Your Ideal Tomorrow: The Power of a Custom-Tailored Retirement Plan
by Gabriel Lewit
If you want to update your retirement plan or are starting your planning efforts, this blog is for you. Creating a custom-tailored retirement plan is about understanding your unique circumstances, needs, and goals. Then, you use this information to develop a retirement plan that is tailored specifically for you.
At SGL Financial, we approach wealth creation and preservation differently than other retirement planning firms. First of all, we have a deep understanding of retirement planning. And, rather than give you a cookie-cutter financial plan, we have developed the Four Pillar Retirement Plan that focuses on:
- Need for income
- Prudent investing
- Tax minimization
- Legacy planning
This blog will explore the four pillars of retirement planning in Buffalo Grove, IL in greater detail. Let’s get started.
Retirement Income Planning: Securing Your Financial Foundation
Years before you retire, you must understand what your income will consist of once you leave the workforce and where it will come from. You may have very optimistic plans for your retirement, but certain realities may cause you to reboot your planning process or modify expectations based on your anticipated amounts of income.
At SGL Financial, we project a baseline for your income, expenses, and key goals. We call this proprietary process the Retirement Plan Tracker (RPT). This tool can be pivotal in helping you assess where your retirement income will come from and how sustainable these sources are for a retirement that may span 30 or more years. Some of the outcomes this tool includes are:
- Optimizing your retirement income so it isn’t just a stream of numbers; it’s a way to pay for the quality of life you envision for the golden years of both spouses. You will be transitioning from a monthly paycheck to retirement savings, annuities, Social Security, and other sources of income.
- Just as crucial as maximizing your retirement income streams is the need for capital preservation and effective risk management. Markets fluctuate, economies change, and unforeseen expenses occur. By incorporating risk management into your optimized investment strategy, you’re preserving wealth and ensuring that your retirement assets track your plan and you don’t struggle to make ends meet later in life.
- Another component related to retirement income planning is having a drawdown strategy in place. Think of it as a roadmap for tapping into your retirement funds over time. Without a strategy, there’s a chance of depleting your savings too soon, especially during market downturns or during inflationary periods when the purchasing power of your assets is reduced. A drawdown strategy isn’t just about making money last—it’s about securing peace of mind for your later golden years.
- An important element of retirement income planning is determining when to begin taking Social Security benefits. As the old saying goes, “Timing is everything.” You can substantially increase your lifetime benefits by choosing the optimal period for taking distributions. The right time can vary, but understanding your circumstances and consulting with a tax planning CFP® professional in Buffalo Grove can help guide your decision.
Retirement Investment Planning: A Critical Balance
When considering retirement investment planning, it’s essential to strike the right balance between return objectives and exposure to financial risks. After all, the dream of most retirees is to live comfortably, enjoy life, and have financial security later in life when they need it the most.
The SGL Financial retirement planning team considers several factors associated with the ways you can invest during retirement:
- The bedrock of your investment strategy should be how you allocate assets for retirement. You reduce your risk of large losses by diversifying your investments across multiple asset classes. An underperforming asset class only impacts part of your assets. Or, one asset class produces positive returns while another may experience negative returns. The key to multi-asset class investing? Ensuring they align with your retirement goals and risk tolerance.
- Asset classes can have different risk characteristics. That’s why we conduct a comprehensive investment screening process. In this evaluation, we sift through the many investment options available based on your needs, goals, and risk tolerance, including expense ratios, types of investments, and management styles. By selecting the right mix, we help you position your assets for optimal growth while being mindful of potential risks.
At SGL, we provide professional management for your retirement assets with a team of investment professionals. You get an entire dedicated team of professionals and not an individual. The SGL team, together with our partners at Savant Capital Management, bring experience, knowledge, and a deep understanding of the complexities associated with today’s complex markets. With a dedicated team focusing on market trends, economic indicators, and potential growth opportunities, you can rest assured your investments are in the right hands.
Retirement Tax Planning: Keeping More of Your Money
You’ve worked hard to accumulate your retirement assets, so you need a retirement strategy that focuses on protecting and keeping your hard-earned wealth for your future use. One way to do that is to minimize your exposure to excessive taxes. Every dollar of unnecessary tax is one less dollar for your future use.
Here are a few important tax planning processes that we include in our retirement planning process:
- Systematic Roth Conversions: By systematically converting traditional IRA funds into Roth IRAs, you can pay taxes now and let future growth and withdrawals be tax-free. This strategy is especially advantageous if you anticipate being in a higher tax bracket in retirement than you are now.
- Tax-Efficient Income Sequencing: It’s about more than just drawing from the right accounts; it’s also about timing. Strategic sequencing determines which accounts and when you tap for distributions and how you can minimize your tax burden during retirement.
- Tax-Loss Harvesting: Market downturns aren’t always bad news. By selling off investments that have declined in value, you can offset capital gains from the sale of other investments, thereby reducing the overall tax impact.
Legacy: Leaving a Mark Beyond Your Years
Accumulating wealth is a major achievement, but ensuring it serves your intended purposes after you and your spouse are gone is your legacy. As your wealth grows, so does the complexity of managing, preserving, and distributing it how you intend. That’s where estate and legacy planning enters the picture. They become an indispensable part of your wealth preservation and distribution strategy. As part of our comprehensive retirement planning service, the SGL team will help you make sure:
- Your will is the cornerstone of your estate plan, ensuring your assets are distributed as you wish. On the other hand, trusts can provide additional control over your assets, offering solutions for tax savings, protecting assets, and specifying terms of distribution. As life events occur, such as the addition of new children or grandchildren, loss of a spouse, or divorce, you want to ensure that your legal documents are properly updated to include any changes that impact your beneficiaries.
- Powers of Attorney (POAs) designate trusted individuals who can decide on your behalf should you become incapacitated. This process includes updating beneficiary designations on insurance policies, retirement accounts, and other assets.
- Beyond just distributing your assets, legacy planning should encompass a vision of how your wealth will impact future generations. It can involve setting up educational funds or ensuring long-term care for a loved one. A legacy plan can ensure that your wealth serves a purpose, providing opportunities and security for your family.
- For many, the prospect of giving back to organizations they believe in can make a lasting difference in their financial journeys. Charitable strategies can involve creating foundations, making direct donations, or setting up donor-advised funds. Sophisticated gifting strategies can provide a more tax-efficient transfer of assets to loved ones, often leveraging annual gift tax exclusions or lifetime exemption amounts.
- The SGL team can coordinate its services with other professionals you depend on for specialized advice and services (CPA, attorney). This is particularly valuable when you have a larger, more complex estate. You avoid the risk of conflicting advice and the payment of duplicate fees. Think of us as the quarterback of a team of professionals who help win the game by achieving all of your financial goals.
The power of custom-tailored retirement plans lies in their ability to be shaped and reshaped according to your evolving needs and circumstances. As your financial advocates, we guide you through the retirement planning process, providing educated, insightful financial choices that affect all areas of your retirement life. Connect with us today to learn about our 4 Pillars of Retirement Planning.