1. Investments
Build an investment plan that will happen at retirement that “fills the buckets,” identifying how much you need allocated to an income strategy to YIELD the income you need in retirement so you are not basing the success of your retirement plan on the outcome of equity returns and the stock market’s success. The income portion of the portfolio is built with assets that are highlighted HERE (Investing for INCOME). The assets that are not needed to fill the income bucket are rolled to the “Growth Bucket.” These assets are invested with a long time horizon in mind with the ultimate goal of capital appreciation. These assets will be invested in a fashion noted in “Investing for Growth.” The goal is for these assets to grow over time in a tax-efficient and strategic manner so that as inflation occurs, clients can move some appreciated assets to the Income Bucket to account for inflation and growing needs. Even before the INCOME bucket is filled, we must determine what amount of cash you need to cover emergency needs, short-term cash funding needs and SWAN (Sleep Well at Night) cash.
Once you know what your buckets need to look like, we can begin planning for allocations of assets leading up to that point. Nobody wants to be in the situation where you have to shift an allocation at retirement in one day. You must plan for this day and slowly shift your allocation to meet your needs by the time you retire.
2. Cash Flow Management
The basic question to all investment planning is, “How much is coming IN vs. how much is going OUT?” Matching your income needs with your current income cash flow, including Social Security, pensions, etc., is crucial to understanding how your investments will meet your income goals. This is more than a budget, it’s an understanding of how you are going to match your income needs with your cash flow sources.
As you are preparing for retirement, we need to make sure that you are saving and diverting your excess cash to the right places (Roth vs. 401(k) vs. 529 plans vs. gifting to children).
3. Tax Planning
CIA will work with your tax professionals (and ours) to ensure that all investment strategies are being used in the most tax-efficient manner. Municipal bonds vs. taxable bonds, individual MLPs vs. ETFs with 1099s, dividend stocks or interest-bearing bonds – these are just some of the considerations that should be discussed to maximize a plan’s effectiveness. Other tax strategies need to be understood as part of a total wealth management plan including:
- Stock options and planning for those leading into retirement
- Defined benefit plan withdrawals
- State tax exemptions
- Withdrawal strategies (IRAs or taxable accounts)
- Tax deduction strategies
- Roth conversion decisions
- Gifting/lifetime giving planning
4. Estate Planning
CIA works with our own network of estate planning attorneys or our client’s own trusted team to make sure that account structure and plans are married properly with the estate plan. Decisions such as what types of accounts to hold assets in (trusts, JT tenancy, individual, etc.), as well as proper beneficiary designations are crucial to carrying an estate plan out from a will through passing assets on to heirs. If a plan has not been put in place, we will work with our clients and help them communicate their larger goals and wishes to a professional when the drafting a document process begins.
5. Insurance Analysis and Planning
It should be noted that CIA does not sell insurance nor is compensated for recommending you purchase some. We analyze and help our clients make decisions regarding insurance objectively with regards to their entire financial picture, without concern or thought of compensation.
- New Policies – Are you under-insured because of liabilities that could be outstanding because of one or both spouse’s death? This could be from a pension that was taken without survivorship options or a large mortgage on the primary or second home or a child’s education that has yet to be accounted, saved or planned for. Another reason for a new policy could be for estate planning purposes. Do you need to pay a large tax bill at the time of death? This could be taken care of with proper insurance planning.
- Existing Policies – Do you really understand why you have those insurance policies from 30 years ago? Do you still need to be paying the premiums on the policies even though you have accumulated enough cash value to pay for themselves? Could the cash value in the policies be used in other ways that may make more sense for your overall wealth plan? These questions should be reviewed and answered.
- Long-Term Care Planning – Long-term care should be considered and understood in the context of your overall plan and situation before you can make a decision as to whether it is right for you and your family.
6. Retirement Plan Management
Making sure that the allocation of your retirement plan assets are correct based on the investment plan above is crucial to claiming success on the official retirement date.