The Crucial Role of Financial Planning in Investment Management

Retirement planning is a key component of investment management, and financial planning encompasses both. In this post, we will focus on how financial planning helps individuals determine their retirement goals, estimate their retirement income needs, and develop investment strategies aligned with their retirement objectives.  

Determining Goals and Needs 

Many older Americans are wondering, “How much do I need for retirement?” The most basic way to estimate your needs is to examine your current spending and determine how it might change in retirement. (Will you pay off your mortgage by then? Do you still have a child to put through college? Will you change homes or move to a new region of the country?) There are many variables we often see as planners, but aside from static living and discretionary expenses, retirement income needs to be stress tested with varying growth and inflation rates. If you’re planning on major activities after you retire, such as travel or pursuing an expensive hobby, you may need to budget those expenses indexed at an appropriate inflation rate for the post-retirement period as well.   

Formulating Tax-Efficient Withdrawal Strategies 

When it comes time to retire, a majority of people will depend largely on Social Security benefits coupled with funds that are presently in pre-tax retirement accounts, including individual retirement accounts (IRAs) and 401(k) plans. A significant portion of retirees will also rely on assets that are currently being held in taxable, tax-deferred, and tax-free registrations; these might include brokerage accounts and Roth accounts and non-qualified annuities. A sound financial plan will afford the client flexibility to draw from a number of accounts with varying tax registrations during retirement. This will not allow for significant tax efficiency during life, but may also provide valuable estate planning benefits to heirs.   

Asset Allocation Shifts 

In the years leading up to retirement, it’s a good idea to examine your assets and determine if they’re in the best type of investment vehicles for your income, your age, your career, and your plans for those eventual golden years. A general rule when it comes to planning for your retirement is to engage in riskier investing earlier in your career while your time horizon is longer and have time to recover from market downturns. As you move toward retirement age, it’s a good idea to reallocate your assets toward a less risky profile that may cushion you against market volatility when you may need access to resources the most. However, asset classes can perform differently in recessionary environments. In some instances, bonds may offset volatility in equities, and when held passively, both asset classes may suffer simultaneously. This is where having a skilled advisor actively managing your portfolio can help mitigate the risks of passive investing when you need your money most.    

Long-term Wealth Preservation for Retirement Management 

None of us knows how long we’re going to live. Since we can’t see into the future, we need to use the variables at hand coupled with accurate data to best project how much money will be needed, and for how long. A financial advisor can help you paint a realistic picture of your post-retirement financial life, but most importantly, they will be there to help you make adjustments and remain dynamic when the unexpected inevitably occurs. 

Seek Professional Investment Advice 

To engage in the best possible financial planning, it’s worth seeking advice from a professional who can help you diversify in ways that will both protect you and present you with new investment opportunities. Toomey Investment Management, Inc. is an independent Wallingford, Connecticut-based RIA that offers clients expertise in holistic wealth management.   

At TIMI, our business model is designed to treat all of our clients equally and fairly. We realized long ago that the financial industry dedicated many resources to capturing money from prospective clients but much less on service and accountability for existing clients. At Wallingford, Connecticut-based TIMI, we listen carefully, keep in touch, and return your calls and communications quickly, so you can count on us. We will work effectively to optimize your financial situation and solve your problems. Call us at 203-949-1710 or visit our website for more information.  

 

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Why a Customized Investment Plan is Key to Achieving Your Financial Goals

Investing can be an effective way to grow your wealth over time, but it’s not always easy to know where to start. With so many investment options available and different factors to consider, creating a personalized investment plan can be daunting. That’s where Toomey Investment’s plan development service comes in. By working with experienced financial advisors, you can develop a customized plan that aligns with your specific goals and risk tolerance.

The Importance of a Personalized Investment Plan

Creating a personalized investment plan is crucial for anyone who wants to achieve their financial goals. When we create a personalized plan it is tailored to your specific needs and is based on factors like your risk tolerance, investment goals, and time horizon. Without a customized plan, it’s too easy to make haphazard investment decisions that don’t align with overall financial objectives, leading to unnecessary risks and suboptimal returns.

Most importantly, it provides a roadmap for achieving your financial goals. This roadmap can help you stay on track, even when emotions get high, market conditions change or unexpected events occur. By having a clear plan in place, you’re more likely to make informed investment decisions that align with your overall strategy, rather than reacting impulsively to short-term market movements.

When you take the time to consider your risk tolerance, you avoid making rash decisions that could damage your long-term financial health. By focusing on your goals and having a clear plan in place, you’re less likely to get caught up in short-term market movements that could lead to impulsive decision-making.

Toomey Investment’s Plan Development Process

Toomey Investment’s plan development process is designed to help clients create a personalized investment plan that aligns with their financial goals and risk tolerance. Here’s an overview of the steps involved in the plan development process:

  1. Initial Consultation: The first step in the plan development process is an initial consultation with a financial advisor from Toomey Investment. During this meeting, you’ll discuss your financial goals and investment objectives, your risk tolerance, and any other relevant factors that could impact your investment strategy.
  2. Assessing Your Current Financial Situation: The next step in the process is to assess your current financial situation. This will involve looking at your current assets, income, and expenses, as well as any debt or other financial obligations you may have.
  3. Identifying Your Investment Goals: Once your financial situation has been assessed, the next step is to identify your investment goals. This could include goals like saving for retirement, building a college fund, or investing in a particular asset class or industry.
  4. Creating Your Investment Strategy: With your goals in mind, your financial advisor will work with you to create a customized investment strategy that aligns with your risk tolerance and overall financial objectives. This could include selecting specific investments, determining asset allocation, and establishing a plan for rebalancing your portfolio over time.
  5. Implementation and Monitoring: Once your investment plan has been developed, the next step is to implement it. Your financial advisor will help you execute your investment strategy and will monitor your portfolio over time, making any necessary adjustments as your needs or market conditions change.

Throughout the plan development process, Toomey Investment’s financial advisors are there to provide guidance and support, helping you makes informed decisions that align with your specific financial goals. Call Toomey Investment today so you can feel confident that you’re on the right path to achieving your financial objectives.

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The Importance of Simultaneous Investment & Tax Planning

Planning for your future is a big deal. Whether you’re just starting out in your career, building your family and want to develop your retirement still years away or you’re at the age when retirement is finally coming closer, it’s always the right time to get serious about your finances.  We cannot stress enough the importance of working with an experienced and qualified team of financial experts to come up with a plan that works.

Tax Planning

One thing we speak about often with our clients is the importance of tax planning while you’re assembling plans and establishing goals for the future. Doing this at the same time will help to ensure that you’re choosing accounts that will work for you and that won’t likely generate exorbitant tax bills when it’s time to retire.

A wise investment plan will incorporate tax liability strategies alongside investment planning.

When might your plans break down? This is a complicated question, but a common situation which can impact future financial gains may occur if a vast majority of your net worth is sitting in a 401(k) or IRA.  Suddenly when retirement comes, your distributions are treated as ordinary income on the tax return which means higher taxation, per-dollar.*

Tax Loss Harvesting

With assets in a taxable account, a qualified, tactful adviser may help you structure a plan to offset taxes you’ll face on both gains and income so you have optimal asset allocation and minimal surprises.

A better plan could be to contribute to a ROTH IRA and a taxable brokerage account. This may provide ample flexibility to source funds during retirement without a large tax burden. (* per current, general tax law)

This planning should also include a design for inheritance and passing on a financial legacy in a tax-efficient way. All of the parts of the puzzle are interconnected and should be treated that way when coming up with a solid financial plan that will work for you.

Remember, having diversity across the tax registration of accounts is often overlooked and it’s something you should focus on now.

If you want to talk to someone who can help you create a healthy financial plan for your future, call Toomey Investment Management, Inc., today. 

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Stock Market Report 2023: Is This Another Bubble?

So January was an awful month for the global stock markets.  According to most reports, it was the worst start to the year ever.  In fact, the drop began on December 30th and just gained momentum into the new year.  Measured against recent market highs, several market indices had dropped by over 12 percent before mid-February.  That rapid loss of market value certainly reconstituted the fears and anxiety we experienced in 2000-2001 and 2008.  You probably recall that the former drop was the “tech” bubble and the latter was coined the “housing” bubble.  Has another yet-to-be named bubble formed since then?

Before I opine, let’s review a simple evolution of the market levels today and some contributing factors as to how we have arrived here.

By the end of the housing bubble, the broad market indices had been cut in half from recent highs.  The mortgage derivative and related products industries had collapsed and taken much of the economy and many jobs with them.  As we reflect, calling that a difficult time is a great understatement.

In an effort to support the economy and promote spending, the Federal Reserve undertook some unorthodox policies to maintain low interest rates which are still evident today. One result of the Fed actions was very low interest rates on treasury bonds, bank savings and similar accounts.  Simply stated, there was almost nowhere to earn interest for many years.  Now where would the multi-billion dollar pensions, trust accounts, mutual funds and Wall Street put money to at least earn dividends?  That’s right, the stock market.   In fact, I reference the size of the market since 2008.  Since the lows of 2009, the total value of the primary US index has roughly tripled…in 7-8 years!  One should ask, how and why has that happened and could it be justified?

So has a bubble formed in the stock market as a result of a huge demand imbalance of stock buyers who arguably had nowhere else to go for well over 5 years?  I believe the answer is yes and further, I cannot see how a bubble doesn’t exist.  Although much evidence can be cited in addition to the demand rationale above, I would direct you to locate a chart of the US stock market that covers at least a 30-year timeframe.  Pay close attention to the period from 2008 until today vis a vis any other time frame and you should become very concerned, especially when superimposing the true state of our economy during that same time.  Again, what could have supported the market values tripling in that period when most folks agree that things were not that great?  And will we look back in a few years and just say that things were fine?  Certainly,  that’s possible.  But I think it is very clear that some added caution should be exercised as we move through the next year or two.

Toomey Investment Management a boutique wealth planning firm partnering with mid to high net worth individuals, families and businesses.

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Roth IRA Conversions

Have you heard of a Roth Conversion? Well, it is the process by which a traditional (regular) IRA is exchanged to a Roth IRA regardless of income levels. So why would you do this? Basically, a regular IRA is an account designated for retirement that was typically funded with pre-tax (tax-deductible) contributions*…and distributions from the account are considered taxable income during retirement. A Roth IRA provides no tax-deduction for contributions, but under current law, you will NOT pay taxes on any distributions*.

Since 1998 regular IRA’s could be converted into Roth IRA’s…the IRA owner included all pre-tax contributions and earnings from the IRA on the tax return. So if the converted IRA was worth $20,000 and was comprised entirely of pre-tax contributions and earnings, the $20,000 would be included as income on the tax return. But subsequent gains on the new Roth account would not be taxable*….the goal is to pay tax on today’s dollars but avoid taxes on hopefully a much larger account later.

Roth conversions enable potentially huge tax benefits for your future…after you make the money back you lost to taxation. If I may offer my humble and longstanding opinions: Almost NEVER volunteer to pay taxes today for a promise of tomorrow and expect them to change the taxation of Roths down the road (as they did, for example, with Social Security).

*exceptions and other details apply; please refer to IRS rules and guidelines

Toomey Investment Management a boutique wealth management firm partnering with mid to high net worth individuals, families and businesses.

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