Blog | CB Investment Management

How Much Is Avoiding Best Practice Financial Planning Costing You?

How To Make Financial Planning Low Cost, Accessible And Beneficial. 

“If You Fail to Plan, You Are Planning to Fail”

 Benjamin Franklin. 

“Your IRA Is an IOU to the IRS”

Ed Slott

Very few people do financial plans. Only one in three Americans has a concrete, as in written down, financial plan. Only 15 percent use a financial planner. This assessment comes by way of a 2021 Charles Schwab survey.

Clearly, the benefits, costs and quality of Best Practice Financial Planning are not well understood. Done right, Financial Planning can often uncover significant resources, perhaps up to half your net wealth. Even when the direct savings are modest, the clarity it brings to your financial situation will still deliver savings by setting you up for more informed and better decisions.

It is easy to understand how the obstacles to comprehensive planning can appear substantial. No doubt the complexity of Financial Planning is an issue. It can seem overwhelming. So defaulting to simple decisions can seem appealing. Unfortunately, without sufficient testing those decisions are often wrong and expensive. Then most investors may not understand how the value and cost of financial planning advice can be made simple, transparent and low cost. Lastly, how can you ensure Best Practice? That too needs attention.

This article will address all these issues, describe examples of the significant benefits of Financial Planning, and provide immediate tangible advice:

  1. By taking incremental steps this resolves the value to cost issue.
  2. By defining best practice Financial Planning, choosing the best service becomes easy to identify.
  3. What action you can take every tax year to improve your long term financial situation.
  4. The exact age when it becomes crucial that you do a retirement plan.
  5. Two examples of how significant benefits can result from Financial Planning.
  6. How to become connected to a network of planning support to ensure all your planning and retirement issues can be supported and addressed.

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By taking incremental steps this resolves the value to cost issue.

You will get value for service if you break down the full service financial plan into a few simple steps:

  1. A free initial retirement review of your own individual circumstances.
  2. A free assessment of your retirement tax and IRMAA situation. In addition a few practical steps you can take over time to improve your situation. If, however, more detail is required because you are likely to be at risk and would benefit from a more detailed assessment, I would recommend the next step.
  3. A mathematical analysis of your full retirement tax and IRMAA outlook were you to take no further action, as designed by the IRMAA certification website. 
  4. If you choose to take a more comprehensive and detailed assessment I will offer you a choice. I will offer my own services, as well as at least one other alternative service, so you can consider your best option.
  5. The final step would involve a comprehensive Maxifi optimization program with follow up deep analysis. Maxifi meets all Best Practice criteria.
  6. In the case of Maxifi there are also options for a second opinion from three different highly experienced sources including directly with Larry Kotlikoff. Consult With Larry | MaxiFi Planner

By defining best practice Financial Planning, choosing the best service becomes easier to identify.

It is important that you appreciate the differences between financial planning services. Flawed and already failed concepts are still prevalent in many financial plans, as well as instability and unreliable assumptions. It is crucial that you get a sound accurate and reliable approach executed with significant experience and skill.

This is not a simple issue, but it is important that when you are considering a Financial Plan that you have access to extensive resources on this so you can make an informed choice.

For a deep dive into considering the issues with many financial plans, start here:

Financial Planning | CB Investment Management (cb-investment-management.com)

Then realize the importance of getting a detailed retirement plan in this video:

IRMAA | CB Investment Management (cb-investment-management.com)

 

What action you can take every tax year to improve your long term financial situation.

As the quote above describes, most investors are heavily committed to deferred tax plans like a 401k, or IRA. It is very important to be clear about what “deferred” tax really means. It means that all of an IRA will be taxed before anything can be spent. Even then it moves to a taxable account, with likely further taxes on death.

The benefits of having a Roth IRA are incomparably better. This link describes why:

https://blog.cb-investment-management.com/the-retirement-tax-trap-big-ira-urgent-action-required/

Successful planning includes finding ways to reduce your investment taxes and compounding your long term returns tax free. Every year you get a chance to add to your Roth IRA. Check with your tax advisor, but don’t miss that opportunity to maximize your Roth IRA contributions every year unless there is a very good reason.

The exact age when it is crucial that you do a retirement plan.

Up until age 59 ½ withdrawing from your IRA carries a penalty which precludes efficient strategies for escaping from your IRA. At age 60 that problem disappears. Furthermore, it turns out the efficiency of transferring assets out of an IRA into tax free alternatives is greatest when longevity is greatest.

That makes age 60 the optimum time to create a retirement plan to maximize the benefit of your transfers out of your IRA. The bigger your tax deferred assets are the more crucial this becomes. The savings can be very substantial. Every year you delay your tax efficient savings opportunity will decline.

Two examples of how significant benefits can result from Financial planning.

This link goes into detail on how significant your savings could be, by focusing just on conversions out of your IRA into a Roth IRA.

https://blog.cb-investment-management.com/the-retirement-tax-trap-big-ira-urgent-action-required/ . Even leaving aside the issue of tax, a well constructed Financial Plan can reveal astonishing savings just by revealing the savings you can make just by reconstructing your existing assets and lifestyle choices.

Here is an example of what can happen when financial planning reveals an opportunity. Making a Million Dollars for My Friend in an Hour.

How to become connected to a network of planning support to ensure all your planning and retirement issues can be addressed.

Financial Best Practice is constantly evolving and getting more complicated all the time, as laws, taxes, the practices of Medicare and Social Security constantly evolve. Make sure you stay up to date and well prepared for whatever comes and have a community to support you and be your advocate through any challenge that could arise.

Here is an example of the range of issues you may already need to consider for continuing confidence in your financial management:

https://blog.cb-investment-management.com/social-security-and-medicare-horror-stories-need-proactive-action/

Best Practice is a matter of your Best Interest.


Education and a Commitment to Informed Consent is an Obligation.

Chris Belchamber is an IRMAA Certified Planner

Medicare’s IRMAA impacts every retirement plan. Learning how to mitigate it is available via IRMAA Certified Planners designation.

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