To Generate Long Term Success, Create Confidence Though Financial Planning

What does confidence mean to you?

Confidence knowing that you are tax efficiently investing.

For retirement accounts, should you be investing on a post-tax or pre-tax basis? Much of this will depend on what your income is today vs expected income during retirement, but retirement timeline is also a HUGE factor. If you have more years to save, a Roth IRA may make the most sense. Sure you do not get a tax deduction today, but tax free growth is a great benefit as well.

Did you know that in non-retirement accounts, investments have to be held for at least a year to qualify for the more tax friendly long term capital gains rate? Also, your capital losses from investments this account could potentially be used to lower your taxes owed on income (up to $3,000 a year) or can negate other investment gains this account? Nice silver lining in the very least.

Confidence knowing down market days don’t have to keep you down (in fact, they may even make you celebrate).

A fantastic and underutilized tool in investing is dollar cost averaging. This is a systematic investment plan where you invest a set amount monthly, regardless of what the market does. This way, you automatically purchase more shares as prices go down, and purchase fewer shares as markets go up.

One major reason while investors underperform the markets is that they try to “time” the market. Though an investor has to be disciplined to continue to invest through price fluctuations and the process does not protect against losses in a down market, the systematic approach can take the emotion out of investing.

Confidence knowing rainy days are already planned for.

Many people should have two types of portfolios when they invest. One is for rainy days, where this money is easily accessible and conservative so they are not as prone to the major swings of the market. This “rainy day” portion is there when the heater breaks, car engine dies, and somebody loses their job, also known as “when real life happens”.

The more aggressive portfolio will be invested in potentially higher returning opportunities over the long run. The longer timeline can afford us to invest in assets that we believe are greatly discounted today, and even continue to add to take advantage of in volatile times.

Confidence on creating an income stream that fits when YOU need it.

There should be a plan for how much you should take out in retirement. Not only the amount is important, but the question of which account to take it from (Roth vs Traditional) is a real one as well. Expected income and taxes will again play a role in this decision.

Confidence on when to retire.

Planning of social security, health insurance, and the types of retirement plans are vital. Many retirees can start taking social security at age 62 and 63, but that doesn’t mean that they should necessarily, as your SS benefit can increase the longer you defer. Medicare begins at age 65, but there is a process to do this or there can actually be a penalty levied forever. Also, retirement plans each have different rules for penalty free distributions, so having the correct strategy in place before you need the money is very important.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. No strategy can ensure success or protect against loss. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.