Asset rich and cash flow poor….for those soon to retire or retired
I became an advisor in 2009 in the heart of the financial crisis. The stories that clients have shared with me over the years, led us to develop our SCORE methodology of financial planning. In particular, retirees found it extremely difficult to harvest growth from their portfolios in 2001, 2008, 2020 and 2022. It’s why we think of the cash flow strategy BEFORE the opportunities for investing. After all, as Mark Twain said: “history doesn’t repeat itself, but it often rhymes.” Fixed expenses and having to sell discounted assets can create long term cash flow issues for those retired. Here are some things to think about in regards to your assets:
- Interest rates on CDs, money markets and investment grade bonds have made them appealing for the first time in nearly twenty years. Building your customized SCORE and thinking about where the cash flow will come from at 6, 12, and 18 months will provide a strong foundation.
*If you have investment real estate as part of your asset strategy; don’t forget to account for repairs, other expenses, and lapses of rent income.
- It’s easier to get investment accounts to grow by dollar cost averaging contributions into a 401k. We build our investment plans taking into account whether it’s a contributory or non-contributory account. Not all accounts are created equal.
- Also remember to account for taxes from your IRAs and 401k accounts that are pre-tax. For many clients, Social Security is also taxed at their ordinary income tax rate, and Medicare premiums have been rising steadily. It may make sense to explore a series of Roth IRA conversions.
Big changes are coming in 2024 for those earning $145k or more; your catch up contribution may need to be Roth; see below.
Orchestrating Fiscal Harmony™,
Kelly Kunst CFP®
Founder
2023 Five Star Wealth Manager
Once again, I am honored to be named a Five Star Wealth Manager by Texas Monthly. Nearly 4,000 Dallas-Fort Worth wealth managers were considered for the award; ten percent of these candidates were named 2023 Five Star Wealth Managers. Being recognized is always nice, but the real blessing is serving families and helping them on the path to Fiscal Harmony LLC in their lives.
There are risks involved with investing which may include market fluctuation and possible loss of principal value. Particular investments may not be suitable for certain situations. Carefully consider the risks and possible consequences involved prior to making an investment decision. Our firm does not provide legal or tax advice. Be sure to consult with your own legal and tax advisors before taking any action that may have tax implications.
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