Wealth Management and Taxes

March 7th, 2012 | Posted by TRAVIS T SICKLE, CRPC®, AAMS® in Financial Planning | Investments | Retirement Planning - (0 Comments)

It can sometimes be overwhelming when deciding between retirement plans and which types of accounts to choose.  Having a financial plan with a wealth management strategy may help you work towards your financial goals.  You have decisions about which investment vehicles, portfolios to choose and the tax consequences they may bring.  Let’s take a look at a retirement planning strategy that may help you improve your financial planning and help to manage your taxes at the same time.  Having a well thought out financial plan and wealth management strategy may help you improve your results beyond just the types of investments you choose.

Separating your retirement planning accounts into three buckets can help you to organize and manage your taxes.  The three buckets may help to better manage your tax consequences and wealth management strategy.  Bucket #1 holds investments that are placed into these accounts typically after you receive your paycheck, or after-tax dollars. Think of this bucket as money or investments you will use today and in the near future.

Bucket #2 holds investments that enter pre-tax and are tax deferred.  Depending on which types of investment plans you have available, these investments may have favorable tax considerations until you withdraw them in retirement.  When you pull these investments out in retirement they are typically subject to taxes as ordinary income.

Bucket #3 holds investments that are typically after-tax and tax deferred.  Certain types of accounts may even offer tax free benefits.

This wealth management strategy helps answer the question of where to put your savings in an uncertain economy with uncertain tax changes.  A financial advisor can help you determine the best types of investment options and accounts to choose in your specific situation.

Let’s take a look at a wealth management example to better understand the considerations when choosing types of accounts to invest and hold your money. If you invested $60,000 towards your retirement in bucket #2 you may be taxed approximately $12,000 on your investments, depending on your tax bracket. You would be left with approximately $48,000 in spending money.

Consider an alternative wealth management strategy by taking half from bucket #2 and half from bucket #3.  Assuming bucket #3 consists of tax free investments that were made with after-tax dollars. The difference is that only half of your withdrawals could be subject to current tax rates.  That will also put you in a potentially lower tax bracket and thus save you potentially thousands.  Over the course of retirement, that could add up to a significant amount.  You may also have greater control over your taxable income by having various places with varying tax consequences in retirement.

Of course, with any wealth management strategy that involves taxes, speak with your CPA.  This strategy does not take into consideration the types of investment options to invest.  Speak with your financial advisor for more information on strategies designed to improve your financial planning and wealth management.

 

This is a hypothetical example and is not representative of any specific investment. Your results will vary. Withdrawals made prior to age 59 may be subject to a 10% IRS penalty tax.

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Lowering account fees and Financial Advice

March 7th, 2012 | Posted by TRAVIS T SICKLE, CRPC®, AAMS® in Financial Planning | Investments - (0 Comments)

You have many options when choosing where to get your investment advice.  Sometimes your discount brokerage firm gives you the advice you pay for.  You don’t have to settle for a cheap wealth management strategy often coupled with complicated tools.  You can get sound financial planning advice and wealth management strategies at a reasonable fee.

Let’s take a look at some of the choices you may have.  First, paying someone based on performance isn’t always the correct route.  Your financial strategy should be set with a risk tolerance, time frame and tax status that are designed only for your specific needs and goals.  Performance based pay can cause a conflict of interest in your advisors ability to choose your investments.  On the plus side of this arrangement, if you are looking for aggressive growth then this may be right for you.

Transactional financial advice is only on a transaction by transaction basis.  Your advisor most likely makes a commission based on the product that you invest into.  The pro in this situation is only paying a transaction charge most often upfront.  It may save you money in the long run – but your advisor may or may not service your account to your full potential.

Fee only sounds like it could be a good option.  You pay a set percentage for flat fee for the advice you receive.  Most often you’ll find these advisors focus more on assets or general analysis of your financial situation.  The ongoing financial planning is in line with your ever changing life.

Fee based is arguably to most versatile of the structures.  Depending on which type, fee or transaction would make the most sense is what you’d most likely choose.  It’s often a combination and fee and transactional based financial planning.   You can have your advisor on a fee for retaining their knowledge and expertise while getting a cost effective implementation when you need it.

While there are many types of financial advisors – one thing is for certain, getting the right advice can have a significant impact on your ability to reach your goals.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partners, a registered investment advisor and separate entity from LPL Financial.

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Financial New Year’s Resolutions 2012

December 31st, 2011 | Posted by TRAVIS T SICKLE, CRPC®, AAMS® in Financial Planning - (0 Comments)

wealth managerBring in the New Year with a financial bang. After a tough year in the stock and job markets, it’s time to make a commitment to yourself. It’s a financial resolution that you are going to do it better this year! Okay, now that you’ve decided to do better financially and make the correct decisions, now what? Financial planning could be the answer you are looking for. It’s pretty simple to just put money into your 401k at work or an IRA with your broker but planning takes a bit more work. First you will need to define your financial goal, whether it be retirement or your next vacation, having the correct game plan can make it easier. Here are the basics:

  1. Have a goal.
  2. Gather the facts.
  3. Analyze those facts.
  4. Create a plan.
  5. Execute your plan.
  6. Track your plan.

Easy, right? Not exactly, financial planning or more importantly the correct financial advice is what can help you reach your financial goals. Well, it’s not much different than last year’s gym membership. Did you go as often as you said you would? Not exactly, because you may have learned the hard way that dumbbells don’t lift themselves. Getting a financial adviser may help you quickly and more effectively put your goals more within reach. Start your New Year’s resolution out right; get a financial adviser.

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How to get a Financial Boost

December 25th, 2011 | Posted by TRAVIS T SICKLE, CRPC®, AAMS® in Financial Planning | Retirement Planning - (0 Comments)

Times are tough right now and it may be hard to see the light at the end of the tunnel.  Volatility in the markets may seem never ending and certainty often appears lost.  Don’t give up and run for the hills just yet!  Reevaluate your financial plan and what you have set for your short term and long term goals.  Do you have enough cash in case of an emergency?  Do you have enough insurance coverage in the event you are sick or injured?  Getting back to the basics may help you to understand where you are headed.  Don’t let the news headlines of today sway you into making irrational decisions that will affect you negatively tomorrow.

Here is a little history lesson from the life of Abraham Lincoln:

*1831 – Failed in business
1832 – Defeated for legislature
1833 – Again failed in business
1834 – Elected to legislature
1835 – Sweetheart died
1836 – Had a nervous breakdown
1838 – Defeated for speaker
1840 – Defeated for elector
1843 – Defeated for Congress
1846 – Elected for Congress
1848 – Defeated for Congress
1855 – Defeated for Senate
1856 – Defeated for Vice-President
1858 – Defeated for Senate
1860 – ELECTED PRESIDENT

Look at all that failure.  You might not have thought that Abraham Lincoln had so many failures in life and that’s the point.  It’s the end result that really matters.  Reaching your goals and investing may take a lot of discipline.  It may feel uncertain at times but having a well thought out financial plan may increase your chances of reaching your goals.  Getting guidance from a financial advisor who can help guide you to a successful retirement may be just what you need.

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