Financial planning for every stage of your life

By Tina Hurley, Senior Vice President | Head of Advice, Planning and Product

As a strategic partner who helps clients navigate and grow in changing circumstances, Tina is responsible for the direct management of the Wealth Management Product Team, including the investment platform and a team of Certified Financial Planners serving all segments of net worth.

Finding a financial advisor

A trusted and experienced financial advisor will be your guide in establishing your strategy to help reach your goals. They can answer your specific questions and provide advice for investments that align with your objectives and risk tolerance. A financial advisor can also suggest steps you can take to help protect your wealth, and you may want to leverage the additional services and access to specialists who are available through the relationship with your advisor. For example, a Citizens Wealth Advisor has access to a variety of investment options and can develop a personalized financial plan, in partnership with a CERTIFIED FINANCIAL PLANNER™ professional¹ who can help determine which of those options may be appropriate.

Planning for higher education

Paying for the college education of one or several children can be a challenge for many families. A 529 account can be a smart and effective way to support higher education. These are potentially tax-free qualified tuition programs, administered by individual states that can be used to pay for tuition at any qualified college or university in the country, and even some abroad.

There are two types of 529 plans: One, a prepaid tuition plan allows you to pay all, or part of the costs of college tuition up front. The other option, a college savings plan, works similarly to a Roth 401(k) by investing after-tax contributions in mutual funds and other vehicles. The college savings plan can be used to pay for qualified expenses ranging from textbooks to rent, as well as student loans and the cost of apprenticeship programs.

Investing for retirement

One common way to get started on your retirement investing is a with 401(k). This product is a tax-advantaged retirement account commonly offered by employers. With this type of a plan, you can benefit from potentially reducing your tax liability in the future when you withdraw funds.

Contributing to your 401(k) as early and often as possible is one of the most reliable strategies to build wealth, as your investment returns can compound year over year. Your employer may also match contributions to this account, with either a partial match (up to a certain percent of your contribution) or a full match.

The amount of income you can contribute to your Roth IRA as an employee is subject to change every year. In 2023, the limit for people under 50 is $22,500. Those over 50 can make extra catch-up payments of up to $7,500. Once you contribute, the cash will sit in a money market account earning interest, unless you invest it in the mutual funds or exchange-traded funds allowed by your plan.

There are other options that will allow you to invest for retirement in a tax-advantaged way, regardless of the benefits that your employer offers. These include an individual retirement account, commonly referred to as an IRA, which has a wider array of investment options. Once your IRA is set up, you can start contributing up to $6,500 annually; if you’re over 50, you can contribute an additional $1,000 in catch-up payments. If you have a 401(k) from an old job, you can roll it into an IRA or another 401K.

You may also be eligible to set up a health saving account (HSA) to prepare for health care costs later in life or pay for general health care expenses along the way. To be eligible, you must be enrolled in a high-deductible health plan. Your contributions to this account are not taxed on the federal level but could be taxed on the state level pending your state’s regulations.

Investing

There is a dizzying array of investment opportunities and strategies to consider, and your financial advisor can help you focus on the right options for you. They will work with you to determine the level of risk you are comfortable taking, and offer personalized advice based on your needs and goals.

Setting up an estate plan

It’s important to determine who will receive your assets and handle your responsibilities in the event of your death. Ideally, this planning should start sooner, rather than later. So if you haven’t already, there’s no time like the present to begin. Creating your estate plan early on allows you to fine tune it as time goes on.

You will need to create an inventory of your tangible and intangible assets, name a guardian for any minor children and your wishes for their care, and establish legal directives that will determine how your wishes are carried out in the event of death or incapacitation. These directives can establish trusts, spell out living wills, and give power of attorney to a trusted individual. You may want your financial advisor to partner with your lawyer, to be sure all your wishes are documented.

As you move through life, your needs and goals may change. You may have children and are thinking about how to secure their future, and your own. You may have decided to settle down and buy a house and are wondering about how owning property could affect your finances in the future. When big changes to your life occur, you can work with your financial advisor to reevaluate your options and revise your financial plan to take your loved ones into account.

Paying down debt

Becoming debt-free before retirement is a worthwhile goal that can increase your financial stability and leave you with peace of mind. Therefore, assessing the impact of a mortgage, student loans, and other debt early, can help you mitigate any impact they might have on your retirement. For example, making minimum payments on your lower interest loans can leave you with more money to pay off debts with higher interest rates, build your emergency fund, or pay for large expenses like your child’s college education.

Owning property

Renting and buying both have their merits, depending on the lifestyle you choose. But if homeownership is one of your goals, you’ll want to investigate the many programs available for first-time homebuyers.

Many state housing authorities provide tax breaks, closing cost and down-payment assistance, and mortgages with favorable interest rates to help you get started. You’ll want to investigate whether or not you are eligible for these housing benefits.

Federal assistance for aspiring homeowners is also available depending on income, credit rating, and occupation. For example, active duty and veteran service members could be eligible for VA loans, and the U.S. Department of Housing and Urban Development’s Good Neighbor Next Door program provides help to teachers, law enforcement, emergency medical technicians, and firefighters.

As you approach the age when you want to retire, your needs and goals will change again. You’ll start thinking about how you want to live out the rest of your life and how to care for your loved ones after you’re gone. Although these conversations can be difficult, they are important to ensure the legacy you want to leave behind is carried out.

Claiming social security

Social Security is a guaranteed source of income (for eligible participants) that keeps up with the cost of living. You’ve been paying into this fund your whole working life, and taking advantage of it later on will open up new strategies for supporting your retirement.

Reviewing various Social Security claiming options with a financial advisor is key to maximizing your finances. If you dip into Social Security at the earliest opportunity (age 62), you’ll receive a more reduced benefit than what you would get if you waited until full retirement age. It’s 66 years and 10 months for those born between 1943 and 1954. For those born in 1960 or later, full retirement benefits are payable at age 67.

Just remember, postponing Social Security can keep you in a lower income tax bracket during early retirement, which will put more money in your pocket.

Married couples also have a lot to consider when it comes to claiming Social Security. You can only claim spousal benefits when your spouse has started to collect their share. If the higher-earning spouse can afford to hold off until they’re 70 to claim benefits, the surviving spouse will get their portion (the maximum benefit) if the higher earner passes away.

Making it last

There are many strategies to make sure your retirement assets last. Your financial advisor can help you determine the best approach drawing income without depleting your account prematurely.

For example, you may have heard of the 4% Rule. This approach maintains that you can sustain a 30-year retirement by withdrawing 4% from your retirement assets in the first year, and making inflation-adjusted withdrawals of the same amount every year afterward.

While the idea of the 4% Rule is sound in theory, the real amount should vary based on context including age, expenses, and life expectancy. Keep in mind that withdrawing a fixed amount could deplete the principal of the account, affecting your retirement account’s performance.

Another strategy is to leave the principal of your retirement account intact and only withdraw the dividends and interest from investments. This way, your account will never run dry. The caveat is that you need a sizable principal or it may be difficult to live on a less predictable income of interest alone.

Certain retirement benefits can help you create an income floor, such as Social Security, annuities, and pensions. No matter how the markets perform, the income from these accounts could help provide you with stability and serenity.

You may also want to consider a “bucket” strategy to help your money last. With this strategy, you separate your money into three buckets:

• The first contains the money you’ll need in the next three years. This would be invested in relatively low risk, but low return vehicles to reduce the risk of incurring losses.
• The next holds what you’ll need in the next 10 years. This would be allocated in a less risk averse manner, in pursuit of moderate growth.
• The third contains everything else. This money could be invested more aggressively, as there is a longer time horizon before the funds are needed.

As you can see, a good plan goes a long way. Whether you’re considering parenthood or preparing for retirement, your financial plan will give you an advantage as you navigate through the challenges and capitalize on your successes in life.

Smart planning could enable you to live the life you want, protect yourself and your loved ones, and help you retire comfortably. Along the way, Citizens Wealth Advisors can help you create and regularly revise your financial plan to help you achieve your dreams. Click the button below to request a call from an advisor today.