The Value in Collaboration: Why DIY Investors Seek Professional Advice Before Retirement
Many clients come to us with impressive financial backgrounds. They've built successful careers, saved diligently, and made smart investment decisions.
A client we recently helped was a prime example—self-made investors who thrived in the DIY world. They have amassed quite a nest egg and are ready to leave their current job prior to age 60.
As retirement approached, they recognized the opportunity for a strategic partner. The complexities of distribution planning and navigating a longer time horizon presented new challenges.
Here's where we come in. Our role wasn't to dismantle their existing strategy but to complement it and identify areas where our expertise could help.
We explored ways to optimize their charitable giving. Strategies such as “bunching contributions” could maximize tax benefits. This strategy involves contributing a larger charitable contribution in one year instead of smaller contributions every year. By structuring your giving this way, you can take advantage of a large charitable itemized tax deduction in the year in which you make the contribution and then receive the benefit of taking the standard deduction for the years in which you don’t make charitable contributions.
Many successful individuals hold stock options as part of their compensation. We helped them navigate the complexities of Restricted Stock Units (RSUs) and Incentive Stock Options (ISOs). By understanding the tax implications and developing a diversification plan, we ensured their portfolio wasn't overly reliant on company stock. In some cases, an 83(b) election for ISOs can further minimize tax burdens.
Tax planning for high-net-worth individuals is a huge part of a family's future success. We have put together a road map for removing assets from his Traditional IRA in a tax-efficient manner. Including Roth conversions at the beginning of retirement when their income will be at its lowest. This can help reduce the negative impact of Required Minimum Distributions (RMDs) that may have caused very high tax bills in the later years of their plan.
Another crucial aspect of retirement planning is ensuring a secure income stream and making sure your money will last as long as it needs to by taking into account all of your spending needs and goals. First, we needed to dial in what their spending need would be in retirement, taking into account healthcare expenses, vacation goals, and regular monthly bills like their mortgage and car payments. While many DIY high-net-worth investors do have a large amount of money saved, some fail to realize that it is not infinite. You can spend away all of your assets if you are not careful, even if your nest egg is as big as $5 Million or above.
We worked with them to create a detailed 5-year income plan that factored in Social Security, retirement accounts, and investment returns. This plan provided confidence and a clear roadmap and confirmed that they had saved enough to meet their goals and needs.
This family's story is a testament to the power of collaboration.
Their DIY spirit remained a valuable asset, but by partnering with a financial advisor, they gained access to specialized knowledge and tools. Together, we formed a strong team, ready to navigate the sometimes-tricky waters of retirement.