Wealth Planning for a Fruitful Retirement

"The best part about being retired is never having to request time off." – Unknown

Retirement is often dubbed the “golden years” for ages 65 to 85 currently. For many, it’s a time to enjoy the fruits of their labor and turn to what they enjoy. Pre-retirees often plan their wealth around traveling, starting a hobby-based business, moving to a new area, or simply relaxing with grandchildren. What is pulling at your heartstrings? 

However, to create such a rewarding retirement, it’s essential to plan ahead, and planning early is the optimum practice. Learn how to prepare for a more abundant retirement by considering the importance of early wealth planning and how to get started.

MANAGING YOUR WEALTH OFTEN INVOLVES MORE QUESTIONS THAN ANSWERS! LINCOMB-WILLIAMS LOOKS FORWARD TO ANSWERING YOUR UNCERTAINTIES.

Why Early Planning for Retirement Is Important

Wealth generally grows over time. The more years that your invested capital can appreciate, the more it can compound in value. Capital appreciation depends on the asset classes it’s invested in and the individual choices you make within those asset classes.

In general, the asset class that has appreciated the most over the last two centuries is the stock market.  This is not hard to understand.  Stocks represent ownership of businesses that are constantly working to grow in value. The S&P 500, a broad-based index of the U.S. stock market, has risen about 10% annually on average for the past 100 years. 

Note: Stocks are a volatile investment and will periodically undergo bear markets, in which the prices drop 20% or more. But the 10% average long-term return includes these anticipated declines.

The other most commonly held asset classes are bonds and cash instruments, such as certificates of deposit (CDs) and money market accounts. Both bonds and cash provide stability in retirement portfolios and are often used to counterbalance stock volatility and potential risk. Currently, the yields of both bonds and cash are at historically low levels, yielding interest between 0% – 2%.

The effect of time and appreciation can be seen in the following statistics. If you begin investing $200 per month in a retirement fund at the age of 25 and keep up the same amount every month for 40 years, you will have saved $2,400 per year, or $96,000.  If you invested the money in stocks that appreciated at the average rate of 10% annually, the money would have grown to $1,275,000 at the end of 40 years — a nice retirement nest egg.  That’s a 13-to-1 multiple.  

If you invested the money in bonds and cash, earning perhaps 2% annually, the money would have grown to approximately $147,000.  

Plus, the chance for more appreciation is not the only reason to start early. Suppose you invest retirement funds in traditional tax-advantaged accounts, such as 401(k) or Individual Retirement Accounts (IRAs). In that case, the money grows tax-deferred until you withdraw it at retirement, which augments the impact of the appreciation.

In addition, 401(k) contributions can be deposited as pre-tax, which lowers your reportable income from the year and thus lowers your taxes. Traditional IRA contributions are tax-deductible. The tax advantages effectively put money back in your pocket that otherwise would be in the arms of the Internal Revenue Service (IRS) every year.  (That said, contributing pre-tax is not ALWAYS the best strategy; if you are in a low tax bracket in your early working years, making an after-tax ROTH contribution can possibly produce better long-term results.)

Read: Prepare For The Unforeseeable In Your Retirement Plan 

 

How To Begin

The best way to get started with wealth planning is to sit down for a conversation with a reputable fiduciary financial advisor or wealth planner. They can serve as your ultimate investing counselor, helping you to set a goal, analyzing each one at a time, and devising action plans to help you achieve long-term financial fruition.

If your company offers retirement plans such as a 401(k), it’s also prudent to familiarize yourself with the plan's terms. Some employers will match employee contributions by 100% or 50% each year. If yours does, you can grow your retirement wealth even more by participating. A wealth planner can help you understand your plan and choose among the available options.  Whatever you do, make sure you contribute enough to qualify for the full matching contribution from your employer.

 

Who Can You Count On To Help With Planning 

It’s not uncommon to feel unsure about the best financial planner to choose. Who can you count on to steer you in retirement planning that may be unclear or even daunting?

WEALTH MANAGEMENT CAN BE SIMPLIFIED: LET'S TAKE A LOOK AT WHAT YOU CAN DO FROM START TO FINISH–CAREER TO RETIREMENT.

Registered investment advisors (RIAs) are an excellent choice for several reasons. They are dedicated to clear and transparent investment advising. This makes them quite different from product salespeople, who may concentrate more on selling financial products rather than true planning.

It’s also crucial to know that RIAs are fiduciaries. Fiduciaries are required to provide planning and investment advice that is in your best interest for your situation, disclose any potential conflicts of interest, and place your financial best interests above their own. That may appear to be an obvious requirement for a wealth planner. Still, many categories of investment advisors are not pure fiduciaries (100% of the time) and do not always operate by putting your best interests first. 

Stockbrokers, for example, are generally not fiduciaries in all of their interactions with customers. Brokers must advise their clients in a way suitable to the latter’s situation. But they are not required to always place their clients’ best financial interests above their own on an ongoing basis. They may recommend investment choices that provide themselves with a commission versus an equally good alternative that does not. 

Lastly, consider if the professional financial advisor explains and fully shares information on all of their fees upfront. Transparency builds trust. 

 

Goal Planning And How To Achieve Those Goals

A fiduciary RIAs will work very closely with your overall life and financial objectives to arrive at the optimal wealth planning choices to help you achieve them. Your financial life, after all, is determined by your goals — and these goals are not limited to retirement. 

RIAs will aid in fleshing out your goals: buying a home, starting a family, saving for higher education, and so on. 

 

Next Steps For Your Personal Retirement Plan

So, what are your next steps? First, before meeting with a wealth planner in Atlanta, it helps to have a sense of your life goals:

  • When would you like to retire? 
  • What do you want to do when you get there? 
  • What other goals are important to you?

Second, make an appointment with an RIA whom you find comfortable to talk with.  It should be someone whose clients are roughly similar to you in earnings, net worth, and geography. 

Similarity in earnings and net worth means they will have expertise working with people in your wealth category and the issues most commonly associated, such as estate planning and taxation. Similarity in geography implies that they will know any legal or political issues that could affect your wealth planning, such as taxation or real estate appreciation.

APPLY THE FRUITS OF YOUR LABOR TO A NURTURING WEALTH PLAN! LINCOMB-WILLIAMS IS A TRUSTED TEAM OF ADVISORS AND FIDUCIARIES IN ATLANTA.

Are we right for you? Contact Linscomb & Williams to see if we are your ideal financial partner. Don’t risk your Retirement Planning Going Innocently Wrong. Make an appointment to ask every question. 

Lastly, compare the DIY method vs. hiring professional help by downloading our complimentary eBook! We look forward to serving you well into your golden years and beyond. New call-to-action

B. Craig Ivy, CFP®

B. Craig Ivy, CFP®

B. Craig Ivy is a Director and Wealth Advisor for Linscomb & Williams.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.