The next step in the Wealth Management process is Wealth Enhancement.
Alan and Sue had a variety of accounts scattered across several institutions, including IRAs, 401(k)s, 403(b)s, and trust accounts. By all accounts, they had done a good job saving, investing, and using tax deferred accounts when appropriate.
Even though they had significant assets, they didn’t actually know how much they could afford to spend without worrying whether their money would last their lifetime. So their first question was, “How much can we afford to spend?”
Because they had a variety of account types, both tax deferred and taxable, the next question they asked was, “Where do we start taking income from first?”
Next they asked about several other issues, including Social Security and how they could best utilize this valuable benefit.
By doing an analysis of their investment holdings and creating hypotheticals, we were able to create several possible cash flow analyses that gave Alan and Sue some direction about how much they could afford to spend and not run out of money.
We next analyzed their various accounts, both tax deferred and taxable, to determine the most tax efficient manner in which to take withdrawals to fund their lifestyle.
We were able to compare the various Social Security claiming strategies available to them and helped them decide what suited them best. These were just a few of the decisions we helped them make as they faced the various challenges common in retirement.
Wealth Enhancement, as the name suggests, focuses on the various strategies our clients can utilize which strive to protect and maintain wealth. The principal focuses are tax mitigation and cash flow planning.
By working collaboratively with our clients’ tax preparers, we can utilize multiple strategies aimed at reducing tax burdens. Examples of this include using tax-advantaged investments, timing investment sales, realizing capital losses, and controlling taxable income for insurance purposes.
Cash Flow Planning
Utilizing robust financial planning software, we are able to analyze complex financial situations to monitor and potentially maximize client cash flow. This might be of utmost importance when considering decisions such as when to retire, when to begin receiving Social Security benefits, whether to help a child with a home down payment, or when to go on vacation in the most tax-efficient and investment-efficient manner.
This investment profile is hypothetical and is presented only as an example and not intended as investment advice. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. You should discuss any tax or legal matters with the appropriate professional.