penalties.

• Tax-deferred retirement accounts, such as pre-tax IRAs and 401ks: Withdrawals from these accounts trigger ordinary income taxes, as they’ve enjoyed tax-deferred growth.

• Tax-exempt accounts, such as Roth IRAs: These accounts allow tax-exempt investments to grow for as long as possible, and qualified withdrawals are tax-free.

There are two main withdrawal strategies to consider based on your specific goals, tax situation, and income needs.

• Traditional approach: You would withdraw from one account at a time. Typically, the order of withdrawals is from taxable accounts first, followed by tax-deferred accounts, and, finally, tax-exempt accounts. This allows the tax-advantaged accounts to continue growing tax-deferred and tax-free for a longer time. However, it may result in uneven taxable income.

• Proportional approach: This strategy establishes a target percentage that will be withdrawn from each account each year. The amount is typically based on the proportion of retirement savings in each account type. This can help ensure a more stable tax bill and can also help you save on taxes over the course.

The benefit of following a disciplined approach is that you won’t be tempted to spend more than you can afford. This can help you maintain adequate assets to last a lifetime, regardless of market volatility. An advisor can assist you with creating a distribution strategy aligned with your financial needs and tax bracket, whether through a traditional or proportional approach or some combination of the two.

4. Regularly revisit and readjust.

Given the potential longevity of retirement, periodic reviews of your financial plan and income strategy are essential. You don’t have to do it alone — a qualified wealth manager can help you understand how regulatory and market changes may impact you, and adapt your plan as needed to align with your evolving goals.

Tags Finance, retirement, retirement plan, retirement savings

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Locating Lost Assets

Post author By Gene Gard
Post date September 27, 2023

Don’t lose track of your assets. (Photo: Joshua Hoehne | Unsplash)

Losing track of retirement funds is a common and concerning trend that has worsened in recent years. According to a report from the firm Capitalize, as of May 2023, there were about 29.2 million forgotten 401k accounts in the United States that held approximately $1.65 trillion in assets. Due to recent increases in job switching, the number of forgotten 401ks has grown by more than 20 percent since May 2021.

Missing out on these retirement funds can put your retirement at risk, as you may end up losing significant assets. Fortunately, there are ways to locate and reclaim lost retirement accounts. The following tips can help.

1. Check with past employers.

If you’ve changed jobs throughout your career, it’s important to follow up with past employers to make sure you didn’t leave any money behind. Retirement plan administrators have several options for how to handle abandoned funds in an employer-sponsored account, based on the amount left in it.

$1,000 or less — The employer can issue a check and mail it to your last known address. If you’ve moved since leaving a job, you may need to request a new check.

Between $1,000 and $5,000 — Employers can move funds to an IRA without your consent. You’ll need to ask your past employer how to access the account.

More than $5,000 — There’s a good chance your funds are still in the employer’s plan. It may be wise to roll over the account balance to an IRA that you control.

2. Search unclaimed property databases.

Sometimes people lose track of their retirement savings when they move and forget to notify past employers of their new address. When an employer or financial institution is unable to reach an account-holder, it may turn over the account to the state’s unclaimed property office.

Fortunately, you can search for your name on the National Association of Unclaimed Property Administrators (NAUPA) website or your state-specific unclaimed property office to find any unclaimed retirement funds that may be waiting for you.

3. Check the Department of Labor (DOL) abandoned plan database.

If your past employer’s plan was terminated, the DOL’s Employee Benefits Security Administration consolidates information about unclaimed retirement benefits and makes it easy to track down missing funds.

4. Contact the Pension Benefit Guaranty Corporation (PBGC).

The PBGC can be a great resource if you lost track of a defined benefit pension plan at a previous employer. This organization is a government agency that insures the value of pension benefits and helps individuals locate lost pension plans. Visit pbgc.gov for more information.

5. Track down forgotten IRAs.

If you think you may have abandoned an IRA along the way, take inventory of past bank and investment account statements for any evidence of the account. You can also reach out directly to any financial institutions you’ve worked with in the past to inquire about any inactive or dormant IRAs associated with your name.

If you think you left behind retirement assets at some point, it may be worth the effort of tracking them down. Even if you haven’t contributed to the accounts in many years, the power of compounding has the potential to significantly grow your retirement assets over time.

Tags Finance, lost assets