Financial Strategy For The New Year
With the New Year upon us, I recently had a conversation with a client to assess the year in front of us. Given the choppiness of the markets Kevin and Jan mainly wanted to discuss investments.
Kevin, a jack-of-all-trades, was looking to retire at the end of the year from one of the area plants. In preparation, he was trying to make sense of his conglomeration of assets.
During our discussion I asked Kevin about the last time he had been to the doctor for a physical. That question was followed with an inquiry about any outstanding health issues.
He quizzically looked at me and replied, “You know, I came here for investment advice.”
I assured Kevin that I understood this and responded by telling him he could take my question one of two ways. Either I genuinely care about his well-being, or I want him to understand that he is of no use to his family, or anyone else, if he is dead.
My bluntness caught him off guard for a second and then he smiled and proceeded to fill me in on their overall health picture. Kevin understood that a discussion about health issues should be part of an overall plan. This has been even more obvious in a post-COVID world.
In addition to investments and health-related issues, we discussed estate planning, children, marriages, divorces, taxes, insurance and everything else that was of interest.
In fact, conversations of this nature should be the heart of the wealth management business for one reason–we have never met a wealthy person who only had “investment needs.”
As such, whether you have significant wealth or are working on building your wealth—everyone’s financial plan should include regular evaluations of the following:
- Managing and understanding taxes. Even if you don’t compile your own income taxes, it is imperative to have a solid understanding of the tax impacts that different decisions have upon your assets. Remember, it is not what you make that matters—but rather what you keep net of taxes.
- Properly cover risk management needs. We don’t sell insurance. However, we offer to review our clients’ insurance needs simply because we don’t want them to get wiped out due to something that could have been easily covered. Risk management reviews should include at least home, health, auto, life, disability and personal liability umbrella coverage’s. Don’t skimp—get the right amount of insurance.
- Properly coordinate estate planning needs. At least every three years review your will, trusts, power of attorney, power of health care and directive to physicians. Give considerable thought to these documents as they must clearly state your wishes when you are incapacitated or dead.
- Review beneficiary designations. Understand that beneficiary designations override the language in your will. As such, it is imperative that beneficiary designations complement your goals and what your estate plan is attempting to accomplish.
- Maximize retirement plans. There are significant tax benefits to fully funding retirement plans-whether IRA’s, 401(k)’s or other plans. Assess the benefits of tax-exempt growth in a Roth plan versus the tax deferral of a traditional plan. Furthermore, many employers will match contributions into a company sponsored plan. A match is free money! As such, it is best to be proactive.
- Review Social Security strategies long before retirement. Despite the criticisms that Social Security receives, it is incredibly important to review and understand the implications of claiming benefits early at age 62, at full retirement age or at age 70. Not only is this important for the individual claiming, but it can be even more impactful upon a survivor’s benefit.
- Assess and improve your health. All the money in the world does you no good if you can’t appreciate it. Get in the gym and eat right.
The above items are general topics. Hopefully they get you to consider the things requiring proper coordination in your life. Lastly, financial planning is not about picking the hot stock—it is an evolutionary process that needs to be logically updated and refined on a regular basis.
Given this, set a New Year’s resolution to get your complete financial house in order.