Fox Business Feature: Financial experts reveal how Americans can prepare for the possibility of a recession
Andrew Van Alstyne had the privilege to be featured in Fox Business to talk to readers about best practices in preparing for times of economic uncertainty.
Andrew discusses the importance of a fully funded emergency fund along with addressing liquidity concerns in volitile times.
Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Beyond The Paycheck Podcast with Paula Christine: Transforming Life Through Financial Literacy
Andrew Van Alstyne had the privilege to be featured on the
Beyond The Paycheck Podcast with Paula Christine.
Andrew recently had the opportunity to join Paula Christine on the Beyond The Paycheck Podcast. In this episode, they discuss the everyday challenges many face when stepping into adulthood and the common hesitation parents experience in teaching financial principles to their children. Discover the importance of early financial education and how instilling good money habits in children can pave the way toward a financially secure and fulfilling future
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Financial Freedom Podcast with Dr. Christopher Loo: Mastering Generational Wealth
Andrew Van Alstyne had the privilege to be featured on the
Financial Freedom Podcast with Dr. Christopher Loo.
Andrew recently had the opportunity to join Dr. Christopher Loo on the Financial Freedom Podcast. In this episode, they explore the crucial topic of generational wealth and how to effectively manage and transfer wealth across generations.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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The Power of a Family Bank
Discover the power of a family bank: transform your wealth management. Many American families face the challenge of preserving and growing their wealth across generations. The concept of a family bank offers a robust solution, providing a structured system to manage and utilize family wealth effectively.
Many American families often face the challenge of preserving and growing their wealth across generations. The concept of a family bank offers a robust solution, providing a structured system to manage and utilize family wealth effectively. Drawing inspiration from Emily Griffiths-Hamilton's "Build Your Family Bank" and James E. Hughes Jr.'s "Family Wealth," this guide introduces you to the philosophy and logic behind creating a family bank. Let us explore how this powerful strategy can transform your wealth management approach.
Initial Steps to Establish Your Family Bank
Establish Leadership and Oversight
Set up a governance framework with clear roles and responsibilities. Typically, this involves a family council or board of directors that oversees the bank's operations, makes key lending decisions, and enforces policies. A structured governance system ensures transparency, accountability, and consistent decision-making.
Develop Lending Policies
Set transparent lending policies, including who can borrow, for what purposes, interest rates, and repayment terms. Incorporate the Applicable Federal Rate (AFR) to ensure compliance with tax regulations of family loans. Family members should submit business proposals to acquire loans, fostering a professional and disciplined approach to borrowing.
Implement Family Financial Education Programs
Provide ongoing financial education to family members through family summits or retreats, educational resources, and mentorship programs with individuals outside of the family. These initiatives should be specifically tailored to different age groups and financial literacy levels, ensuring that everyone can learn and grow at the life stage they are in.
Continuous Improvement
Regularly evaluate the performance of the family bank, reviewing loan impacts, financial health, and policy adherence. This ongoing assessment allows for timely adjustments, ensuring the bank remains effective and aligned with its goals. An idea format for these meeting is at an annual family retreat.
Benefits of a Family Bank
Wealth Preservation
A family bank helps preserve wealth by keeping financial resources within the family, reducing reliance on external financial institutions, and retaining interest payments within the family circle. This internal circulation of funds strengthens the family's financial base.
Fostering Innovation
Family banks can be a crucial source of funding for entrepreneurial ventures. By providing capital to family members with innovative ideas, the family bank fosters a culture of entrepreneurship and business growth, encouraging family members to pursue their ambitions with the support of the family. This also improves the overall competencies of the family as they gain knowledge in these new ventures.
Strengthened Family Bonds
The collaborative nature of a family bank strengthens family bonds. By working together towards the overall health of the family and the family bank, family members develop deeper trust and cooperation, enhancing family unity.
Empowering Financial Decision-Making of Future Generations
The educational aspect of a family bank improves financial literacy among family members. This knowledge equips them to make informed financial decisions and manage their resources effectively, contributing to their personal and professional success.
Shifting Future Growth Opportunities to Younger Generations
A family bank allows for the strategic shift of financial risk to younger generations who are better positioned to manage it. This can include funding new ventures or investments, enabling older generations to safeguard the growth of their wealth while empowering younger members to take calculated risks.
Special Considerations
While a family bank offers numerous benefits, it also comes with potential risks and downsides that need careful management:
Family Dynamics
Managing financial relationships within a family can lead to conflicts, especially if there are disagreements over lending decisions or repayment issues. Establish clear policies and dispute resolution mechanisms through a family board comprised of multiple family members in addition to outside advisors to address conflicts promptly and fairly. In addition to the board, regular family meetings and transparent communication can also help in mitigating misunderstandings.
Risk of Family Loan Defaults
There is always a risk that family members may default on loans, which could strain family relationships as well as the bank's financial health. Implementing a family investment policy statement for lending policies in addition to requiring detailed business proposals for loans by all family members. The family should also establish plans for how they would like to manage defaults should they occur.
Governance Challenges
Ensuring effective governance can be challenging, particularly if family members lack the necessary experience or commitment. Create a strong governance structure with experienced members and include external advisors that have the family’s best interest at heart.
Maintaining Financial Discipline
Ensuring that all family members adhere to the established policies and guidelines can be difficult as a family grows and evolves. Continuously work to ensure family policies are being enforced consistently and conduct regular audits. Foster a culture of accountability through transparent reporting and setting clear consequences for policy breaches. This may include excluding family members from use of the family bank.
The Rockefeller Centre in New York City
A Real-Life Example of a Successful Family Bank
The Rockefeller family has long used family banking principles to preserve their wealth across generations. By focusing on stewardship and long-term planning, they have maintained their financial legacy. The Rockefellers emphasize financial education and mutual support, ensuring that each generation is equipped to manage and grow the family’s wealth. Their family bank supports entrepreneurial ventures, philanthropic efforts, and educational initiatives, reflecting their values and long-term vision.
Creating a family bank can be a transformative strategy for individuals looking to manage and preserve their wealth for future generations. By fostering a family-wide view of financial stewardship, education, and mutual support, a family bank can not only secure a financial legacy but also promote family unity and fiscal discipline. I hope this guide has provided you with valuable insights into the power and potential of a family bank. If you have any questions or would like assistance in establishing your own family bank, it would be an honor to help you.
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Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.
Fiduciary Financial Advisors does not give legal or tax advice. The information contained does not constitute a solicitation or offer to buy or sell any security and does not purport to be a complete statement of all material facts relating to the strategies and services mentioned.
Legacy Planning(c), A Resource Library: The 5 Pillars of Capital For Your Legacy
Andrew Van Alstyne had the privilege to be featured on the
Legacy Planning(c), A Resource Library’s Podcast with Angelina Carleton.
Andrew and Angelina discuss that while most families seek out management of their financial capital, it is important to remember financial capital is merely a tool that should be used to grow the qualitative forms of capital within the family.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Wealthtender Ask an Advisor Feature: Is $5.5 Million the Magic Number to Retire Comfortably and Pass Wealth to Your Children?
Andrew Van Alstyne had the privilege to be featured in Wealthtender’s “Ask an Advisor” for how much money is needed for retirement.
Andrew discusses that it is important to focus what you want retirement to look like when calculating the amount you’ll need. He also discusses a different way of thinking as to how to leave a legacy to your loved ones while still alive.
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Wealthtender Ask an Advisor Feature: How Can a 24-Year-Old Married Couple Strike a Balance Between Short-Term Saving and Long-Term Financial Security?
Andrew Van Alstyne had the privilege to be featured in Wealthtender’s “Ask an Advisor” for what to focus on financially as a young couple.
Andrew discusses the importance of planning ahead for major life events, communicating with your spouse, and optimizing your savings strategy to be tax efficient.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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KAJ Masterclass Live: Managing Multi-Generational Wealth
Andrew Van Alstyne had the privilege to be featured on the
KAJ Masterclass Live Podcast.
Andrew discusses the importance of early discussions amongst family members to instill financial literacy. Andrew also shares his insights on how these open discussions can prevent financial under-preparedness. He also talks about the role of including all family members in wealth management, the benefits of starting inter-generational wealth transfers before death, and how to overcome the tension of talking about money in families with difficult financial histories.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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MSN Ask an Advisor Feature: What steps can a couple in their early forties with tweens take to balance saving for retirement and funding their children’s education?
Andrew Van Alstyne had the privilege to be featured in MSN to talk to readers about saving for both your children’s education and for retirement.
Andrew discusses the importance of setting goals and priorities while remaining adaptable to the variabilities that life may bring you.
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How Healthcare Professionals should use the Synergy of Health and Wealth to be Successful
Is it easier to be healthy when you are wealthy? Is it easier to be wealthy when you are healthy? I would say yes to both questions since health and wealth have synergy. Let’s explore a few habits that can assist healthcare professionals to be successful with both.
Downward Spiral versus Upward Spiral
Struggling to maintain both physical health and financial stability can be a common issue for many healthcare professionals. Health challenges can include poor diet, lack of exercise, insufficient sleep, or poor stress management. Wealth challenges can include overspending, low savings rates, poor investment decisions, or the absence of a financial plan.
Instead of focusing on health OR wealth, it is crucial to focus on BOTH since they are interconnected. Poor health can limit work capacity and increase medical expenses, reducing financial security. Conversely — limited finances can cause increased stress and decrease the time available for exercise/relaxation, which is detrimental to health. By focusing on both, you can create a positive feedback loop where improvements in one area support improvements in the other.
Habits to Adopt
The hardest part is usually just getting started. It takes a lot of hard work and dedication to move from out of shape to in shape. Once in shape, it is much easier to maintain and stay in shape. The same is true regarding finances. It takes a lot of hard work and dedication to pay off debt, balance the budget, and start setting money aside for the future. Once a financial plan is in place and followed, it is much easier to maintain and stay on track. Fortunately, the same habits can help enhance health and wealth.
Goal Setting: Setting clear and achievable goals
Example: Set a savings target for your retirement account for the year
Example: Set an activity goal for the number of times you plan to exercise every month
Discipline and Routine: Establishing and sticking to a routine
Example: Set up automatic monthly payments into your retirement account
Example: Carve out specific times each week for consistent exercise
Small actions every day can lead to significant results over a long period of time
Monitoring Progress: Regular check-ins and adjustments to stay on track:
Example: Review your budget and expenses regularly
Example: Calculate your net worth and update it every 6 months or every year
Example: Track your weight, strength, and cardiovascular health
Accountability: Seeking professional help when needed:
If you struggle with eating or exercise habits, consider working with a dietician or personal trainer to achieve your health goals
If you struggle with finances, budgeting, or expenses, consider working with a fee-only fiduciary financial advisor to achieve your financial goals
Having another person to assist with accountability and goal tracking can be immensely helpful
Encouragement Moving Forward
No one is perfect, but striving for continual improvement can lead to a healthier and more financially secure tomorrow. Here are a few key thoughts to remember.
Consistency is Key: Small, incremental changes can lead to significant improvements over time
Start Today: Don’t put things off until tomorrow. Make the harder first steps now so your future self will thank you
If you would like help improving your financial situation, please Schedule a Time to Meet. I would be happy to connect and assist.
Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.
The Importance of Filing Estimated Quarterly Taxes
Learn why filing estimated quarterly taxes is crucial for avoiding IRS penalties, managing cash flow, and ensuring financial predictability. Our comprehensive guide provides key dates, steps to estimate what you owe, and expert tips for entrepreneurs, investors, and high-net-worth individuals.
Navigating the tax landscape is a critical aspect of financial planning for many. One crucial component of this landscape can be the filing of estimated quarterly taxes. Unlike employees who have taxes withheld from their paychecks, individuals who generate income through self-employment, investments, or other non-traditional means must take responsibility for calculating and paying their taxes in installments throughout the year. Here, we’ll discuss the importance of filing estimated quarterly taxes, key filing dates, how to properly estimate what you owe, as well as other essential considerations.
Why Estimated Quarterly Taxes Matter
Paying estimated quarterly taxes is vital for several reasons:
Avoiding Penalties:
The IRS requires taxpayers to pay their taxes as they earn income. Failing to pay enough in estimated taxes can result in significant penalties and interest charges when taxes are filed at the end of the year. By making quarterly estimated payments, you can avoid these late fees entirely. This proactive approach helps maintain financial stability and compliance with tax laws.
Cash Flow Management:
Regularly paying taxes throughout the year helps manage cash flow, preventing a large, and usually unexpected, tax bill at the end of the year. For most, this means avoiding a sudden drain on resources that could impact other financial goals.
Financial Predictability:
Quarterly tax payments provide a clearer picture of your financial health throughout the year. By aligning your tax payments with your income streams, you can make more informed decisions about budgeting, investments, and business expenditures.
Key Filing Dates
The IRS has set specific deadlines for paying estimated quarterly taxes:
First Quarter: April 15
Second Quarter: June 15
Third Quarter: September 15
Fourth Quarter: January 15 of the following year
Please be mindful that if the due date falls on a weekend or holiday, the deadline is extended to the next business day. Missing these deadlines can trigger late payment penalties, so it’s crucial to mark your calendar and set reminders.
It is important to note that these quarterly dates are not aligned with traditional fiscal calendars. The second and third quarters were adjusted in the 1960s to align with the Congressional budget year which starts on October 1. This timing allows the government to receive an additional quarter of tax payments before the new fiscal year begins.
Estimating What You Owe
Accurately estimating your quarterly taxes involves a few key steps:
Calculate Your Expected Income:
Estimate your total income for the year from all sources, including self-employment, investments, rental properties, and any other income streams. This estimate should be as accurate as possible to avoid underpayment or overpayment.
Deduct Allowable Expenses:
Identify and subtract any business expenses and deductions for which you are eligible. This might include costs related to operating your business, such as supplies, travel, and home office expenses. Ensure you keep detailed records and receipts to substantiate your deductions.
Subtract your deductions from your total income to get your taxable income.
Special Considerations
Safe Harbor Rule:
To avoid underpayment penalties, the IRS provides a "safe harbor" rule. If you pay at least 90% of your current year’s tax liability or 100% of the previous year’s liability (110% for high-income earners), you can avoid penalties. This rule provides a buffer for taxpayers whose income might vary year-to-year, offering some peace of mind.
Income Fluctuations:
For individuals with fluctuating incomes, such as seasonal businesses or commission-based earners, it may be beneficial to use the annualized income installment method. This method allows you to pay estimated taxes based on the actual income earned during each quarter. This approach can help ensure that your tax payments more accurately reflect your income patterns.
Given the complexities of estimating taxes, especially for those with diverse income streams, consulting a tax professional or financial advisor can provide valuable insights and help ensure accuracy. A professional can also help you identify potential deductions and tax-saving strategies, keeping you compliant with tax regulations while optimizing your tax liability.
Filing estimated quarterly taxes is a critical responsibility for many entrepreneurs, small business owners, and high-net-worth families. By understanding the importance of timely and accurate payments, knowing the key filing dates, properly estimating what you owe, and utilizing available resources, you can avoid penalties, manage your cash flow more effectively, and maintain control over your financial future.
Filing estimated quarterly taxes does not have to be a daunting task. With careful planning and the right approach, you can stay ahead of your tax obligations and focus on what you do best— growing your business and managing your wealth.
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Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.
Fiduciary Financial Advisors does not give legal or tax advice. The information contained does not constitute a solicitation or offer to buy or sell any security and does not purport to be a complete statement of all material facts relating to the strategies and services mentioned.
Money Talk with Skyler Fleming: How Family Conversations Shield You from Financial Under-Preparedness
Andrew Van Alstyne had the privilege to be featured on the
Money Talk with Skyler Fleming Podcast.
Andrew discusses the importance of family conversations in financial planning. Andrew also shares his insights on how open discussions can prevent financial under-preparedness. He also talks about the role of including all family members in wealth management, the benefits of inter-generational wealth transfers, and how to overcome the tension of talking about money in families with difficult financial histories.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Route 664 Podcast Feature: Wealth Planning
Andrew Van Alstyne had the privilege to be featured on the Route 664 Podcast.
Andrew discusses the significance that proper financial planning can have on multi-generational wealth and the importance of doing thorough, comprehensive financial reviews.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Financial Freedom and Wealth Trailblazers Podcast Feature: Financial Guidance and Planning
Andrew Van Alstyne had the privilege to be featured on the Financial Freedom and Wealth Trailblazers Podcast.
Andrew discusses the importance of finding an advisor that aligns with your needs and who understands your relationship with money. He also discusses the significance that proper financial planning can have on multi-generational wealth.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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The Power of the Three Bucket System to Maximize Retirement Savings
Discover the Three Bucket System for retirement savings. Learn how to optimize tax efficiency and maximize investment growth while crafting a personalized strategy tailored to your financial goals.
Effective retirement planning is a common goal for many clients seeking financial guidance. While the focus often starts with an optimal savings strategy, the transition into retirement raises important questions about accessing those funds for income once the earning years stop. Among the various strategies available, the Three Bucket System stands out as a powerful approach that can optimize retirement savings while minimizing tax implications. In this article, we'll explore the intricacies of the Three Bucket System, explaining how it works and how investors can implement this strategy to maximize their retirement income.
Understanding the Three Bucket System
The Three Bucket System is a retirement savings strategy based on the tax status of different types of accounts, aiming to maximize tax efficiency and optimize investment growth. It involves dividing retirement savings into three distinct buckets:
Taxable Bucket:
The first bucket consists of taxable accounts, such as brokerage accounts or savings accounts, where investments are subject to taxation on capital gains, dividends, and interest income. While contributions to these accounts are made with after-tax dollars, they offer flexibility in terms of liquidity (access to the funds) and no restrictions on contribution limits.
Tax-Deferred Bucket:
The second bucket comprises tax-deferred accounts, such as Traditional IRAs, 401(k)s, 403(b)s, and similar retirement plans. Contributions to these accounts are made with pre-tax dollars, allowing for immediate tax savings. However, withdrawals during retirement are subject to ordinary income tax, and there are penalties for early withdrawals before age 59½ (with some exceptions). Investments in this bucket grow tax-deferred until withdrawn, enabling investors to potentially accumulate a larger retirement nest egg over time.
Tax-Free Bucket:
The third bucket encompasses tax-free accounts, such as Roth IRAs and Roth 401(k)s. Unlike traditional retirement accounts, contributions to Roth accounts are made with after-tax dollars, but qualified withdrawals, including earnings, are tax-free in retirement. Additionally, Roth accounts offer flexibility in terms of withdrawal timing and no required minimum distributions (RMDs) during the account owner's lifetime.
Benefits of the Three Bucket System
Tax Diversification:
Diversifying retirement savings across buckets with varying tax statuses is key to reducing overall tax liability in retirement. This strategic allocation empowers retirees to adjust their contribution and withdrawal strategies based on prevailing tax rates, effectively managing their tax burden. By spreading assets across taxable, tax-deferred, and tax-free accounts, investors can optimize their after-tax income while preserving wealth.
Flexibility in Withdrawals:
The Three Bucket System provides flexibility in retirement withdrawals, allowing investors to tailor their distributions to meet their financial needs while optimizing tax efficiency. Retirees can choose which accounts to draw from based on factors such as tax rates, investment performance, and financial goals, maximizing their after-tax income in retirement.
Risk Management:
Diversifying retirement savings across different tax buckets helps mitigate risks associated with changes in tax laws, market volatility, and economic conditions. By maintaining a balance of taxable, tax-deferred, and tax-free assets, investors can adapt to changing circumstances and protect their retirement savings from unforeseen events.
Implementing the Three Bucket System
Implementing the Three Bucket System requires careful planning and coordination. Here are four key steps to consider:
Assess Your Current Retirement Accounts:
Start by reviewing your existing retirement accounts to determine their tax status and contribution limits. Identify which accounts fall into each bucket (taxable, tax-deferred, tax-free) and evaluate their investment holdings and performance.
Establish Allocation Targets:
Decide the ideal allocation of your retirement savings contributions across the three buckets based on your tax situation, risk tolerance, and retirement goals. Make sure to take into consideration factors such as your current age, income level, anticipated retirement expenses, and projected tax rates, both now and in retirement.
Plan a Withdrawal Strategy:
In addition to planning how you are going to contribute to these accounts, a withdrawal strategy from your retirement accounts is needed to optimize tax efficiency and investment growth. By strategically tapping into taxable, tax-deferred, and tax-free accounts based on individual tax circumstances and financial goals, retirees can maximize their after-tax income and preserve their retirement nest egg for the long term. This approach not only ensures financial stability throughout retirement but also enables investors to leverage the potential growth of their investments while minimizing the impact of taxes on their overall portfolio.
Monitor and Adjust Regularly:
Regularly review your retirement accounts and adjust your allocation as needed based on changes in your financial situation, tax laws, and market conditions. Rebalance your portfolio periodically to keep your desired asset allocation and further mitigate risk.
The Three Bucket System offers a comprehensive framework for managing retirement savings with tax efficiency and investment growth in mind. By strategically allocating assets across taxable, tax-deferred, and tax-free accounts, investors can optimize their retirement income while minimizing tax liabilities. Implementing this strategy requires careful planning, but the long-term benefits of tax diversification, flexibility in withdrawals, and risk management make it a valuable approach for achieving financial security in retirement.
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Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.
How Much Should You Invest for Retirement?
When it comes to investing, we all have to start somewhere. It can be easy to look for a set number or percentage of income to invest and stick with it. While that may be the simple approach, I believe more needs to be considered when choosing an amount to invest continually. With that being said, this should not be so complicated; it takes forever to figure out. While investing will look different for everyone, there are some helpful guidelines to establish what investing should look like for you.
The Importance of Investing
We must first establish why you should invest in the first place before diving into how to invest. Investing gives you the advantage of putting your money into a vehicle designed to grow wealth. This is the classic case of risk vs reward. You could leave your money in a savings account but will get minimal growth, if any. The alternative is investing some of that money into the stock market strategically to take advantage of a multiple percentage return.
When investing, it is crucial to know your goals with that money. This could be anything from saving for vacation to retirement planning and anything in between. Knowing what you are investing for is one piece of the puzzle. The second piece to consider is the timeline of your investment. If you are investing money that you plan to use for a vacation six months from now, your strategy will look significantly different than the money you invest towards your retirement, which is 20 years away. The final consideration is the risk you are comfortable taking with your investment. The timeline plays a role in this, but a personal component needs to be considered and talked through with a financial advisor.
How Much To Invest
When it comes to establishing the amount you are investing, it again depends on multiple factors. You must take into consideration the end goal as well as your own capacity to invest. The overarching recommendation is to invest 15%-25% of your income toward retirement. While this can be a helpful target to shoot for, this amount could be too little with the end goal. Instead of picking an arbitrary amount, I suggest doing a retirement expense inventory. Doing this will allow you to get a goal that is tailored to your cost of living and retirement expectations. This takes into account life expectancy, healthcare costs, and expected retirement lifestyle. From here, you can reverse solve to find a proper investment target using a compound interest calculator. Keep in mind that this target is going to move on you throughout your life. What makes sense at 30 years old will be different at 40 years old because you’ve gained more clarity on the components used to establish your target.
As great as it would be for everyone to understand their retirement expenses, it can often be challenging to project. What about someone with significant student loans who can't swing 15% of their income to retirement? This is where capacity comes into play. The above scenario is the goal, but it may not be feasible for your current financial situation. If that describes you, then the mentality you should have is to start small but start now. You will be better off by investing a little bit each month and building the habit of investing, as opposed to waiting until your circumstances are perfect to start. I recommend you find an amount that works with your budget and commit to investing that amount for a year. By doing this, you have built the habit of investing and allowed your money to start working through compounding interest.
Where to Invest
Now that you have established your goals and an amount of money to invest, you can consider what investment vehicle you want to use. If this is new territory for you, read my article “The Order of Operations for Retirement Savings.” This can give you a baseline of where to begin with investing.
All the pieces we have discussed up to this point will influence the strategy you choose for investing. At the end of the day, diversification is one of the most essential components of retirement investing. You’ve heard the phrase, “Don’t put all your eggs in one basket,” which holds true when investing. The stock market is volatile and should be approached with a well-thought-out strategy. Diversify your investment across multiple asset classes such as stocks, bonds, real estate, etc. This will help you have a robust strategy when the market is up and protect you from downsides when the market is down.
Adjust and Review
I’ve mentioned it once, but it deserves to be revisited. The amount you contribute to retirement savings will be a moving target. It will change as you get closer to retirement, have income fluctuations, and gain clarity on your financial goals. This change is not something to shy away from. It creates the opportunity to revisit this topic regularly. If you work with a financial advisor, this conversation should be part of a standard cadence between you and them. Having a plan is important, but understanding how that plan should flex over time is equally important.
Keep in mind that these are general guidelines around investing toward retirement. As I mentioned, everybody has a different situation and should consult a financial advisor to help consider all factors of your financial picture. If I can leave you with any piece of advice, it is that the best time to start investing was yesterday. The second best time is today.
References
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
https://smartasset.com/investing/how-much-money-to-invest-in-stocks-per-paycheck
Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.
Yahoo! Finance Feature: Transitioning Into Retirement: A 2024 Financial Checklist
Andrew Van Alstyne had the privilege to be featured in Yahoo! Finance to talk to readers about the preparing for retirement in 2024.
Andrew discusses a systematized checklist that can be utilized in the years leading up to, and then through, retirement.
Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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Fiduciary Financial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
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A cash balance plan helps business owners save more for retirement while lowering taxes. With higher contribution limits than a 401(k) and tax-deferred growth, these plans offer major financial advantages. Employers fund the plan, providing stable benefits for employees. While they require annual contributions and administration, the tax savings and wealth-building potential make them a smart choice for high-income professionals.