Investment Management

At the heart of it, saving for retirement isn’t terribly complicated. You know you need to max out your employer-sponsored 401K so you can receive your employer match and allow your investments the opportunity to grow tax-free. This is undoubtedly the best place to start. But if you’re a high earner, your 401K won’t be nearly enough to fund your retirement nest egg. So where do you invest next?

401K Limits Aren’t Enough

As we head into 2023, the elective deferral limit for anyone participating in a 401k plan will be $22,500 (an increase from $20,500 in 2022). With the catch-up contribution limit, that amount is $30,000 for those aged 50 and over. But for high earners, these annual limits won’t be enough to create the income you need to continue your current lifestyle in retirement.

So, to create that comfortable retirement you’ve always dreamed of, it’s time to put more of your money to work.

• IRAs—Traditional and Roth

Individual Retirement Accounts (IRAs) are the natural next place to save as they are also tax advantaged. But, there are two types—traditional IRAs and Roth IRAs. The main difference in these two types of accounts is when the tax savings are captured. Traditional IRAs utilize pre-tax money for contributions and are taxed upon withdrawal in retirement, whereas Roth contributions are funded with post-tax dollars, but retirement withdrawals are tax-free.

However, Roths have no Required Minimum Distributions (RMDs). This type of account allows you to begin withdrawing money on your timeline and not the one that is determined by the IRS.

In 2023, you’ll be able to contribute up to $6,500 to both types of IRAs – $7,500 for those over 50.

Keep in mind, though, that Roth IRAs do have income limits:

• For single filers: $138,000 to $153,000
• For married couples filing jointly: $218,000 to $228,000
• For married and filing separately: up to $129,000

Chances are, you probably earn too much to open a Roth IRA, but don’t worry. You can still take advantage of the Roth account benefits by converting traditional IRA fund into a Roth through an annual Roth Conversion.

• Health Savings Account

After you’ve maxed out your 401K contribution, funded a traditional IRA and perhaps performed a Roth IRA conversion, you should turn your sights toward Health Savings Accounts. Their name might be throwing you for a loop, but HSAs can be great retirement saving vehicles. Here’s why.

Health Savings Accounts are heralded for their triple-tax advantage: they are funded with pre-tax dollars, experience tax-free growth, and qualifying medical expenses are covered with tax-free withdrawals. Considering the average American couple will spend $315,000 in out-of-pocket medical expenses in retirement, HSAs provide a way to save for them while also generating tax-free retirement income. Or, you can withdraw the funds and use them as you need (for non-medical related expenses) once you have reached age 65 and simply pay regular income tax on those withdrawals.

Keep in mind, only folks with a high-deductible health plan are eligible to open an HSA. However, if you lose or change away from your high-deductible plan, your HSA remains in your possession and the money can remain invested.

• Brokerage Accounts, Real Estate, & Business Ventures

Once you have maxed out your tax-advantaged options, there are several options to choose from when it comes to investing for the future. If you’re comfortable with a little more risk, the following have proven great ways to supplement retirement income.

Brokerage Accounts (Taxable): Taxable brokerage accounts remain the most flexible for high earners with a substantial capacity to save. There are no income limits, annual contribution limits, and the assets can be accessed at any time for any reason. While you won’t benefit from any tax breaks with this account, you are in complete control.

Real Estate: There are multiple ways to invest in real estate. You can invest in residential properties to rent out, buy and flip houses, invest in a company that buys and flips houses, purchase commercial property to lease, or even invest in a Real Estate Investment Trust (REIT). This type of investing is typically best for investors with large cash reserves and an understanding of the real estate market.

Business Ventures: Since 2015, investors have been able to invest in startups and small businesses through brokers or crowdfunded campaigns. This can be an exciting option, but typically quite risky. You’ll want to make sure you do your due diligence and to familiarize yourself with what your investment entails and what your compensation options look like. Or, if you want to keep things closer to home, you can choose to invest in a friend of family member’s business. But, like with any large transaction, be sure you have the proper legal paperwork in place before handing over your money. This type of investment is attractive to those passionate about entrepreneurship and comfortable with risk.

Fill One Bucket, Then the Next

If you want to maintain or enhance your quality of life in retirement, it’s important that you put your money to work as efficiently as possible to keep from overpaying in taxes or missing out on potential income. We can help. If you’re ready to put your money to work, let’s chat. We can help you determine which savings vehicles will enable the happy, comfortable, and stress-free retirement you need.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Investing is one of those endeavors that requires a lot of trust—trust in the long-term return potential of the markets, trust in yourself if you are a DIY investor, or trust in your financial advisor if they manage your investments. Trust is easy to come by in a bull market when everything is looking up. But throw in volatility, and it can be harder to remain disciplined and keep trusting your long-term plan.

You know you must remain invested to allow your money to grow, but have moments when you wonder if you’d be better off moving some of it to cash or safer securities.  What should you do?

As financial experts, we want to help, so we’ve put together this list of the top three reasons you should stay invested during volatile markets.

1. Volatility Just Creates Blips

The stock market overall has grown by 3,000 times since 1950, and bear markets have only occurred every fifth year since World War II. So, when you look at the big picture, volatile markets have really just been small blips on a really long climb up.

The initial panic at the beginning of the COVID-19 pandemic serves as a good example of what can happen when individual investors make drastic changes during volatile periods. Vanguard research shows that 86% of self-directed investors who got out of the market between February 19, 2020, and May 31, 2020, not only locked in losses but also missed out on the market rebound.

While that period saw a 34% fall in the S&P 500, it also saw a subsequent 36% rise. Investing in the stock market traditionally has almost always paid off for those who have stayed patient and disciplined even during periods of extreme volatility.

2. There is No Good Time to Time the Market

We get it. When the market continues to go wild after many months, the temptation to try to time the market grows, whether you are more motivated by wanting to limit losses or taking advantage of buying low while you can.

Unfortunately, what happens the majority of the time when investors give into that temptation is that you end up selling low and re-buying at higher prices for an overall big net loss.

Remember all of the cliche sayings:

• Time in the market always beats timing the market.
• Investing is a marathon; not a sprint.
• Play the long game.
• Stay the course.
• Keep your eye on the prize.

These are all cliches for a reason, because they are all true.

3. You Have a Diversified Portfolio for a Reason

Whether the market is currently fluctuating like crazy or not, going completely all-in on one kind of investment is super risky. That is why your portfolio is diversified and balanced to your unique risk level and time horizon at all times. This means you have a mix of investments that won’t all behave the same way when the market declines and your investments make sense for how close to retirement you are and how well your nerves can handle fluctuations.

Better yet, you should have an advisor to manage your portfolio if you don’t already. According to a study by Russell Investments, a financial advisor can increase your returns by 3.75%, and another study by Ramsey Solutions says that 44% of investors who partner with an advisor have $100,000 or more saved for retirement versus just 9% who do it by themselves.

An advisor can also help keep you on track and away from emotional investing decisions when FOMO and panic start to set in during incredibly volatile markets.

Schedule a Complimentary Consultation Call

At Platt Wealth Management, we empower our clients to lead their best lives by providing them with the financial expertise they need. This includes supporting you (not just your portfolio) through volatile markets. Of course, we are always working to reposition your portfolio to capture the upside in any market, but we are here to help put your mind at ease and guide you when the financial markets aren’t on the upward trend.

If you are a current client and are concerned about today’s market conditions, we encourage you to reach out. We are always here to answer your questions.

If you are not a current client but are looking for a financial advisory firm that puts you and your money first, we’d love the chance to chat. Simply schedule your complimentary introductory phone call here or call the office directly at 619-255-9554.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Typically, when you start thinking about or talking about retirement, the main topic of conversation is about money. But the whole idea of retirement is to get to enjoy the rest of your years however you want!

Before and during your working years, you likely had to make many sacrifices and answer to your parents, bosses, or anyone who wasn’t yourself. But now you get to become and/or celebrate the version of yourself you always wanted to be without any burdens or expectations.

So, even as your financial advisors, we are going to tell you to forget all of those questions about finances, RMDs, and Medicare. And instead, ask: How do you want to spend the rest of your life? And here are five tips for reinventing yourself in retirement to get you started:

 Determine Your Passions

What are you passionate about? These can be hobbies or causes or something as simple as only drinking really good wine. But don’t pigeonhole yourself. What you are passionate about does not have to be the same as what you’ve always done.

Try to remember that you are under no obligations in retirement. You don’t have to impress anyone. So, what do you really care about? Once you have made that list, you then know what to refer back to when it comes to the rest of the tips.

Consider Your Goals

You’re not working anymore, but that doesn’t mean you can’t set any goals. We’re not talking about some big strategy; just whatever you want to accomplish while taking your passions into consideration. This helps set a list of priorities and even an order to those priorities.

For example, if traveling is a passion, then setting a goal of visiting all of the destinations on your bucket list by a certain date would be a good idea. None of us know how long our health will last, so putting anything more physical toward the top of your priority list is a good strategy.

Whatever your goals, just make them your own and ignore any naysayers.

Find Your Place

Where do you see yourself spending your retirement? Where should you be in order to be able to pursue your passions and accomplish your goals? That location could be right where you are and in a house that is paid off and can fit your whole family at Christmas. But it also could be somewhere entirely new.

Don’t be afraid to change location in whatever way that makes sense to you. Maybe you are a lifelong suburbanite who has always longed for a beach house or city apartment. Maybe you wish to spend the rest of your life with a family who currently lives on the other side of the country. Or maybe you love your current house’s location but hate the kitchen. Your surroundings make a big difference in your day-to-day happiness. Find the right place for you to spend retirement.

Establish Your Boundaries

Life and retirement are too short to spend with people who don’t bring you joy. You are under no obligation to spend time with people you don’t like. No more people from work you tolerate just because they’re your co-worker. You don’t need to impress anyone. And just because you’ve been friends with people for years, doesn’t mean you have to spend your well-deserved time and money in retirement to see those people if you don’t like them.

But you also can set expectations for other people. If you expect your children to spend at least one holiday per year with you, then talk to them about it and how important it is to you. Setting boundaries can be hard, but more often than not, they help create a healthier mental and emotional environment for yourself and those you care about.

Push Your Agenda

You will likely have at least one living parent and at least one adult child when you retire. You’ve done a lot of caregiving in your lifetime. It can be easy to continue that role in retirement when you seemingly have more time but don’t forget to prioritize yourself and what you want.

And be sure to dream big. What would you change about the world around you? What would things be like if you were in charge? Because you are now! Don’t be afraid to push your agenda and reinvent yourself and your world. You’ve earned it!

Need Retirement Help?

Want to have the freedom to reinvent yourself in retirement? Our expert financial advisors can help establish a retirement plan to give you the peace of mind you need to spend the rest of your years however you’d like. Contact us today for a complimentary Discovery Call.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.