Step 1 – Discovery:
We start by getting to know you, in order to understand as much as we can about your specific financial goals, investment timeframe, risk tolerance, tax situation, liquidity needs, assets, liabilities, and any other issues that you would like to address. The information obtained during this first meeting provides the foundation for building your personalized financial plan.
Step 2 – Build Your Financial Plan:
In this step, we combine your goals and objectives with the data we gathered during the discovery process to build a financial goal plan personalized for you. Our financial planning analysis includes a unique stress test to run thousands of planning scenarios, in order to calculate the probability of success for each of your goals. We discuss the multitude of investment vehicles to determine which best suit your needs, and answer any questions that come up along the way. This step is not finished until you are satisfied that your financial plan is complete.
Step 3 – Implement Recommendations:
The implementation process includes identifying which specific portfolio investment options are right for you. We then align your portfolio and target a rate of return, as determined by your financial plan. Any funds held in an employer-sponsored retirement plan are included as part of this step to aggregate all assets and ensure proper alignment with your goals and objectives.
Step 4 – Monitor Your Goals and Investments:
One of the most important aspects of financial planning is making sure you stay the course. Having a plan built and designed for your specific needs allows us to have a point of reference to gauge your progress each year. We actively monitor investment performance and use appropriate asset class benchmarks to help ensure your individual investments remain in line with the expected risk and potential return for overall performance. We emphasize competing with your financial plan instead of any given index or benchmark, and we help make sure you stay on track to meet your goals. We will also help you deal with market volatility, changes in interest rates, and economic ups and downs along the way.
Phases of Financial Planning:
Many people are confused about how and where to begin in the journey towards achieving their financial goals. The internet, television, magazines, and newspapers contain a tremendous amount of information that is delivered instantaneously through e-readers, tablets, smartphones, laptops…the list goes on and on. Not only is information delivered much faster in today’s society, but there is also more of it to be found. There are millions of articles, video clips, and live broadcasts to read and watch, each providing a different opinion about seemingly every aspect of the investment world. Very easily, you can pick up two different publications that take opposite positions on the same subject.
It is very important to separate the financial facts from the abundance of financial noise, and Rosenthal Wealth Management can help you make sense of the investment world as it pertains to you and your goals.
The three basic phases of financial planning are:
The first phase of financial planning begins on the first day of your very first job, and continues until you reach retirement. Whether you save money into your employer plan, an IRA, a taxable investment account, or a 529 plan for college, it is important to properly structure your investments to keep pace with taxes and inflation. For example, if you are in a 25% Federal tax bracket and inflation is 4%, then you will need to earn 8% on your investments in order to net out a realized 2% rate of return.
The second phase of financial planning begins on the first day of your retirement, and continues throughout the rest of your life. It is important to determine the amount of investment assets needed to supplement any retirement income that you may have. That way, you can develop a sustainable systematic withdrawal plan to deliver that income to you from a reliable source and in a tax-efficient manner. It is imperative that your systematic withdrawal plan is set up correctly and efficiently so you create a stream of income that outlives you. Rosenthal Wealth Management can help guide you through this challenging – and often scary – process of transitioning into retirement and turning your accumulated assets into a distribution of income for your retirement needs.
This last phase of financial planning begins many years before death. It is essential to put a plan into place to transfer your assets to your heirs and charities in the most tax-efficient manner possible. Depending on the size of your estate, your retirement assets could face both estate and income taxes, and your heirs could lose up to 75% of their inheritance simply due to improper planning. By making sure that your beneficiary forms are filled out correctly, your will and/or trust is in place, and all documents are reviewed regularly for accuracy, you can ensure that your assets will pass on as you wish. Rosenthal Wealth Management can help you set up and review your documents on a regular basis to ensure that your legacy plan is in place.
It is of utmost importance to our firm to help guide our clients through the three phases of financial planning by giving them the knowledge and resources that they need to build and implement a proper financial plan.
Asset / Tax / Product Allocation
You’ve probably heard the old saying, “don’t put all your eggs in one basket.” That saying essentially describes the need for asset, product, and tax allocation:
The three main asset classes - equities, fixed-income, and cash – all have different levels of risk and return, so each will perform differently over time as the economy expands and contracts. Asset allocation seeks to balance risk versus reward in accordance with your goals.
All properly structured financial plans incorporate multiple types of investment vehicles. Our industry provides products such as mutual funds, ETFs, UITs, individual stocks, bonds, annuities, options, and more. Each of these has pros and cons to them, and one product’s advantages can help to offset another product’s disadvantages. It is important to understand how to create the proper product mix in order to deliver efficient investment income to support your goals.
Since we all know that after-tax returns are what you actually spend, we focus on investing efficiently to limit the potential tax liability on your investment income. We focus on helping you properly allocate your assets across the four tax buckets.
- Taxable: As money grows each year, you must pay taxes on portions of the growth (dividends, capital gains, and interest earnings).
- Tax-deductible and tax-deferred: Money contributed to certain retirement plans receives a current-year tax deduction and the earnings continue to grow tax-deferred until the money is distributed. Most people have saved the majority of their investment money in this tax bucket because they believe they will be in a lower tax bracket in retirement. However, due to budget deficits, the probability of taxes rising in the future is strong. So the question is, will clients be in a lower tax bracket when they retire or not?
- Non-deductible and tax-deferred: Money contributed is after-tax money. However, the growth of this money is tax-deferred until distribution.
- Tax-free or tax-exempt: Money contributed is after-tax money and distributions are tax-free, such as distributions from a Roth IRA assuming applicable criteria is met.
Rosenthal Wealth Management can provide the knowledge and resources you need to discover the right investments for you, and help you monitor them regularly. Remember – it is never too early (or too late!) to seek guidance on how best to work to accumulate your assets.
Please Note: Neither Voya Financial Advisors nor its representatives offer tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation.