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February 12, 2020

Oakland, CA | Top Financial Advisors in the East Bay Help with Tax Planning

Posted in: Recent Projects

If you have been working for the last 10-15 years and have consistently contributed to an employer-sponsored retirement plan, the growth (thanks to a 10+ year bull market!) will most likely have compounded into a sizable sum of money.

With at least 15-20 years until retirement, you are in an ideal situation to make important financial choices that will have a significant impact on the rest of your life.  The first and most important step is to develop a comprehensive financial plan so you know where you currently stand and can begin sculpting your future.  We know the future is unpredictable, but when we construct a financial plan, we are able to make educated, well-informed assumptions, that help project where a client may be financially throughout their lifetime.  Of course, these assumptions and estimates will not be 100% accurate, but they are not expected to be.

When working on a retirement calculation, the goal is not to predict the future, but rather encourage wise financial decisions and behaviors now.

In our practice, we use a sophisticated financial planning software package, eMoney Advisor.  We use this tool to project annual cash flows.  We calculate final portfolio assets and a net worth at end-of-life, and can identify what year a client most likely run short.  These are important outputs of the financial planning process.  However, the main benefit is that once we have this baseline established, we can modify the assumptions and estimations, and dig deeply into specific planning opportunities that should be considered now.  In many cases, it is only when the financial planning model is fully developed that certain opportunities present themselves.  The model allows us to help our clients make wise, well-informed financial decisions now and as a result, enjoy the benefits over many years, and in many cases pass on these benefits on to their heirs.

A couple, both 45 years-old, for whom we recently did a plan, came to us with multiple streams of income expected to be available at retirement; social security benefits, rental income, and investment income in the form of dividends.  There would also be tax-free Roth income to supplement as needed.

With multiple sources of income at retirement to cover approximately 85% of their expected expenses, their projected required minimum distributions (RMDs) at age 72 were much higher than they needed to be. Our clients were going to have to withdraw significantly more money annually than would be needed, placing them in a higher tax bracket.  Understanding this scenario early enough allowed us to create a long-term plan to manage and reduce their tax liability and allow them to reach and exceed their financial goals and objectives.

Each tax year presents an opportunity to make wise financial decisions that will impact the rest of your life. If you do not have a plan, you’ll be missing out.

If you are looking for financial guidance, whether it be for a one-time financial plan or continuing advice on your investments, we invite you meet with a First and Main Financial planner for a free consultation.  We would be more than happy to sit down with you, assess your financial situation and review with you our services to help you navigate a healthy financial future.

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