A comprehensive plan can help you spot risks, weigh tradeoffs, and make more informed decisions.
If you’re like a lot of households, your financial life has become more complicated over the past few years. And it’s no wonder.
As their net worth grows, investors diversify into a wider array of assets — well beyond their primary residence and the familiar territory of stocks and bonds. Many own a business, rental property, and other assets, which may include annuities, art, collectibles, precious metals, and cryptocurrencies. Households may also take on more debt.
Consider a couple in their late 50s.
The husband owns a dental practice in Seattle while the wife is a full-time executive. They have $2.5 million in their IRAs, 401(k)s, HSAs, and a couple of brokerage accounts. They also dabble in real estate and have two mortgages. All together, their net worth is $3 million.
Our couple’s multi-faceted financial life means that a decision in one area can have ramifications in others.
This is especially true of major life changes like retirement. For households like this, retirement is not a single decision. It is a series of choices, each of which may lead to another that may come with several options.
For our couple, retirement immediately presents the question of when to sell the dental practice. That, in turn, raises other considerations. For example, are there ways to structure the proceeds to minimize the tax impact? And what will be the effect on the estate plan?
Similarly, a decision about whether to keep their rental property could influence the couple’s liquidity, income needs, and estate goals.
Questions around Roth conversions, charitable giving, and legacy planning are also not isolated; each one depends on how the couple’s balance sheet, cash flow, and future plans fit together. Even decisions about long-term care funding or insurance must be evaluated with the household’s full resources, obligations, and legacy goals in mind.
If our couple hasn’t fully informed their advisor of their complete financial picture, some surprises may be in store. Among these might be some financial setbacks that could have been avoided. These could include large tax liabilities, a smaller estate to pass along, and possibly a derailing of their dream retirement.
On the other hand, a holistic plan that takes into account all their assets and liabilities — their entire financial landscape — could provide greater protection. It would enable their advisor to gauge the effects of each financial decision on all other parts of their economic life.
Given the growth and complexity of your financial world, some of your assets and liabilities may have fallen through the cracks. By giving your advisor an up-to-date picture, you’ll enable them to provide you with a comprehensive, holistic plan.
In addition to investment management, such a plan would address taxes and tax planning as well as estate planning, including business succession strategies. Life insurance needs and options for long-term care would be covered as well. A plan could even provide direction regarding tax-efficient charitable giving.
Holistic planning is about making decisions in context, not in isolation. When all the pieces of your financial picture are viewed together, you’re better positioned to reduce avoidable missteps and make choices that support your broader goals.
A coordinated plan like that can give you greater confidence that nothing meaningful has been overlooked.
If it’s been a while since you reviewed your full financial picture, this may be a good time to take stock of your accounts, income sources, insurance coverage, alternative investments, and liabilities. Once that picture is up to date, the next step is to review with your advisor how those pieces fit together.
Decisions about taxes, income, risk, estate planning, and liquidity rarely stand alone, and a periodic review can help surface tradeoffs or gaps that are easy to miss when each item is considered separately.
With Allworth, a holistic approach can enable you to manage your complexity and help you meet your long-term goals.
This information is meant for educational purposes and not as direct tax or legal advice. Rules and regulations can shift anytime, so it’s always best to consult a qualified tax advisor, CPA, or attorney for guidance tailored to your specific situation.
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