The Gatewood Planning Foundation: Why It Matters for Your Investment Strategy
The CFA® Designation – A Hallmark of Excellence
Are you familiar with the CFA® designation?
The Chartered Financial Analyst (CFA®) designation is considered the gold standard in the field of investment analysis and portfolio management. It is globally recognized and given by the CFA Institute, validating an individual’s competence and integrity in investment management. It signifies a rigorous course of study and a commitment to the highest ethical standards.
At Gatewood Wealth Solutions, our team includes CFA® credentialed investment professionals bring expertise and credibility to our clients’ investment strategies.
Not All Strategies are Created Equally
In the realm of financial advisory services, not all strategies are created equal. While many advisors opt to delegate investment management to outside money managers or rely on predetermined strategies within their firms, others take a more passive approach by simply allocating funds to passive or index funds and ETFs, often without active portfolio management tailored to the individual’s total asset mix and risk profile.
At Gatewood Wealth Solutions, we take a different approach. We use the CFA® Goals Based Planning Methodology for Portfolio Management in which a client’s assets are first categorized into three different buckets based upon the type of risk they face.
This approach allows us to provide personalized investment strategies that align with our clients’ needs and aspirations, rather than adopting a one-size-fits-all approach.
Let’s break down each bucket:
The Personal Risk Bucket
Purpose:
The first bucket is for low risk liquidity. It helps us make sure we have enough cash so we can weather any economic storm. We typically recommend 6-30 months of cash depending upon one’s life stage. This bucket is designed to cover essential needs and core lifestyle expenses. It’s the foundational component of one’s wealth and aims to ensure that even in adverse market conditions, an individual or family can maintain a basic standard of living without having to liquidate assets at the wrong time.
Asset Types:
Typically, this bucket includes assets with low volatility and risk: cash, high-quality short- to intermediate-term bonds, fixed annuities, and other conservative assets. It also includes one’s primary residence.
Risk Profile:
The focus here is on preservation of principal and liquidity, so assets in this bucket generally have minimal exposure to market downturns. The expected return of these assets is below inflation.
The Market Risk Bucket
Purpose:
The market risk bucket is essentially your “core retirement bucket”. It’s the net present value of all the cash you’ll need in retirement. The goal is not preservation of principal, but preservation of purchasing power. Inflation is best hedged with a diversified investment portfolio. The goal for this bucket is meant for generating returns that will outpace inflation and grow wealth over time.
Our aim with this bucket is to keep up with the benchmarks rather than try to drastically outperform the market. This way, as families navigate their way through retirement, education, and other life goals, their capital account can keep up with the growth of these expenses. It addresses the need for long-term financial security beyond just the essential needs covered in the personal risk bucket.
Asset Types:
This bucket contains a diversified mix of assets that include equities, longer-term bonds, mutual funds, ETFs, and other traditional investment vehicles.
Risk Profile:
This bucket has a moderate to high risk, with the understanding that market fluctuations can impact its value in the short to medium term. However, over longer periods, it’s expected to provide positive real returns. The expected return is above inflation.
The Aspirational Risk Bucket
Purpose:
Anything in excess of the first two buckets we consider aspirational. This is the “swing for the fences” bucket. The goal is to achieve substantial or outsized returns that greatly exceed the market and can move the individual up the wealth spectrum. However, it should be money that an individual can afford to lose without affecting their basic standard of living or long-term financial security.
Asset Types:
These are illiquid assets like a business or real estate, or concentrated assets like a single stock or equity compensation. It also includes high-risk, high-reward investments like startups, speculative stocks, and hedge funds.
Risk Profile:
This bucket is high risk, and there’s a significant chance of loss. The expected return is to greatly exceed the market and inflation.
Putting It All Together
What is our ultimate strategy with these buckets when helping clients pursue financial independence?
We first want clients to enter retirement with no debt, their homes fully paid for, and enough cash in their personal risk bucket to weather any economic storm and insulate their portfolios from being liquidated at the wrong time.
Next, we want their market risk bucket fully funded with the net present value of all their future cash needs in retirement invested in a diversified portfolio that when stress-tested they have a 90% or better chance of never running out of money.
Anything in excess of this bucket can be invested for legacy planning or a cause that is important to them.
It is important to remember that “wealth is made through concentration but preserved through diversification”.
Conclusion
The beauty of this approach is in its intuitive separation of assets based on their purpose and risk. By allocating wealth across these three buckets, individuals can ensure they’re covered for basic needs, have a strategy for long-term growth, and can pursue high-reward opportunities without jeopardizing their fundamental financial security.
Stepping Up to the Plate: Four Baseball Money Lessons
Baseball and financial management can have more in common than meets the eye. Below, we discuss four key lessons that investors—and everyone else—can learn from America’s favorite pastime.
Diversification of Assets is Critical
Having nine power-hitters who are weak in the outfield can help your team rack up high scores—but may not be enough to win the game. Just as you want your baseball team to include a good mix of a variety of skills and abilities, you should want your investment portfolio to include a diverse mix of stocks and more conservative assets, domestic and international assets, and tax-deferred and tax-advantaged accounts.
And like any good manager, it’s also important to have solid, identifiable expectations of the assets in your portfolio and to know when to cut certain “players” loose. Whether this means selling an asset once it hits a certain price or engaging in more complex strategies like tax loss harvesting, knowing when to call it a game can be the key between winning and losing.
You Need a Plan to Manage Losing Streaks
Few teams are able to consistently stay on top; even the best franchises have gone through tough times. And if the Chicago Cubs’ 107-season World Series drought is any indication, baseball can be full of some long down periods.1
Investors and baseball fans should be prepared for these down periods, no matter when they occur. Look back at historical statistics to reassure yourself that these events happen periodically, and with good planning and a bit of luck, winning seasons can come back. Having a plan to get yourself through these slumps can help investors and sports fans weather even the most discouraging times.
Try to Avoid One-Hit Wonders
Who doesn’t love to see a player blast a 500-foot home run, or watch a penny stock or crypto coin increase by over a thousand times in value nearly overnight? While these types of opportunities are fun to watch and present great feel-good stories, having a portfolio composed of power-hitters can also leave you vulnerable to major fluctuations in value.
All investments have some degree of risk, but it’s important for these risks to be compensated—in other words, investments that have a likelihood of increasing in value that corresponds to their risk, not those that will depend on overcoming the slimmest of odds to create a small group of lottery winners.
Take Advantage of the Seventh-Inning Stretch
The seventh-inning stretch gives fans an opportunity to get a brief change of scenery to focus on the last couple of innings of the game. Investing for years without setting aside time to evaluate your asset allocation, your tax reduction strategies, and your retirement plans can leave you scrambling once it’s time to make decisions about your future. Give yourself a virtual “seventh inning stretch” by stepping back and taking a holistic look at your finances so that you can buckle down with renewed focus.
With a solid game plan and prudent evaluation of risk, you’re ready to get started!
Important Disclosures:
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 professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
GWS Planning Services – Where Your Financial Dreams Become Our Mission
At Gatewood Wealth Solutions (GWS), we understand that financial planning is more than just numbers on a page; it’s the roadmap to your dreams, security, and legacy. It’s about the confidence that comes from knowing you’re prepared for the future, the excitement of seeing your goals within reach, and the comfort of knowing you’re not alone in this journey.
At Gatewood Wealth Solutions, we are committed to providing you with the highest level of personalized financial planning services. We believe in building a secure financial future for every client, no matter the size of your investment with us.
Why Our Planning is Invaluable:
Embarking on the path to financial freedom can be daunting, but with GWS, you’re not just getting a service; you’re gaining a partnership that cherishes your aspirations as much as you do. We charge a planning fee for accounts under $500,000 because the depth and breadth of our work necessitate it. This fee enables us to dedicate the necessary resources to craft a financial plan as unique as you are, ensuring we can operate at the highest standards of service and expertise. We invest in your future so that you can enjoy the present, secure in the knowledge that every aspect of your financial well-being is being meticulously managed.
Our commitment is to provide you with a personalized financial plan that includes retirement planning, insurance management, investment strategy, cash flow optimization, tax efficiency planning, estate planning, education funding, and debt management. These comprehensive services are designed to bring you closer to your financial goals, no matter the complexity of your needs.
Client Stories of Success:
Gatewood Wealth Solutions was founded in 1981, and since then, we have had the privilege of witnessing numerous success stories by being a steadfast guide and support for our clients during pivotal life events. We have navigated them through both challenging and prosperous times, tackled complexities, simplified matters, and stood by their side during moments of adversity and satisfaction.
Please click the link below to see profiles of clients we have served:
Our fee structure is designed to reflect the value and expertise we bring to your financial life, especially for clients with account balances under $500,000. We have implemented a financial planning fee which is composed of a $3,000 upfront fee and a $1,500 annual fee for accounts below $200,000, and a $3,000 upfront one-time fee for accounts between $200,001 and $500,000.
Here are the key reasons why this fee model is beneficial for you:
Comprehensive Planning: We undertake an in-depth analysis of your financial situation, including retirement planning, investment management, and more, to create a plan that is as unique as your fingerprint.
Breadth of Expertise: Our team of Certified Financial Planning® professionals and other specialists is equipped to manage complex financial situations, offering advice on tax efficiency planning, estate planning, and other specialized areas.
Personalized Attention: Your dedicated Wealth Planner ensures that your individual needs are met with the utmost care and attention.
Continual Monitoring and Adjustment: Financial landscapes change, and so do your life circumstances. Our ongoing fee allows us to proactively adjust your financial plan to align with these changes, ensuring you remain on course to achieve your goals.
Resource Allocation: The fee ensures that our firm can continue to allocate the necessary resources and tools that facilitate the high-quality services you deserve.
A Fair Model: For accounts under $500,000, the cost of providing in-depth financial planning services can exceed the income from typical asset-based advisory fees. Our model allows us to offer these services at a break-even or a mild profit, maintaining the sustainability of our high-caliber advisory service.
Your Partner at Every Step:
We understand that fees are an important consideration. This is why we want to be upfront about the costs associated with managing your wealth. Your trust in us is paramount, and we strive to ensure that every dollar you invest in our services brings you value, security, and confidence your financial goals and dreams can be realized.
Our commitment to your financial well-being is unwavering, and we invite you to discuss with us how our comprehensive advisory services can make a difference in your life.
Thank you for your understanding and trust. We are here to help you navigate your financial journey with confidence and clarity.
Building Financial Resilience: Determining Emergency Cash Reserves
At Gatewood Wealth Solutions, we prioritize empowering our clients with robust financial strategies, including effective cash management to weather market uncertainties. Understanding the importance of maintaining liquidity during bear markets while remaining confidently invested for the long-term, we review and update cash needs regularly. Here’s how we determine appropriate emergency reserves tailored to different life stages using our Gatewood Rules-of-Thumb:
Cash Management: Pursuing Stability During Market Fluctuations
The primary strategy is to maintain sufficient cash reserves for liquidity needs, especially during bear markets. By holding targeted cash reserves during one’s financial journey, individuals can mitigate the risk of selling investments during down markets and remain confidently invested for the long-term.
Determining Emergency Cash Reserves by Life Stage
Emergency reserve targets are based upon an individual’s life phase and total monthly expenses.
We follow the Gatewood Rules-of-Thumb below for the number on months’ worth of total household expenses one should keep in cash:
Life Phase 1 – Early-Career Accumulation (3-6)
Life Phase 2 – Mid-Career Accumulation (6-18)
Life Phase 3 – Late-Career Nearing Retirement (12-24)
Life Phase 4 – Retirement Income Distribution (18 – 30)
We then determine one’s near-term lump sum expense needs. These include significant financial commitments, such as making a down payment on a new house, buying a new car, funding a home renovation project, or covering tuition fees for a child’s education.
Calculating the Cash Total Target
To determine the total cash target, we assess:
Emergency Reserves (3-30 Months’ Expenses – Life Phase Based)
+ Near-Term Lump Sum Expense Need (0-24 Months from Now)
= TOTAL CASH TARGET
Conclusion
By targeting emergency cash reserves according to your life stage and financial needs, we aim to provide investor confidence during economic uncertainties. Contact Gatewood Wealth Solutions today to explore how we can tailor a cash management plan to align with your specific financial goals and aspirations.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The Evolution of GATORS: Gatewood Wealth Solutions Pillars of Culture
Aaron Tuttle, CFA®, CFP®, CLU®, ChFC®
Chief Executive Officer
INTRODUCTION
At Gatewood Wealth Solutions (GWS), our journey is defined by more than just financial success—it’s about fostering a culture that inspires growth, integrity, and resilience. At GWS, culture isn’t just a buzzword—it’s the heartbeat of our organization.
But how did we arrive at this ethos? Let’s take a stroll down memory lane to uncover the origins of our distinctive culture and the birth of the GATORS. Our journey towards cultivating a vibrant and values-driven culture began with the passion and dedication of our founder, John Gatewood. He instilled in us a commitment to excellence, integrity, and continuous improvement.
ORIGINS OF THE GATORS
Our founder, John Gatewood, had a keen eye for detail and an unwavering commitment to excellence. When he corrected errors or provided guidance, it became known as being “Gatored.” This dedication to improvement laid the foundation for our core values, which would later be encapsulated in the acronym GATORS.
CRAFTING THE GATORS
As the firm’s ownership changed hands, there was a collective desire to formalize our values. Thus, the GATORS were born—a set of guiding principles that reflect our commitment to excellence, trust, ownership, resilience, and seeking sustainable solutions. These values aren’t just words on a page; they’re the fabric of our culture, shaping how we interact with each other and serve our clients. From leadership to frontline, every team member is measured by these values.
GROWTH – is on the other side of adversity: Commit to a lifetime of learning and becoming a better version of you, both personally and professionally. Becoming comfortable can lead to complacency, push yourself outside of your comfort zone and embrace change.
ATTITUDE – is an expression of your values, beliefs, and expectations. Make it great: Be quick to admit mistakes and take corrective action. Be willing to give and receive positive and constructive feedback. Be responsible for your words and actions.
TRUST – is earned over 1,000 actions but lost in 1: How consistently do I keep my promises and act with honesty in all situations. Do I demonstrate reliability over time and am I willing to take responsibility for my actions. Am I transparent with my fellow team members?
OWNERSHIP – because you are more than your job title. To the client, you are the company: You are responsible for learning, doing, improving, and advancing your own career. You are responsible to know and follow GWS policies and procedures. No one is above any job, if something needs to be done, do it. Don’t make it someone else’s responsibility.
RESILIENCE – never give up! When you fall 7 times, get up 8 times. How effectively do I handle unexpected challenges and maintain a positive outlook? How determined am I to keep trying despite obstacles and failures?
SOLUTIONS – not answers: When faced with an obstacle, seek the solution to the problem, not just an answer that provides a temporary resolution.
WHY IT MATTERS
Our culture isn’t just about us—it’s about our clients and our team members. For our clients, it means entrusting their financial futures to a team that embodies integrity, resilience, and a relentless pursuit of excellence. For our team members, it means being part of a workplace where they feel valued, empowered, and inspired to make a positive impact.
LEARN IT! LIVE IT! DEFEND IT!
At GWS, our culture isn’t just a set of guidelines—it’s a way of life. We breathe life into our values, defending them fiercely and embodying them in everything we do. By embracing the GATORS, we not only create a better workplace but also deliver superior service to our clients.
As we continue to uphold the legacy of excellence and integrity that defines Gatewood Wealth Solutions, we invite you to join us on this journey. Learn it. Live it. Defend it. GATOR up!
At Gatewood Wealth Solutions, we’re not just about preparing for the best; we’re about being ready for the worst. Our approach to retirement income planning revolves around a core philosophy: keeping our clients “Bear Market Ready, but Bull Market Positioned.” In this blog post, we’ll delve into our robust methodology for cash management in retirement, highlighting the importance of cash reserves and strategic investment planning.
Understanding the Cash Target
Our firm has worked hard to develop an approach that allows us to pinpoint exactly where that “sweet spot” is, based on clients’ expenses, life stages, and our investment committee’s outlook on the market. Our financial planning and investment management teams work closely together to ensure no stone goes unturned in making this assessment.
The cornerstone of our approach is what we call the “Cash Target.” This is the amount we recommend our clients keep readily available in cash to weather market downturns without the need to sell off investments at unfavorable times. Determining this Cash Target involves a meticulous process that takes into account various factors such as annual expenses, income, market conditions, and life stages.
Steps to Calculate the Cash Target
1. Assess Annual Expenses: We start by evaluating our clients’ total annual expenses, including lifestyle costs, taxes, insurance, and other financial obligations.
2. Review Income: Next, we analyze the client’s income streams, ensuring we have a clear picture of their financial inflows.
3. Incorporate Market Outlook: Our Investment Committee routinely evaluates market conditions to adjust the Cash Target Timeframe. This is the recommended duration, in months, for which one should hold enough cash to cover total expenses, tailored to the current economic environment
4. Calculate the Cash Target: Using a specialized formula, we compute the precise number of months required to cover one’s total expense needs, subtracting regular income received. This Cash Target is based on the client’s expenses, income, and the designated Cash Target Timeframe.
5. Fund the Cash Hub Account: Once the Cash Target is determined, we allocate funds accordingly, so our clients have the necessary cash reserves in place.
Retirement Income Distribution Planning
The cash hub account is just one small part of our overall distribution planning approach, which you can see below. Our planning team constantly turns these funnels on and off based on our clients’ specific financial situations and life goals. We can make sure we correctly put our clients’ money to work for them while maximizing their tax-saving strategies.
Cash – Invest or Keep?
Understanding the role of cash in retirement is crucial. While investments offer growth potential, cash provides stability and liquidity, acting as a safeguard against market volatility. By maintaining an adequate cash reserve, individuals can avoid the need to sell off investments during market downturns, thus preserving their long-term financial security.
Real Life Example
Consider Jane Smith, who illustrates the significant impact of having a cash reserve during retirement. By strategically tapping into her cash reserves during market downturns, Jane was able to preserve her IRA balance and substantially enhance her long-term financial outcome.
Life Stage Considerations
We tailor our cash management approach to different life stages, recognizing that the cash needs of individuals vary depending on whether they’re in the accumulation phase, distribution phase, or approaching retirement.
Adapting to Market Conditions
Our Investment Committee remains vigilant, adjusting the number of months for one’s Cash Target in retirement to market highs and downturns. This is crucial when clients rely on their investments for retirement income. In bearish markets, we will draw from cash reserves to avoid liquidating assets during unfavorable conditions, whereas in bullish markets, we rebuild cash reserves to the target.
Conclusion
At Gatewood Wealth Solutions, we believe in empowering our clients with robust retirement income planning strategies. By strategically managing cash reserves and investments, we aim to ensure financial stability and long-term prosperity for all our clients. If you’re ready to take control of your retirement finances, we’re here to guide you every step of the way.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The Gatewood Team Structure: Personalized Guidance for Every Financial Stage
At Gatewood Wealth Solutions, our philosophy is centered around providing personalized and proactive financial guidance for our clients.
In our experience, as clients’ net worth builds, so does their financial complexity. Given this relationship — and recognizing the importance of navigating various needs based on specific life circumstances — we carefully divide our clients into three groups:
Private Client Care: Ultra-high net worth, ultra-high financial complexity.
Client Care Plus: High net worth, high financial complexity.
Client Care: Average net worth and financial complexity.
Within these segments, we designate specific Client Care Teams to serve a particular number of families, so they can familiarize themselves with typical client needs within those segments. This also helps ensure that no financial plan or investment portfolio is ever reliant on just one person. If something ever happened to one of the advisors — whether retirement, promotion, death, or any other unforeseen circumstance — there would always be another team member familiar with the client’s goals, objectives, and moving pieces to step in and manage their account moving forward.
While some firms take the traditional, one-client-to-one-advisor approach, we set the standard on a true family-to-firm approach. This continuity plan ensures we can deliver on our promises to the families we serve for generations to come.
Client Care Team structure
As a Gatewood client, you receive an on-call Client Care Team tailored to your needs and aligned to your segment. Each member of the team specializes in a particular area related to your account, and all team members work together so that no stone is left unturned when it comes to keeping you on track towards reaching your goals.
While your Wealth Planner is your day-to-day contact, you also have at least three other team members working behind the scenes at all times on your account, not to mention our specialists who can be called in at a moment’s notice to advise as needed.
Wealth Planner: Navigating Your Financial Future
Your Wealth Planner is your family’s personal Certified Financial Planning professional. The CFP® designation demonstrates their proficiency in financial planning, risk management, investment, tax efficiency, retirement, and estate planning advising. They serve as your trusted guide to create and maintain your personalized financial plan that aligns with your goals and aspirations, going beyond simply providing day-to-day services. He or she will be your go-to for most questions!
While the Wealth Planner focuses on your financial strategy, the Wealth Advisor strives to make your client care journey with Gatewood is nothing short of exceptional, especially during times of crucial or complex life decisions. They are dedicated to enhancing your overall experience with the firm, ensuring that every interaction with Gatewood reflects our commitment to excellence.
Your Wealth Planner is supported by a dedicated Wealth Coordinator who takes care of the administrative details of your accounts, from information updates to paperwork. They are the glue that holds the team together, and they work tirelessly to ensure your family has its financial details covered.
Specialists: Providing Experienced Account Support
Our specialists are always ready to provide nuanced knowledge to your family precisely when you need it. Whether you need advice from the Gatewood Investment Committee, a complex strategy from our tax and estate planning specialists, a consultation for employer sponsored retirement plans, or business owner exit planning, we’ll bring in just the right specialist from our team of advisory professionals.
Gatewood Investment Committee: Overseeing and Optimizing your Portfolio
The Gatewood Investment Committee works behind the scenes every day to ensure we’re positioning your investments in a way that helps you pursue your goals. Be sure to tune into our Monthly Market Insights videos to hear their transparent take on the market!
Educational Excellence and Advanced Credentials
At Gatewood, we pride ourselves on the exceptional educational background and advanced credentials of our team members. With a roster that includes MBAs, MAccs, MSFs, MSFSs, JDs, and a suite of distinguished certifications such as CFA®, CFP®, CPA, CEPA®, CMT®, and CAIA®, our professionals bring a depth of knowledge and a breadth of expertise to the table.
In addition to years of experience, this wealth of education and certification translates into a discerning eye for detail and a comprehensive approach to financial strategy. As a client, you benefit from our team’s informed guidance and ability to create sophisticated solutions to meet the complexities of today’s financial landscape.
Gatewood Culture
At Gatewood Wealth Solutions, our culture isn’t just about serving clients; it’s also about nurturing our team members’ growth so they can continue to provide excellent service for years to come. We prioritize a supportive and empowering environment where every individual is encouraged to thrive personally and professionally. This commitment to our team’s well-being fuels their dedication to delivering nothing short of exceptional client experiences, making our culture the driving force behind our success.
Our Commitment to Your Family
Our team structure is designed to ensure that, regardless of life’s changes, you have a consistent, knowledgeable, and dedicated group of professionals ready to support you. As your life evolves, so does our service, adapting to provide the relevant expertise that your situation demands.
If you have any questions about your own Client Care Team structure, please reach out to your Wealth Planner. Not only are we passionate about your success, but we’re also deeply committed to excellence, continually striving to get better, and staying competitive. We will always go the extra mile for our clients and our teammates!
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
The Essential Shield: Life Insurance in Business Continuity
Christina Shockley, JD, CFP®
Partner & Chief Planning Officer
INTRODUCTION
Imagine you’ve poured your heart, soul, and countless hours into building your business. It’s not just a company; it’s a part of who you are. But what if, in an unforeseen moment, everything you’ve worked for is at risk because of a sudden loss? What if a key player in your team, perhaps even you, were to pass away unexpectedly? Would your business survive, or would it crumble under the weight of the loss?
Sadly, many business owners find themselves in this exact scenario, unprepared for the impact of a death on their business operations and financial stability. A well-designed life insurance plan can offer a solution to these worries, providing a safety net that ensures continuity and security.
THE WAKE-UP CALL
Consider the story of a small tech firm, thriving and on the verge of a breakthrough. The unexpected death of their lead developer threw everything into chaos. Projects stalled, client confidence wavered, and the financial stability of the firm was threatened. Without the developer, not only was the team’s morale affected, but the company also faced potential financial ruin. This is where life insurance steps in as a critical tool for business planning.
KEY PERSON INSURANCE: THE BUSINESS LIFELINE
Key person insurance is a type of life insurance taken out by the business on the lives of crucial employees whose death would cause a significant financial loss to the company. This coverage helps mitigate the risk, providing the business with financial support to navigate through the tough times. It can cover lost income, provide funds to hire a replacement, or, if necessary, pay off debts, distribute money to investors, or even close the business in an orderly manner.
BUY-SELL AGREEMENT: A SMOOTH TRANSITION
Another critical aspect is funding buy-sell agreements with life insurance. These agreements ensure that the remaining business owners have the means to buy the deceased owner’s share of the business, preventing external parties from stepping in. Life insurance policies fund these buyouts, ensuring a smooth transition and uninterrupted operation of the business.
PERSONAL PROTECTION FOR BUSINESS DEBTS
Business owners often secure loans with personal assets. Life insurance policies can provide the means to cover debts and protect personal and business assets, ensuring that your legacy and your family’s financial security are preserved.
QUESTIONS TO PONDER
When considering life insurance for business needs, ask yourself:
Who are the key people in my business whose loss would be catastrophic?
Do I have a buy-sell agreement in place, and how will it be funded?
What debts are tied to my personal assets, and how can they be protected?
How can I use life insurance to ensure the continuity of my business for my employees and their families?
CONCLUDING THOUGHTS
Life insurance offers more than just individual security; it’s a strategic tool for business planning. It protects against critical risks, ensuring that your business can withstand the shocks of unexpected losses. By carefully considering your needs and planning accordingly, you can shield your business, your employees, and your family from financial turmoil. Don’t wait for a wake-up call; the time to plan is now.
This material contains only general descriptions and is not a solicitation to sell any insurance product. Guarantees are based on the claims paying ability of the issuing company.
High Income, High Debt: 10 Ways High Earners Can Prevent a Credit Loss
A personal credit crisis is something many people fear, as it can lead to financial ruin and burden an individual with immense debt. Fortunately, steps can be taken to avoid such a crisis, even for high earners who may seem financially secure. When managed poorly, credit can invite various potential issues, including problems with enforceable legal judgments, fraud, overspending, and negative impacts on your credit score. Here are ten ways high earners can strategically manage their finances.
1. Budget and track expenditures
It’s essential to maintain a strict budget irrespective of the size of one’s income. Uncontrolled spending can lead to incurring a significant amount of debt, which in turn can trigger a credit crisis. High earners should always keep a detailed record of their expenditures to prevent overspending and stay within their budget.
2. Diversify income streams
While high earners may seem financially secure, relying on a single source of income can be risky. Diversifying income streams is an effective way to help address financial stability and mitigate a credit crisis by using credit when funds are scarce. If appropriate, consider passive income sources like real estate, stocks, or bonds.
3. Conduct regular financial audits
High earners must regularly audit their financial health to check uncontrolled spending, investment performances, and wealth accumulation. High earners must also periodically audit their credit reports to detect any errors or anomalies that could negatively affect their credit scores. In case of discrepancies, it’s crucial to initiate a dispute promptly to preserve a favorable credit status.
Another aspect of financial audits is monitoring interest rates, which impact the interest rate on credit cards, revolving lines of credit, and some loans that high-earners may carry. The higher the interest rate, the more the credit will cost over time.
4. Avoid unnecessary debts
Due to the vast credit card limits that high earners enjoy, using credit cards responsibly is essential. The higher the balance on a credit card, the more adverse the effect on a credit score.
High earners should avoid taking on unnecessary debts, which can lead to financial instability and potentially trigger a credit crisis. Avoid debts incurred through credit cards, unsecured loans, and high-risk investments.
5. Maintain an emergency fund
An emergency fund can be a safety net to cover unexpected expenses. Emergency funds provide a financial buffer that prevents the need to take on high-interest short-term debt, which could lead to a potential credit crisis.
6. Stay insured
Maintaining appropriate insurance policies to protect against unforeseen circumstances that may cause financial hardship is crucial. These include health insurance, disability insurance, liability insurance, property and casualty insurance, and long-term care insurance to protect assets against unforeseen legal judgments or collections.
7. Engage in Financial Education
High earners should continuously educate themselves about personal finance, investment strategies, tax laws, and other relevant topics to make informed financial decisions and prevent financial mishaps that could lead to a credit crisis.
8. Hire a financial professional
A financial professional can provide professional guidance on managing wealth and debt, tax planning, retirement planning, and other financial aspects. They will provide valuable advice and strategies to help high-earners work toward their goals while addressing credit issues.
9. Protect against fraud
Due to their wealth, high earners can be attractive targets for scammers. Therefore, preventing fraud by regularly checking credit reports, safeguarding personal information, and setting up fraud alerts on credit and bank accounts is crucial.
10. Save for retirement
High earnings do not guarantee a financially confident retirement. Therefore, it is essential that high-earners consistently save and invest for retirement, regardless of their current income level. Without financial confidence, high-earners may resort to credit use during retirement, which could lead to financial insecurity later in life.
Financial independence for high earners is about earning a high income and managing it responsibly. These preventive measures can help high earners manage their wealth and credit, maintain a positive credit score, and help mitigate a credit crisis.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Luck of the Investor: Making Your Own Luck on St. Patrick’s Day
As Samuel Goldwyn once said, “The harder I work…the luckier I get!” 1 But when it comes to investing, luck may play a huge role in outcomes—no matter how hard you work.2 Below, we discuss some ways that luck may impact your investing, as well as some steps you may wish to take to try to make your own good luck this St. Patrick’s Day.
The Impact of Luck on Investment Returns
One reason so many financial professionals advise against market timing for long-term investors involves the distribution of days with major gains and days with major losses. Historically, and particularly seen during the earliest days of the COVID-19 pandemic, some of the market’s best days were followed by some of its worst, and vice versa.3
Trying to sell at the top and buy at the bottom may require a great deal of luck. You may need to trust that a day with a 2 or 3 percent loss may not be immediately followed by a day with a 2 or 3 percent gain. However, over the course of a long investing horizon, these single-digit gains and dips aren’t likely to have a major impact unless you make a habit of buying and selling during volatile periods.
Focus On Process, Not Prior Results
How can you take advantage of good luck and avoid the impact of bad luck when choosing your investments? The answer may be complicated and may depend on your personal circumstances. However, by focusing on the investment process—rather than chasing returns by buying into funds that have recently had a good run—you may be more likely to pick a future winner.
Having a solid process may increase your probability of investment success over time. With your financial professional, consider focusing on these three steps:
Discuss your financial professional’s analytical process. How does your financial professional choose funds? How does he or she know whether it’s time to dump underperforming funds or stick around for a future rally? By having some insight into the process your financial professional uses to choose their investments, you may determine whether this approach fits your risk tolerance and desired asset allocation.
Ask whether this process is designed to manage and mitigate some of the behavioral biases that may send investments off-course. Some of these biases include overconfidence, sunk cost fallacy, and anchoring of sources. Ensure that your financial professional is reading and absorbing information from a variety of solid sources.
Once an investment or set of investments has been chosen, evaluate it with an eye toward its end user. Is this investment intended to provide high commissions that enrich the investment company more than the shareholders? Or does it provide an excess return that more than accounts for its fees? Compare the investments to their benchmarks to see how they’ve performed over the years.
Sifting through which successes are attributable to luck and which to skill may be tricky. But by firming up your investment selection process, you may improve your own luck and increase your likelihood of success.
Important Disclosures:
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 risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Asset allocation does not ensure a profit or protect against a loss.
Past performance is no guarantee of future results.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
Regardless of the stage of life, your credit score is an essential component of your financial health when you’re in retirement. A consistently strong credit score can pave the way for greater confidence, easy loan access, and lower interest rates. Many retirees overlook the importance of maintaining a suitable credit score after they stop working or that credit scores lose relevance in retirement. Yet, nothing could be further from the truth. Here’s a detailed look at why your credit score matters in retirement.
To Maintain Your Ability to Seek Credit
Retirement does not equate to financial inactivity. Even though you may no longer earn a regular paycheck, you may still engage in financial transactions requiring a credit check. For instance, if you plan to refinance your mortgage to a lower rate, lenders may consider your credit score part of the qualification process. If your score is low, you might be denied the mortgage or offered a higher interest rate mortgage.
To Find Housing
In addition, retirees often consider downsizing their homes, moving to senior living communities, or relocating to different states or countries. Any of these scenarios might necessitate applying for a new mortgage, a process that, once again, requires a solid credit score. Additionally, vacation home landlords often conduct credit checks before renting their property. A poor credit score can limit your options or cause you to lose out on your preferred vacation destination property.
Money for emergencies
Another reason your credit score matters in retirement is the possibility of unexpected expenses. Life is inherently unpredictable, and even in retirement, unforeseen costs can arise. These costs could be due to health complications, housing repairs, or helping a family member financially. In line with these circumstances, having good credit can make borrowing money more accessible.
New Opportunities
Retirees may also want to explore new ventures, like starting a business. Credit scores significantly impact the credit terms under which one can borrow capital to launch a business. An excellent credit score can make acquiring a loan less costly and more accessible. On the contrary, a low credit score could lead to onerous loan terms or a loan denial.
Suitable Insurance Rates
Furthermore, some insurance companies use credit-based insurance scores to determine risk factors and premiums for auto and homeowner’s insurance policies. A poor credit score might cause retirees to pay a higher premium or, worse still, reject their policy application outright.
Tip to Maintain Good Credit
A good credit score is essential to your overall financial health. Lenders, landlords, utility companies, and insurance companies use credit scores to evaluate your reliability. Here are some tips retirees can use to help maintain good credit.
The first and most significant tip for maintaining good credit is ensuring your bills are paid on time. Delayed or missed payments can negatively affect your credit score.
The proverb “the less, the better” holds significance regarding credit card balances. Keeping your credit card balances low and not revolving is essential, and a lower percentage of credit use (below 30%) is positive. Maxing out your credit cards or maintaining high balances can negatively impact your credit.
While having a mix of credit types – such as credit cards, car loans, or mortgages – can help your credit score, it’s important not to open too many accounts in a short period.
Proactive credit report monitoring is vital, especially regarding credit scores. Regular credit report checks are instrumental in maintaining good credit. It helps to promptly identify any inaccuracies or fraud that could harm your credit.
The length of your credit history is another factor influencing your credit score. If you close an old credit account, you shorten your credit history, which could hurt your score.
Having a diversity of credit types, such as a mix of installment loans, retail accounts, credit cards, and mortgage loans – can positively impact your credit score. Credit diversity demonstrates to potential creditors that you can responsibly handle different types of credit.
If you are overwhelmed with managing credit or have already slipped into a bad credit score, seeking professional help could be appropriate. Credit counseling agencies can provide invaluable assistance in rebuilding your credit score. Your financial professional can also be a source of help in providing recommendations based on your situation.
In conclusion, maintaining a suitable credit score is indispensable in your financial life, even throughout retirement. Retirees must focus on maintaining an excellent credit score to provide them with financial independence in their golden years.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
Financial responsibility isn’t always easy to learn, but it’s an essential part of taking control of your finances and using your income to its fullest. This responsibility can lead to better spending tendencies that can, in turn, help you pay off your debts faster and build up savings to protect you in the future. So if you’ve struggled to stay on top of your spending, here are a few key ways you can adjust your habits and mindset to better meet your financial goals.
Create and stick to a realistic budget
Budgeting is a great first step toward managing your finances. In fact, according to a survey conducted by the Certified Financial Planner Board, people who budget feel more financially secure and confident than those who don’t. When you budget, you’re being strategic with your spending and controlling where your money goes each month. Budgeting strategies like the 50/30/20 method—where 50 percent of your income goes toward necessary living expenses, 30 percent is spent on your additional wants like eating out and entertainment, and 20 percent is put directly into savings—can help you create a realistic budget and become more financially responsible and secure.
Keep all your monthly expenses in one place
It’s essential to know what bills you must pay each month and when they’re due since missing one can hurt your credit score and end up costing you more money. It’s a good idea to have a spreadsheet that lists all your recurring expenses and their due dates. If spreadsheets aren’t your thing, you can instead use an app like Mint or even just make a note on your phone to better track your recurring expenses. It’s also important to automate your payments so you won’t have to actively think about them. Whatever method you opt for, tracking bills and expenses can help you keep up with your spending and give you an idea of how much will be coming out of your account and when.
Start giving yourself a weekly allowance
Many people receive an allowance growing up, but this tends to stop when you’re an adult and start earning a paycheck. However, setting up a weekly spending allowance for yourself can help you cut back on excess spending. You can set aside cash for each week or simply have a set number in mind to put on your debit or credit card. Either way, an allowance shows you how much money to dedicate to lunches, coffee, home goods, and anything else that you might want to buy in a given week. Having a specific number helps you to say no to that extra dinner out and instead save money by making something at home.
Consider saving as a payment to yourself
Setting aside a specific portion of your income each month can help you save for an upcoming trip, additional spending during the holidays, or emergency expenses. Putting money directly into your savings can give you a sense of security, so look at it as a payment to your future self. You’re preventing potential headaches down the road when it comes time to spend extra money on something, and you’ll be grateful that you had the forethought to put money away when you did.
Plan for larger purchases
Before making an expensive purchase, be it for a new piece of furniture or a nice outfit, it’s important to think it through. You don’t want to make a rash decision, especially if the item far exceeds what you’re used to spending. Give yourself some time to consider the purchase and plan out how you’re going to save for it. You can set aside money every paycheck for the item, allocate funds outside of your usual savings, or, if you’re dipping into your savings, check to make sure the purchase won’t bring the total amount too low for comfort. Taking control of your spending is about being strategic with your purchases and giving big expenses more consideration than you may have in the past.
Pay off your credit cards every month
Credit cards can be a great financial tool to have, but paying off the full balance every month is an important part of being more financially responsible. Just as important, they often have high interest rates that can significantly increase your debt if you don’t pay the entire balance—so it’s important to manage them the best you can. If you find that you can’t pay the full amount each month, consider adjusting your spending habits. Instead of picking up coffee every morning, eating all your lunches out, or adding a new item to your virtual cart every day, you can save money by making your own coffee and lunches and cutting back on your online shopping. These expenses may not seem like a lot in the moment, but they can quickly add up and create a high monthly balance that isn’t always easy to pay in full.
Regularly review your spending
To make sure that you’re continuing to stay on top of your finances, you want to regularly review your spending. Look at your credit card statements and your savings and checking accounts, and see what you are spending your income on each month. Carefully reviewing your accounts can help you better understand your financial habits and see where perhaps you’re spending too much and need to cut back. It’s simply a way to hold yourself accountable, allowing you to adjust your spending accordingly.
By taking a few easy steps to better control your spending, you can manage your finances and become more financially secure.
You’re About to Retire: Here are 7 Tips to Stay Independent
Independence is important in retirement. The more independent retirees are, the more fulfilling their retirement is likely to be. However, living independently as you age isn’t always easy and may take some degree of planning well before you are even ready to retire. Want to ensure your chance of living independently during your retirement? Below are a few tips to put you on the path toward an independent future.
1. Have Your Finances on Track
To remain independent in retirement, you will need to have enough money put aside to take care of your monthly costs and stay on top of inflation. By having enough money to cover your expenses, you may not need to rely on family members and shouldn’t have to adjust your lifestyle as much to make ends meet.1
2. Make Your Home Safe
While you may have several years before you have to worry about problems getting around your home, it is a good idea to plan for any major expenses you may need to make to ensure your home is safe when you are older.1
3. Keep Up With Medical Visits
One of the primary reasons that many people are no longer independent as they age is due to medical conditions. You may lower your risk of major medical issues and lessen the effects of medical issues you may have by keeping up with medical visits and preventive services before you retire.2
4. Take Charge of Your Mental Health
Depression and anxiety may become worse as you get older, especially if you don’t live around family and friends. If you suffer from any mental health conditions, make sure that you address them so they do not become a significant hindrance when you are older and trying to maintain your independence.1
5. Build a Strong Support System
The key to independent living is having help and knowing when to ask for help. As you age, there are tasks you won’t be able to complete independently. You may need to outsource tasks to professionals, family members, or friends. By building this support system early, you will be more likely to maintain your independence for longer.2
6. Get Organized
Getting organized and having systems in place to help you stay organized is crucial for living independently into your golden years. Keep good records of your finances and budget, keep to-do lists, and have contact information where it is easy to find. The more organized you are, the easier it will be to get through your daily routine.2
7. Keep Up With Technology
Understanding and being able to navigate technology is a great way to ensure your independence in retirement. Technology often acts as a lifeline between you and the rest of the world and, when used correctly, has the potential to make your retirement easier. Smartphones, for example, can be used to order everything from food to medical supplies. Camera systems can help you maintain security.2
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
How Portfolio Diversification Can Be Sweet Like a Box of Chocolates
In the world of investing, risk and reward go hand-in-hand. To help manage risk and reward, investors often utilize a portfolio diversification strategy that mitigates risk while working toward accumulation across asset classes. Diversification mitigates the potential for unsavory pitfalls while offering a variety of suitable outcomes. In this article, we explore portfolio diversification by using concepts related to chocolate to make it more understandable – and palatable.
An assortment of chocolates and asset classes
When tasting different chocolate flavors, one may revel in the variety of experiences each offers. Some might prioritize white chocolate for its creamy sweetness, while others find the aromatic bitterness of dark chocolate satisfying. Like chocolate tastings, investment portfolios inherently cater to personal preferences. Each investor has goals, objectives, risk tolerance, and time horizon. Portfolio diversification helps tailor these individual tastes to their portfolio’s holdings.
Much like a box of assorted chocolates, equities, bonds, real estate, commodities, private investments, and other asset types may be included in the portfolio. Each asset type behaves differently under various market conditions, just like every chocolate provides a different flavor profile. Finding the right mix of different investment types can generate optimal results.
Balancing chocolate flavors
Similar to how chocolates have varying balances of sugar, cocoa, milk, and other ingredients, allocating investments in a portfolio also requires a balance. Too much emphasis on a single asset class can expose the portfolio to unnecessary, concentrated risk – just like consuming excessive amounts of a single type of chocolate may become less enjoyable or lead to negative impacts. By contrast, a diversified portfolio containing various investment types works together to pursue a consistent overall return.
Like the chocolate connoisseur who consistently updates their chocolate selections, investors must frequently review, rebalance, and adjust their portfolios. The capital markets never remain the same; as some investments become less attractive or risky, investors must adapt their portfolio asset mix in response to these changes.
Cocoa bean and investment strategy origins
In the chocolate world, the cocoa beans’ origins can come from different parts of the world: Africa, Central America, and South America. Each region produces cocoa beans that add a distinct flavor to the chocolate, enriching the overall experience. Similarly, a diversified portfolio containing investment strategies across different geographies and economies may offer growth opportunities and manage risk. Investors must work with their financial professionals to determine if foreign investments are suitable for their situation.
In conclusion, portfolio diversification can be as sweet as a box of assorted chocolates. Diversification enables investors to spread risk across different investments and asset classes based on individual risk tolerance, goals, and time horizons. Finding a suitable investment mix can be satisfying, just like the joy of discovering your favorite piece of chocolate in a chocolate box.
Important Disclosures:
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 professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Strategizing for Success: The Parallels Between Estate Planning and a Super Bowl Game Plan
Just as a winning team meticulously plans its Super Bowl plays, individuals and families may benefit from developing a comprehensive plan for their estate. Estate planning isn’t just for the wealthy. Estate planning is a strategic move for everyone to use that helps to see your wishes honored, your assets managed, and your loved ones taken care of. Here are a few benefits of having a well-thought-out game plan for your estate.
Define Your Goals
Just as a football team sets its sights on the Super Bowl trophy, individuals need to define goals for their estates. Whether preserving wealth, providing for family members, or supporting charitable causes, having a clear set of goals helps guide the process and lets you focus on your ultimate goals.
Manage Your Assets
In football, defensive plays try to prevent the opposing team from scoring. An estate plan also acts as a defense, managing your assets to avoid undesirable issues such as excessive taxation, attacks by creditors, and lawsuits. You could safeguard your wealth for future generations through mechanisms like trusts and strategic gifting.
Ensure a Smooth Transition
A well-executed game plan ensures smooth transitions between plays and helps your team adapt to unforeseen challenges. Likewise, an estate plan facilitates a seamless transition of assets to heirs, manages confusion, and lowers the risk of any potential disputes down the line. Having clearly outlined instructions on asset distribution, beneficiaries, and contingency plans could help you and your loved ones navigate any unexpected life events.
Quarterback Your Legacy
In football, the quarterback is the leader on the field, directing plays and making split-second decisions. Likewise, you can act as the quarterback of your estate plan, making critical decisions on important items such as a power of attorney, healthcare directives, and guardianship for minor children. Taking charge now is an opportunity to see your legacy unfold according to your vision.
Use Special Teams
In football, special teams play a targeted role in handling kickoffs, punts, and field goals. In estate planning, specialized tools like life insurance, charitable trusts, and family limited partnerships act as the “special teams,” providing additional avenues to help you work toward your financial goals.
Adapt to Changing Conditions
Just as a football team adjusts its strategy based on the game’s dynamics, an effective estate plan should be adaptable. Regular reviews and updates determine if your plan reflects changes in laws, family circumstances, and financial goals while allowing flexibility.
Avoid the Two-Minute Warning
In football, the two-minute warning signals the game’s imminent end, and teams must act quickly. Similarly, you shouldn’t wait until the last minute to create an estate plan. Procrastination may lead to missed opportunities and added stress for loved ones. Planning ahead can help put you more in control.
From defining goals and managing assets to quarterbacking your legacy, the parallels between a winning game plan and an effective estate plan couldn’t be clearer. By recognizing the importance of early and thoughtful planning, you could work to manage your financial future and your loved ones’ future and leave a lasting legacy that may even rival the triumph of a Super Bowl victory.
Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
7 Tips for Near Retirees to Protect Their Financial Data
While protecting your financial data has always been important, it grows even more critical as you start planning for retirement. From preserving your retirement savings to maintaining financial independence to avoiding stress, you want to keep all the assets you’ve accumulated by hard work. Here are a few steps you may take to protect your financial information now and in retirement.
Shred Sensitive Documents
Although most financial fraud is committed over the internet these days, some scammers still rely on old-fashioned approaches—and there’s no need to make it easier for them! Always shred financial statements, old tax returns, and any other documents containing personal or financial information before you dispose of them.
Secure Your Mail
On a similar note, you should have a way to secure regular mail, especially if it’s delivered to an unlocked mailbox. Be sure to collect your mail promptly to prevent theft of sensitive documents or financial statements. If you travel frequently and cannot get your mail the day it’s delivered, consider investing in a locking mailbox with a slot.
Secure Your Personal Identification
Keep your Social Security card, passport, and other sensitive identification documents in a secure place, such as a locked safe. Don’t carry these cards or documents in your wallet or leave them in your car unless absolutely necessary, such as when traveling.
Use Strong Passwords and Two-Factor Authentication
Create complex and different passwords for each financial account. Consider using a password manager to store and manage your passwords securely. Whenever possible, enable two-factor authentication for your online financial accounts. This adds an extra layer of security by requiring you to type in a code texted to your phone or sent to your email.
Beware of Phishing Scams
Always be cautious about unsolicited emails, texts, or phone calls requesting personal or financial information. One of a scammer’s most effective tools is a false sense of urgency. Financial agencies understand that you may need to verify that a request is legitimate. Scammers pressure you to make a quick decision by telling you your accounts will be locked, or your credit cards will be canceled if you don’t immediately comply with their requests.
Secure Your Devices
Protect your computer, smartphone, and other devices with strong, up-to-date security software. Encrypt your data and use screen locks with PINs or biometrics. Always avoid conducting sensitive financial transactions on public wireless networks. If you absolutely must use public Wi-Fi, use a VPN.
Consider a Credit Freeze
If you’re not actively seeking new credit, consider placing a credit freeze on your credit reports. This restricts access to your credit information, making it far more difficult for identity thieves to open new accounts in your name.
Taking these precautions can significantly reduce the risk of falling victim to identity theft as you approach retirement. Consider consulting with a financial professional to manage your accounts. Have them set up in a way that manages the risk of fraud and provides a secure transition into retirement.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Protecting Your Tax Identity Doesn’t Have to Be Taxing
When you think of identity theft, you may think of unauthorized credit card payments or new lines of credit. However, tax identity theft is one of the most common types of identity theft — and it’s also the most common fraud attempt during tax filing season.1
If your identity is stolen for tax purposes, you can find yourself waging battle on two fronts: against the identity thief and the IRS. Fortunately, protecting your tax identity doesn’t have to be difficult. Below, we explain a couple of ways you can theft-proof your ID.
Identity Protection PIN
The IRS can issue an identity protection pin (“IP PIN”) that will prevent anyone else from filing a tax return using either your Social Security number or your individual taxpayer identification number (“TIN”).
Only you and the IRS will know your IP PIN, and the identity verification process required to qualify for an IP PIN helps prevent fraud. Your IP PIN is valid for just one calendar year, and the IRS will generate a new PIN each year for as long as you’d like one.
To get an IP PIN, you can either confirm your identity through an online process or file an application in person at a local IRS office.2 Keep this PIN in a secure place, since entering the wrong IP PIN on your electronic or paper tax return will cause it to be rejected. Also remember that the IRS will never ask you for your IP PIN, so don’t reveal this PIN to anyone but your tax professional.
Identity Protection Software
Along with the IP PIN issued by the IRS, there are several different types of identity protection software that can prevent your SSN from being used anywhere without your consent. These programs will ensure you receive notifications whenever someone is trying to use your personal information for their own gain.
These programs aren’t specifically for protecting your tax identity, however; they will also lock your credit at credit bureaus to prevent others from taking out loans or lines of credit using your personal information. This means that whenever you’d like to apply for a new credit card or refinance your mortgage, you’ll need to have this credit lock temporarily lifted and then re-applied.
Because of the above factors, if you’d prefer to protect only your tax identity—not your total identity—an IP PIN may be the way to go.
Important Disclosures:
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.
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.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
High-Net-Worth Retirement Planning: 6 Ideas That May Help You Get Your Finances in Order
Do you consider yourself a high-net-worth individual (HNWI)? Most people tend not to categorize themselves or see themselves as anything more than a spouse, parent, sibling, neighbor, boss, or business owner. However, society does classify people. HNWIs typically have at least $1 million in cash or assets that can be converted to cash easily, which could make planning for retirement more complex. Organizing your financial life can seem daunting at first, so here are 6 ideas to help you get started.
1. Goal setting and money management
People of significant means are often interested in wealth preservation and growing their savings and investments. They are also noticeably concerned with the social impact their money will have on the world. According to the Oxford Press, wealth managers have shifted their focus from specific investment vehicles and strategies to a more holistic investment approach and goal setting. With goals in place, cash flow projections with inflation adjustments will be easier to design.
Historically, inflation averages around 2.5% annually; however, recently, this average has deviated. A financial professional can help you adjust your long-term strategy to include a rise in future inflation and assist with planning how to save enough money to stretch 30+ years without getting sidetracked by expenses such as college tuitions or weddings. Thirty-four percent of U.S. HNWIs claim retirement savings as a top goal, while 26 percent cite preserving wealth for their children as their highest priority. The reality is that creating a comprehensive plan can be challenging and careful planning is critical.
2. Max out your retirement accounts
A 401(k) can be a powerful tool. If you have access to a plan through your employment, it may be beneficial to max out your 401(k) each year and take advantage of any match offered by your employer. The contributions are tax-deductible in the year that they are made. Any money left over can be put into an individual retirement account (IRA), health savings account (HAS), annuity, or another taxable account.
Some retirement accounts have required minimum distributions (RMDs) which, by law, you must withdraw once you attain age 73. In some cases, you may be able to delay RMDs until after you retire if you are still working at 73. Other complexities may arise if you inherit a retirement account, but consulting a financial professional can help you determine how to proceed depending on your relationship with the account holder, the type of account, and the decedent’s date of death.
The following accounts generally required minimum distributions after a certain age:
Traditional IRAs
SIMPLE IRAs
Inherited IRAs (typically, however, there are some exceptions)
Simplified Employee Pension IRAs (SEPs)
Qualified stock bonus plans
Qualified pension plans
Qualified profit-sharing plans, which include 401(k) plans
Section 403(b) and Section 457(b) plans
3. Stay up to date with tax law changes
Estate and gift tax changes – As of January 1, 2023, the federal gift/estate tax exemption increased to $12,920,000, while the federal annual exclusion amount increased to $17,000 per person per parent. So, in effect, any individual may receive up to $34,000 per couple per year. Any amount over the $34,000 threshold can be put toward the lifetime exemption amount. Utilizing this benefit now may be a good idea as come January 1, 2026, unless Congress decides otherwise, these high exemptions are scheduled to sunset and return to the previous Tax Cuts and Jobs Act amounts.
Modifications to charitable deductions – Currently, you are permitted to deduct 60% of adjusted gross income (AGI) for cash contributions held for over a year. For non-cash assets (property and long-term appreciated stocks), you generally deduct, at fair market value, up to 30% of your AGI for charitable contributions to an IRS-qualified 501 (c)(3) public charity if you select to itemize, which means forgoing the standard deduction. To account for inflation, the standard deduction is higher in 2023, up to $13,850 for individuals, $20,800 for head of household, and $27,700 for married couples who file joint returns. When you itemize, you should expect the sum of your itemized deductions to be greater than the standard deduction.
Home sale exclusion for primary residence (Statue 26 U.S. Code 121) – Exclusion of gain on the sale of principal residence allows an exclusion of $250,000 (for individuals) and a $500,000 (for married couples) on home sale gains. People who own a home as a primary residence for at least two of the five years immediately before selling their home can qualify for capital gains tax exclusion. There are many moving parts and rules to this exclusion, and getting help from a financial professional is highly encouraged.
The impact from Medicare surtax – Taxpayers that are above certain income thresholds of $125,000 (married and filing separately), $200,000 (single, head of household or qualifying widow or widower with dependent child), or $250,000 (married and filing jointly) may be subject to the Medicare surtax of an additional 0.9% tax rate. This can be a bit confusing. HelpAdvisor gives a good example; if you make $150,000 per year and are married and filing separately, you pay the standard 1.45% on the first $125,000 and 2.35% (1.45% + 0.9%) on the remaining $25,000.
Other expenses that qualify for deductions along with charitable donations include:
State and local tax
Mortgage interest
Medical and dental expenses
4. Confirm and communicate your charitable goals
An estimated 95% of HNWI gives to charity. A financial professional will want to know the details about your philanthropy efforts to help you get the most out of your giving strategy.
o How are you involved in a charity? Are you just a donor, or do you sit on the board?
o Why do you support the charities that you do?
o What types of assets do you typically donate?
o Have you always donated, or do you plan to wait and donate after you die?
5. Create a withdrawal strategy
The question many retirees have is, “How do we deal with withdrawing our money when the time comes”? When it comes to your retirement, having a well-defined plan can help mitigate stress and frustration and potentially preserve wealth.
Some of the concepts you may want to explore include:
Focusing on the lower tax brackets first – Typically, the income of a high net-worth individual will dip after you stop working. Depending on your age and other requirements, you can consider withdrawing from your IRA and paying the taxes at the lowest marginal tax rate, especially in that window before social security benefits kick in. And if you can, delay taking social security benefits until the maximum age, maximizing the amount you will receive.
Review where your assets are located – Where are your stocks and bonds, for example, located? Are they in a tax shield IRA account where you may benefit because the bonds produce income taxed at ordinary income rates?
IRA Conversion (Traditional IRA -> Roth IRA) and Recharacterization (Roth IRA -> Traditional IRA) – A potentially helpful strategy, albeit complicated, involves converting assets from an IRA to a Roth IRA in what is called a Roth conversion. You pay taxes on any assets converted, and money is withdrawn later tax-free. This strategy could be beneficial if you suspect you may be in a higher tax bracket in the future. A recharacterization is converting assets from a Roth IRA to a traditional IRA. So, for example, you convert assets to a Roth account, and the market happens to drop after your conversion. You can recharacterize those assets back to a traditional IRA, removing the tax liability resulting from the conversion.
Don’t get bullied by the tax rates – You can’t predict the future of the tax rates and where you will be within them down the road. If taxes happen to go up, which they tend to do, then your tax-deferred money suddenly has less value than before since it gets taxed at a greater rate upon coming out of the account. Because this is possible, you should consult a financial professional and let them help you create a strategy that aligns with your financial goals.
6. Seek professional financial guidance
Managing your finances in an ever-changing world can be overwhelming, especially if you are someone with significant wealth. It would help if you had someone to guide you along your financial journey. Working with a financial professional can help you mitigate risk, consider options you might not have considered before, and stay aligned with your financial goals. Schedule a meeting with a financial professional and get the help you need to start your retirement planning journey today.
Important Disclosures:
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 professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
An annuity is a financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
Tax planning might be complex, but it’s also essential—especially for high-net-worth families, where missing tax breaks or failing to optimize income could cost significant dollars, maybe millions, over a lifetime. And even in the short term, with the highest marginal federal tax rate sitting at 37% for 20241 (plus additional state and local taxes), a lack of tax planning could mean you keep less than half of every dollar you earn. Here are four tax planning tips that may help you optimize your finances.
Allocate and Diversify Your Taxable Assets
High-net-worth families tend to have a broader range of assets than other families. These assets may include stock, real estate, alternative investments, businesses, and assets held in trust. By putting each asset in a helpful category for tax purposes, you’ll be able to manage your tax liabilities.
For example, many investors hold tax-efficient investments like municipal bonds, ETFs, and tax-managed stock funds in taxable accounts. Because these underlying investments are already tax-efficient, paying taxes on any earnings at year-end won’t take much of a bite out of your investment. Meanwhile, tax-inefficient investments (or those that tend to lose more of their returns to taxes) are possibly held in tax-advantaged accounts, like 401(k)s and IRAs, where you might be more strategic about when to take withdrawals.
Consider Other Tax-Efficient Investment Strategies
Along with effectively allocating your taxable assets, it’s important to take advantage of tax-efficient investment strategies, such as tax-loss harvesting, to offset gains with losses and manage capital gains tax. Consider investments that generate qualified dividends and long-term capital gains since these are typically subject to lower tax rates than short-term capital gains or regular income.
Plan Your Estate
Estate planning is important at all income levels, as it helps guide your assets to those you want to have them. But for high-net-worth families, creating a comprehensive estate plan becomes even more crucial, as estate taxes may come into play.
If you pass away in 2024 or 2025 and leave more than $12.92 million (the current exemption) to your loved ones, they may be required to pay taxes on any amount above this exemption. And remember, you are allowed to give your loved ones up to $17,000 per year (or $34,000 if you’re married)2 without it counting against this lifetime exemption, so feel free to begin transferring assets while still alive.
Shift Your Income
High-net-worth families may use income-shifting strategies to distribute income among family members in lower tax brackets. This might involve setting up family partnerships or trusts—but be careful about the “kiddie tax” rules that apply to unearned income for children under 18.
It’s important to remember that these are general guidelines, and tax planning should be tailored to your specific financial situation and goals. Because tax laws change almost every year, you must stay informed of these changes and adapt your tax strategy accordingly.
Important Disclosures:
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 professional prior to investing.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
The tax-loss harvesting and other tax strategies discussed should not be interpreted as tax advice and there is no representation that such strategies will result in any particular tax consequence. Clients should consult with their personal tax advisors regarding the tax consequences of investing.
The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
When Gatewood Wealth Solutions became independent, it offered us the opportunity to make our own decisions as a firm when it came to how we cared for our clients — from the technology we used to the services we offered.
As Chief Planning Officer, I worked closely with the Gatewood Leadership Team to carefully craft a Client Care Team structure that suited our clients’ needs. To me, this structure is one of our most important differentiators in the market.
What Do We Mean by “Team Structure?”
The phrase “team structure” can be used in reference to a number of team configurations. But to us, “team structure” refers to a true ensemble structure in which all teams work under the same roof to serve our clients consistently with uncompromising quality. To accomplish this, we carefully divided our clients according to financial life complexity into three groups:
Private Client Care: Ultra-high net worth, ultra-high financial complexity.
Client Care Plus: High net worth, high financial complexity.
Client Care: Average net worth and financial complexity.
Within those segments, we designated specific Client Care Teams to serve a particular number of families, so they could familiarize themselves with precisely what typical client needs are within those segments.
Finally, regardless of segment, each of our Gatewood Wealth Solution client families has their own Client Care Team served by four professionals collaboratively working together to guide clients towards their financial goals. They include:
Wealth Advisor
Wealth Planner
Wealth Coordinator
Portfolio Strategist
We intentionally structured our team this way, so that no financial plan or investment portfolio is ever reliant on just one person. If something ever happened to one of the advisors — whether retirement, promotion, death, or any other unforeseen circumstance — there would always be another team member familiar with the client’s goals, objectives, and moving pieces. This continuity plan ensures we can deliver on our promises to the families we serve for generations to come as a truly enduring firm. While some firms take the traditional, one-client-to-one-advisor approach, we set the standard on a true family-to-firm approach.
Below is a breakdown of each role, what the responsibilities are, and why we structured them this way:
Wealth Advisors
As your primary relationship manager, your Wealth Advisor is responsible for enhancing your experience with our firm. His/her main goal is to ensure your family is receiving excellent Client Care, especially during times of crucial or complex life decisions.
Contact them with questions on:
Your experience with Gatewood
Changes to your high-level goals and strategy
Navigating all of the resources Gatewood has to offer
Introductions to outside, trusted professionals
Wealth Planners
Your Wealth Planner is your family’s personal Certified Financial Planner® professional. The CFP® designation demonstrates their proficiency in financial planning, risk management, investment, tax efficiency, retirement, and estate planning advising. They create and maintain your personalized financial plan that aligns with your goals and aspirations, going beyond simply providing day-to-day services. He or she will be your go-to for most questions!
Contact them with comments or questions on:
Updates to your family’s financial plan
Important financial decisions
Scheduling meetings
Moving money
Investing excess cash
Wealth Coordinators
Your Wealth Coordinator takes care of the administrative details of your accounts, from information updates to paperwork. They are the glue that holds the team together, and they work tirelessly to ensure your family has its financial details covered.
Contact them with questions on:
Account paperwork
Address changes
DocuSign
Account Aggregation on the Gatewood Portal (our app)
LPL My Account View (Tax documents and statements)
Portfolio Strategists
Each Portfolio Strategist is a member of the Gatewood Investment Committee. This group works behind the scenes every day to ensure we’re positioning your investments in a way that helps you pursue your goals.
With this Client Care Team structure, you can be confident we’re proactively watching out for your family’s financial needs — and you’ll know exactly to whom to go with your questions. We’re proud of our team and confident in their ability to provide you with a high-quality experience. We always welcome feedback, so feel free to share any ideas or feedback with your Wealth Advisor.
Testimonials
"Our relationship with Gatewood Wealth Solutions has evolved over the years right along with our family. From building and protecting our wealth to retirement and estate planning, Gatewood has guided us and enabled our objectives. It’s assuring to know skilled professionals we trust are working with us to optimize what we have worked for all our lives. "
"My wife and I have had the benefit of working with John Gatewood for over thirty-five years. Initially, John worked with us planning our personal and business life insurance needs. As his service offerings expanded, we took advantage of his expertise to help us with our family's financial planning. We could not be more pleased than what we are with the plan the Gatewood Wealth Solutions team developed for us. The team members are well-trained, intelligent, friendly, enthusiastic, and very good listeners. We have two scheduled reviews of the plan every year with one of the principals and at least…"
"My wife and I have known and worked with John Gatewood and his team for nearly a decade. The values-driven team of Gatewood Wealth Solutions is motivated, caring, highly competent and personally fueled by character and integrity. I recommended Gatewood to friends and family - including my children - because their deep desire to help clients 'give purpose to their wealth' gives us all the opportunity to better serve our families and communities."
"Navigating the complexities of my corporate life was already a challenge, but when my husband passed away, it felt like an insurmountable mountain of emotions and paperwork. The team at Gatewood Wealth Solutions stepped in with compassion, efficiency, and expertise, guiding me through the entire estate settlement process. Their unwavering support made a world of difference during such a challenging time. I am profoundly grateful for all they've done and continue to do for me. Their services are truly unparalleled, and I wholeheartedly trust and recommend them."
"My wife and I became a client of Gatewood Wealth Solutions twelve years ago on the recommendation of a friend who was also a Gatewood client, and I am very glad that we did. Until that time, I had managed our 401(k) and investments, but with retirement on the horizon, we felt it important to get professional help for retirement planning and investment management. The Gatewood team developed an integrated financial and retirement plan that we refined together. It was based on information such as our current financial position, desired retirement date and lifestyle, anticipated job and retirement income, expenses,…"
"I have worked with Gatewood Wealth Solutions since its inception and could not speak more highly of my experience. Gatewood Wealth Solutions provides comprehensive wealth management services for my family in a very sophisticated way. Their planning services are comprehensive and consider all assets of our family, not just what they manage. This is important for our family since we have a real estate business which must be considered in our planning. They also help us with our estate and tax planning each year. Their service is exceptional and is proactive and not reactive. I have referred members of my…"
"I’ve been with Gatewood Wealth Solutions and its predecessor for 21 years as our financial advisors. I first met John Gatewood in 2002 when I purchased a life insurance policy from him when he was with Northwestern Mutual. Shortly after having additional discussions with John, we started using them as our only financial advisors. They continued over the years to more than perform above my expectations and also started to bring in additional talent within their organization in order expand and meet client’s expectations. Since they’ve organized as Gatewood Wealth Solution and separated from Northwestern Mutual, they’ve continued to add…"
"I have been with Gatewood Wealth Solution for seven years, and I would highly recommend them for wealth management services. They are a very efficient, effective, knowledgeable team that provides highly personalized, client-centered services. If I didn't know better, I would think that I am their only client! They have an excellent working relationship with a highly respected law firm that provides assistance with trusts and estate planning. They also have an excellent working relationship with a tax accounting firm. All of this so that all aspects of my financial planning needs are seamlessly coordinated. Their quarterly meetings are well…"
"Partnering with Gatewood Wealth Solutions has been one of the best decisions we have made in the last five years. I have met with numerous financial planners who’ve all come to me with similar ideas and recommendations that don’t seem to prove that they are thinking outside the box for me individually. But when Gatewood came to me with their plan it was strategically designed with so many aspects taken into consideration that I was surprised at how uniquely competent and professional they were. They brought me many ideas and recommendations that would not bring them profit. They brought me…"
"Gatewood Wealth Solutions gives me confidence that my retirement savings are being monitored and managed with MY best interest in mind. All of the staff is welcoming, friendly and respectful. They have comprehensive knowledge of long-term financial planning, estate planning and tax planning. I have been with Gatewood for many years and hope to be with them for many more years to come."
"I have known John Gatewood, the founder of Gatewood Wealth Solutions, for many years. We became friends well before we talked about business, and it was a natural decision to turn to John for help with our affairs when I needed it because I had grown to know and trust him. It really is true that John and his team at Gatewood Wealth Solutions are completely focused on helping ordinary families like ours to become financially independent. The family part especially means something: One day my 20-something son called to ask if I thought our group would be willing to…"
The statements provided are testimonials by clients of the financial professional. The clients listed have not been paid or received any other compensation for making these statements. As a result, the client does not receive any material incentives or benefits for providing the testimonial. These views may not be representative of the views of other clients and are not indicative of future performance or success.
