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Your Retirement Checklist: Elements to Consider

couple by the ocean

At Centura Wealth Advisory, stewardship is at the core of everything we do. We believe in partnering with our clients to liberate their wealth management process. Part of our role as stewards is walking our clients through the entire financial planning process, from the present day to the coming years.

One of the main areas we address with our clients is their retirement plans. After a long career, many people dream of retirement. Whether it be spending your free time volunteering, making memories with your grandchildren, or sipping a piña colada on a tropical beach, one thing you don’t want to have to worry about is money.

In order to relieve this stressor, a lot of financial planning and coordination has to occur. Today, we’ve outlined your retirement checklist, and while it is not your one-stop shop for all of your retirement planning (we’d recommend reaching out to a trusted financial advisor for that), it does include the various elements to consider prior to leaving your career.

Your Retirement Expenses: Questions to Consider

There are many questions an individual, along with their trusted financial planner, can review in order to fine-tune the logistics of their retirement. The biggest question when planning for retirement is this: Have you saved enough to ensure you don’t run out of money during retirement?

In order to answer this question, you need to identify how much you can spend annually to ensure your funds will not be drained. Luckily, throughout one’s life, there are a variety of different retirement accounts you can save to trust accounts, 401(k), traditional and Roth IRA accounts, and so on.

Once you retire, certain expenses will be reduced, eliminated, and/or added. To further carve out your budget, ask yourself if:

  • You’ll be expected to financially support any family members
  • You anticipate going on any big family vacations or need a medical procedure
  • You might have any large one-off payments (for example, a wedding or car)
  • Your mortgage will be paid off
  • You will have to pay expenses that are currently being paid by your employer (i.e. medical and/or dental insurance, utilities, automobiles)

Consider all of these elements to help plan your expenses during this time.

Your Retirement Income

The idea of no longer receiving a recurring paycheck can be unsettling; however, research shows that retirement has been around since as early as the 1800s – this considered, we know there are ways to make it work.

Retired individuals typically have some form of retirement income (i.e. pensions, rental income) plus any liquid assets they’ve saved.

Tax Planning

Retirement tax planning, however, is a whole different story. You want to ensure that you can access your assets as tax-efficiently as possible.

Below are some questions to consider when identifying your retirement income.

  • How will you access your liquid assets?
  • When will you claim social security?
  • Do you have any fixed sources of income? (i.e. rental income, pensions, annuities, etc.)
  • Are there opportunities (Roth IRA) for creating tax-free income that you can access down the road?
  • What is the most tax-efficient method to asset your retirement assets?

What Will Your Retirement Look Like?

This is the fun part—deciding how you’d like to spend your time. As previously mentioned, there are many ways to spend your retirement: volunteering, spending time with grandchildren, sipping down piña coladas on a tropical beach, and the list goes on.

Many people, however, fail to recognize just how much time comes with retirement. For most, they gain 40 or more hours a week (when you factor in commuting) to do whatever they please.

Having some sort of structure for the weeks and days can be helpful—especially for those who felt their career was a large part of their identity. Consider the following questions when deciding what your retirement might look like:

  • Do you intend to travel? With family, friends, a partner, or alone? International or local?
  • Do you want to work? On what level? Will you volunteer or work a part-time job?
  • Are you planning to relocate? If so, in or out of state? Out of the country even? It’s important to consider how expenses and taxes in a different location than where you are currently might size up.

A Final Word

There are, of course, various additional factors and considerations when it comes to retirement planning; for example, asset allocation, loss of bonuses, your stock portfolio, and more. This article is just a jumping-off point.

There’s no article that could detail all these elements as precisely as speaking face to face with a trusted financial advisor like those at Centura Wealth Advisory.

Interested in more? Read on to learn how to optimize your retirement plan, then get in touch with our team of stewards today.

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Four Methods for a Successful Succession Planning Strategy

man walking

The general lifecycle of a business typically follows a few different stages. These stages include start-up, development and establishment, and finally maturity. As a business owner, once you’ve reached the maturity stage of your business, you are likely considering what the future of your company holds. 

What will happen to your company when you retire? While planning to exit your business can be an emotional decision, it is also essential to the greater success of your business. What we have found, is that most business owners prefer to procrastinate on putting together a proper exit plan, which could end up being the reason your company does not succeed beyond your leadership. 

Ideally, business owners start preparing their succession plan three to five years prior to their exit. This plan is in place to protect the company when the executive team is no longer available to serve their duties. When succession planning is rushed, hiring mistakes are more likely to occur, and the future of your business could be at stake. 

In an effort to help you along this planning journey, here are a few tips to guide a successful succession planning process.

Assess Core Competencies in Alignment with your Business’ Strategy

First, take a look at your organization and work to identify the significant business challenges you may face in the next one to five years. Then, you can connect the positions that will lead to business continuity in the long run. In doing this, you’ll likely find the core competencies, skills, and knowledge that are critical to the success of your business. 

Evaluate High Potential Employees

Once you have identified the positions and skills needed to continue your business, you can begin to consider who may take your place and the place of other leadership positions within your organization. 

During this process, it’s important to account for your overall business strategy. Is the person you’re considering the right person to execute that strategy? What skills does this person need to drive this strategy forward?

Clear Communication with Stakeholders

As you go through the process of finding your successor, it’s important to include other key stakeholders within the business. Involving senior leadership and other members of the executive team to weigh in on whom they think is most qualified to take on this new role is essential to gaining their buy-in when the transition occurs. 

Training Your Successor

Now, it’s time to communicate with your successor. Training your successor to take your place is of the most important steps in this process. Make sure they have enough time working with you to understand how the business operates, and how to grow the business from a position of strength. 

Be sure to spend time with them during this entire process. Help them make decisions with your guidance, show them alternatives that they might not think of due to experience, and help them understand the risks associated with their decisions. 

To go a step further, before you decide to leave your business, craft a strategic plan with one another. This helps ensure your successor is prepared and bought into creating a successful future for your business.

Potential Obstacles

Lastly, there are a few potential obstacles that you may run into during this process. These obstacles typically include timing, resistance to change, and lack of company support.

Timing

The entire succession planning process can be a time-consuming one. The time it takes to assess, evaluate, and develop your successor is not something to lose sight of. This is why it is typically recommended to start your succession planning at least three to five years in advance. 

Not taking the time to develop this process can be detrimental to your company’s success. As we mentioned above, it usually leads to hiring mistakes, but it also has a large impact on your organization as a whole. If your successor is unprepared to take on this new role, your business will not be able to reach its full potential. 

Resistance to Change

One of the reasons it is recommended to take three to five years to a succession plan is the impact it has on your people. Many people are resistant to change, especially as it relates to their careers.

Preparing your successor over time, allows the rest of your organization to familiarize themselves with the new leadership style they will be experiencing. Which leads to greater buy-in, and an easier transition overall. 

Lack of Support

Similar to the point above, during any business transition, you will likely have naysayers, skeptics, and resistance. Most of these issues stem from the emotions that arise when people are concerned that their job is at risk. A simple way to mitigate this issue is to communicate as frequently and transparently as possible. 

Aside from succession planning, there are other factors that go into exiting your business. For you, that may mean selling your business. How can you begin to prepare to sell your business a few years down the line? Take a look at one of our recent articles to get you started.

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What is the Relationship Between an Accountant and a Financial Advisor?

man working on computer

As you look to achieve your financial goals, you may be considering working with a financial advisor or an accountant. Depending on your financial needs and goals, you may need both. So, what is the difference between the two, and when do you need to enlist the help of each?

Let’s discuss.

Financial Advisor vs. Accountant

Let’s identify the differences between a financial advisor and an accountant.

Accountant

An accountant plays a role in recording, summarizing, analyzing, and creating reports of financial transactions. These professionals are licensed to provide tax advice and counsel you on preparing tax returns and estate tax returns. 

Moreover, accountants play a large role in suggesting tax-saving strategies. While accountants help strategize and suggest these strategies, you likely need a financial advisor to help implement these strategies.

Financial Advisor

On the other hand, financial advisors are licensed to give investment advice and develop a plan to grow your wealth. Their role as financial advisors is to construct an effective portfolio for your financial goals and risk profile. This typically includes:

  • Retirement planning
  • Estate planning
  • Philanthropic strategy implementation

Which Financial Professional Do You Need For Your Goals?

Your relationship with each professional depends largely on your financial needs and goals. So, when do you need the counsel of either?

Some view their financial advisors as the architects of their wealth management. Financial advisors interact with their clients more frequently to help implement financial plans, monitor their progress, and adjust the sails as necessary.

Alternatively, an accountant steps into this process as a specialist. Their relationship with clients is traditionally more transactional. These professionals help prepare your financial statements and tax returns when needed. Accountants know and understand the IRS rules and regulations in greater depth than a financial advisor.

Clients typically use an accountant when they have a more complex tax situation; whether that means a business owner, a large family, a rental property owner, or someone with multiple streams of income. Taxes can become complicated, which is when partnering with a CPA can move the needle for you.

Clients use financial advisors when they want to develop a savings and investment plan. Your financial advisor is more involved in your everyday financial planning and decision-making. A financial advisor helps steward you through big life events and helps you plan ahead while working to achieve your specific financial goals.

Financial Advisors and CPAs Complement One Another

Deciding between a financial advisor and a CPA is not a one or the other decision. Financial advisors often work together with CPAs to help you achieve your financial goals. CPAs can offer insight into your financial statements that help guide how your financial advisor helps your plan for your future.

Before you talk with your CPA this tax season, read this article describing a few of this year’s updates to tax deductions.

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How Centura Supports Goals-Based Investing

financial advisor with two clients

In today’s world, the amount of information an individual has access to is endless. With that being said, it can be challenging to navigate the world of wealth management. With ever-changing market cycles and fluctuations, it’s important to understand your financial goals and how they will guide your portfolio.

How can you sift through all the noise to understand what is best for your financial goals and risk profile? Let’s discuss.

The Role of Emotions in Your Investment Decisions

Understanding the role that emotions play in crafting your wealth profile is one of the first steps in reaching your financial goals. 

In an SEC-sponsored research paper, it’s reported that “investors tend to fall into predictable patterns of destructive behavior. In other words, they make the same mistakes repeatedly. Specifically, many investors damage their portfolios by under diversifying; trading frequently; following the herd; favoring the familiar (domestic stocks, company stock, and glamour stocks); selling winning positions and holding onto losing positions (disposition effect); and succumbing to optimism, short-term thinking, and overconfidence (self-attribution bias).”

Knowing this, how can you understand when you may be falling into these predictable, not so profitable, patterns?

It all begins with an understanding of your goals and your risk profile. These two items are the basis for building out a financial portfolio that performs for your needs. 

Your Advisor’s Role in Achieving Your Financial Goals

Wealth advisors that thoroughly understand your goals and your risk profile can make a huge difference in navigating your wealth. At Centura, our advisors use the Liberated WealthⓇ Process to guide our client relationships. Our goal is to understand your wealth, identify inefficiencies, design new pathways, and liberate your wealth.

So, what does this process look like?

Uncover

As we mentioned above, it all starts with understanding your risk profile and your financial goals. During this step of the process, Uncover, our team collects data, discusses your purpose and path, and discovers all that we need to know about your current wealth profile. This discovery is a crucial step in the process of understanding how our advisors can help you build sustainable wealth.

Unlock

Following the Uncover step, our advisors Unlock the initial plans, scenarios, and strategies to move forward with your portfolio. From the information that is gathered in the Uncover step, our advisors identify your existing strategy and establish a baseline plan. In this stage, your advisor is looking at the “what if” scenarios associated with your portfolio and using them to guide potential new strategies. 

Design

The next step of the Liberated Wealth Process is to actually craft the plan—the Design phase. Your advisor will put together a multi-phase action plan, combined with a wealth scorecard to track your progress.

Liberate

You have now reached the point of implementation. The Liberate step of the process is to implement the plan, coordinate necessary professionals, implement the portfolio, and report on the scorecard.

Steward

Lastly, you get to the Steward step of the process. This step is an ongoing effort of monitoring your plan, reviewing, and recalibrating as needed. The advisor you are working with will help steward you through all of the life events that come your way, whether that is retirement, having a child, starting a business, and the list goes on.

Our goal at Centura Wealth Advisory is to steward our clients toward achieving their financial goals. Want to learn more about why stewardship is at the core of everything we do for our clients? Read on to find out why stewardship is at the core of everything we do.

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Keys to a Successful M&A

shaking hands

A merger or acquisition (M&A) can have a huge impact on your business, regardless of if you are the seller or the buyer. Mergers and acquisitions can offer business owners the opportunity to create more value for their business, expanding beyond what they could do alone. The process of merging or acquiring a company, however, can be a lengthy, complicated process.

Why Would You Pursue an M&A Transaction?

First, let’s discuss why you would decide to pursue an M&A transaction. Typically, the objective behind a merger and acquisition is clear from the start.

Some of the most common reasons that business owners pursue an M&A transaction include to:

  • Improve company performance
  • Improve a product’s time to market
  • Reduce excess production capacity
  • Acquire a company’s technology, products, expertise, or resources
  • Lower operating costs by making use of economies of scale

Sometimes, an M&A transaction occurs as a result of seeing potential in a younger company.

Regardless of why you’re considering undergoing a merger or acquisition, it’s important for the success of the transaction that both parties stand to benefit from the deal.

What Makes an M&A Transaction Successful?

According to Harvard Business Review, about 70 to 90% of mergers and acquisitions fail. This considered, how can you make sure your business is a part of the slim 10 to 30% of companies that succeed in this stage of your business?

Mutual Benefit for Both Parties

As we stated above, part of a successful M&A transaction involves a mutually beneficial deal. Both parties should experience some kind of gain, even if that means simply avoiding a potentially negative alternative.

A mutual benefit is essential to your M&A success, as you need to be sure both parties are fully committed to the deal. If one company stands to gain a significantly greater benefit, it may be a sign that the other party may not be as committed to the transaction–which could lead to the M&A’s demise.

Vision Alignment

Another element that leads to success in a merger or acquisition is a clear, shared vision of the future for both companies. For both the buyer and the seller, what does the company look like post-merger or post-acquisition? Having a clear understanding of what this looks like will allow for a smoother transition.

Uncover Your Plan B

In any plan where negotiations between two or more parties are involved, there’s a greater chance of failure. If negotiations stall, hit a dead end, or combust, what happens to your company? Set a plan B before this situation occurs, so you can confidently move into negotiations.

Set a Clear Timeline

Lastly, be sure to set milestones and deadlines throughout your M&A transaction. M&A transactions have a reputation of dragging on for months, even years at times. Having a set timeline with clear milestones and goals is essential to keeping the deal on track.

Why Do Some Merger and Acquisitions Transactions Fail? 

As we mentioned above, the majority of mergers and acquisitions fail. But how is this failure defined? A merger or acquisition failure is defined by whether or not the transaction met the original objective of the transaction.

With that being said, there are a few things to look out for before you undergo this process:

Culture Fit

One of the primary reasons that M&A transactions fail is due to the cultures of the two companies coming together. If the two cultures clash and leadership is unprepared, you may run into quite a few issues. This clash can carry over to your customers, and your original company can lose what made it successful in the first place.

Lack of Due Diligence

Performing an in-depth due diligence process prior to your M&A transaction is essential to the success of your deal. If you have an insufficient understanding of the other company’s financials, processes, and overall business, you may be blindsided post-transaction.

Integration Planning

The integration process after a merger or acquisition occurs can be lengthy. This integration comes into play in every aspect of the business, but buyers should pay specific attention to the technology integration, as it tends to be the most complicated and time-consuming.

Overly Optimistic Forecasting

Buyers are typically overly optimistic regarding the savings they will experience from acquiring a business. It can be difficult to predict operational and manufacturing costs, as there are often unforeseen complications that arise. 

Now that you understand what it takes to experience a successful M&A transaction, you can enter the planning stage. Whether you choose to pursue a merger or acquisition or a different avenue for exiting your business, take a look at this article to start preparing to sell your business.

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Exit Planning vs Succession Planning vs Legacy Planning: What’s the difference?

shaking hands

The terms succession planning and exit planning are sometimes used interchangeably. At the same time, legacy planning is a part of succession and exit planning strategies but can be addressed on its own for those high-net-worth individuals (HNWIs) who are not also business owners. While succession, legacy, and exit plans require care and attention, there are some important differences. 

Both succession planning and exit planning fall under the umbrella of Business Transition Planning. 

Business Transition Planning is the umbrella term for any strategy focused on creating, maximizing, and preserving the value of a business as it prepares for and experiences transition. 

A successful strategic business transition plan targets three crucial areas of need: 

  1. Maximize the value of the business while the business owner is still in place
  2. Prepare the business owner for the transition from tax strategies to life plans
  3. Optimize the organization structurally and culturally to weather the transition

What Makes Up a Successful Exit Plan? 

Exit planning takes a comprehensive look at the structures, financial, cultural, and legal that make a successful exit possible. It is the strategic process employed when a business is going to be sold or is going to merge with a third party. Because an unknown element will impact the business valuation, its leadership, its culture, and its productivity, the process of setting up a successful exit plan can take between 3- 5 years.

Some of the essential elements of a successful exit plan are: 

  1. Identify the Owner’s Objectives: financial goals, timing details, and people-focused objectives.
  2. Understand the Business’ Value: Intellectual Property (IP), revenue, market conditions, multiples, projections, bubbles, and upcoming industry trends. 
  3. Plan for Leadership Succession: Identifying the key people who will remain with the business through the transition to ensure the business retains its value and incentivize them to weather the transition.
  4. Tax Planning: Implementing tax strategies to reduce the tax burden of a multi-million dollar transaction requires months if not years of planning and implementation of tools from Defined Benefit plans to life insurance tools to philanthropic bequests and more…
  5. Financial and Legal Structuring: Ensuring that the company’s financials accurately reflect the business’ profitability will protect the seller from future exposure to litigation. Simultaneously, it increases the value of the business while legal protection and well-structured contracts with employees, vendors, and clients will help retain the value of the business. 

Who Should Have a Succession Plan? 

Succession Planning is focused primarily on the transfer of leadership and financial control of the business to a family member or key employee. 

When a succession plan is put in place early enough, there is an opportunity for the successor to develop their skills and experience in order to step into the leadership role and make a smooth and successful transition.  For this reason, a successful succession plan can be built into the business from the beginning or, at least be implemented well before discussions begin surrounding the business owner’s transition out of a decision-making role. 

When the succession plan involves an ESOP or the transfer to a key person inside the organization, there are components that need to be addressed:

  • Legal details involving representations & warranties
  • A transitional period during which the owner will remain in an advisory capacity
  • The structure of the acquisition of the company from a financial standpoint 

Generational succession requires identifying issues of control, family structure, rivalries, and the future of the company that should be addressed from a financial and cultural standpoint.  

How Does a Legacy Plan Play into Exit and Succession Planning? 

Legacy planning can also play a part in exit planning and succession planning. While exit and succession planning are both focused on the business owner’s departure from their role as chief decision-maker, legacy planning is focused on the impact of how:

  1. Increased time may have on the owner’s life and 
  2. Increased funds may have on the community around them. 

Integrating elements of legacy planning into an exit or succession plan may involve bequests to philanthropies to both offset taxes and leave a permanent positive impact behind.  It may be as straightforward as the choice to remain on a board in an advisory capacity in a boardroom named for you or as complex as a trust that funds the education or ventures of generations to come. 

For business owners who are HNWIs, the complexities around major money-in-motion events are not to be understated.  With so much on the line, it is essential to get the right advice.  

Trusted wealth advisor relationships, family back offices with lawyers who know your business structures, and reliable advisors to your family as a whole – not just to you the business owner – are important as you start to plan for an exit or succession in your business. Putting a plan in place does not mean that you have to stay on that timeline.  

At Centura Wealth we help set up exit planning, and tax-advantaged strategies for major wealth transfer events and then have the flexibility to pivot when clients’ plans change. Our team focuses on unique strategic plans that are customized to your family’s needs and objectives.  Reach out to learn more about how we help our clients be ready for what’s next. 

For more information on generational wealth and how to transform your strategy to make it last, read our article here. 

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5 Steps: The Liberated Wealth Process®

Young man arms outstretched by the sea at sunrise enjoying freedom and life, people travel wellbeing concept

If you’ve worked with any of our advisors at Centura Wealth, you have most likely heard us talking about the Liberated Wealth® process. 

We believe that it’s our role as stewards to embrace the details of your existing financial situation. This is where the Liberated Wealth® process comes into play. 

In the spirit of transparency, we want to provide information to our clients about our processes and findings. Let’s dive deeper into what the 5 steps of the Liberated Wealth® process look like.

Our tax planning generally starts with your existing baseline. After a comprehensive review, we illustrate and synthesize the complexities of your tax profile into sophisticated options. Our goal is to reduce your tax burden and drive meaningful outcomes for you, your family and friends, and charitable organizations.

Since real estate is often one of the major components of a family’s balance sheet, our expertise in real estate planning is frequently at the forefront of our clients’ minds and needs. 

Our team functions based on 5 main steps. They are as follows:

1. Uncover

First, we pursue holistic discovery by gathering and understanding data; the client’s purpose, path, and professional roster. 

2. Unlock

The next phase is to follow a precise design by analyzing and triangulating existing strategies, establishing a baseline plan, considering “what if” scenarios, and identifying a planning scope.

3. Design

The design element is a core piece of the Liberated Wealth® process. The design element includes a multi-phase action plan, a wealth scorecard, and charting new pathways. 

4. Liberate

This step involves understanding purposeful deployment. This includes implementation and advancement with plan implementation, coordination of professionals, portfolio implementation, and scorecard reporting.

5. Steward

The final step of the Liberated Wealth® process is to monitor and pivot through purposeful deployment. This includes plan monitoring, timely recalibration, and life events reset. 

This is a detailed explanation of what a process can look like for a client. It’s important to understand what the short and long-term goals are for your wealth management and understanding your advisor’s process is the first step to achieving that goal. 

All of these steps revolve around the importance of predicting and planning for the future. Let’s take a closer look into how planning is implemented into the Liberated Wealth® process. 

Planning

Planning is a multi-step process that may seem tedious but is essential to progressing your wealth. It’s easy to be financially disorganized, that’s where we step in. Centura Wealth helps you create order and organization, and most importantly — peace of mind. 

Planning to liberate your wealth looks different for each family, individual, and institution. At Centura, we offer different areas of planning, including: 

Tax Planning 

Short Range Tax PlanningLong Range Tax PlanningPermissive Tax Planning Purpose-Driven Tax Planning

Retirement Planning

  • Wealth Accumulation
  • Lifetime Income

Portfolio Planning

Portfolio ReviewPortfolio ProposalPortfolio Stress-testingBespoke Alternatives

Estate Planning

  • Charitable Planning
  • Multi-generational Planning
  • Life Insurance Planning

Real Estate Planning


Real Estate Portfolio Analysis 1031/ExchangesRefinancingExit PlanningLike Exchanges (TICs, NNN, DSTs)

Clearly, there are many planning options available to meet your unique needs. Depending on your position and interests, one of our advisors can work with you to narrow down which options deliver the highest value for you.

Precision

Our tax planning starts with your existing baseline. After a comprehensive review, we illustrate and synthesize the complexities of your tax profile into sophisticated options that drive meaningful outcomes to reduce your tax burden for you, your family and friends, and your organizations.

Precision is key, and our team will analyze and triangulate your purposes and want to design a unique liberated wealth plan. 

Part of the precision element includes:

  • Identifying Existing Strategies
  • Establishing a Baseline Plan
  • Unlocking “What-If” Scenarios
  • Identifying Planning Scope 

Purpose

The purpose of liberating your wealth will naturally stem from planning your finances with precision. Once Centura designs your personalized Liberated Wealth® Plan, the next step is to implement and advance the plan. This includes coordinating professionals, portfolio implementation, and scorecard reporting. 

With any big step, there are going to be adjustments that come up along the way, and we make sure they still align with your purpose. Centura will help you steward your Liberated Wealth® Plan, even if that means pivoting original goals. 

There are tangible ways your plan can be stewarded, including:

  • Plan monitoring
  • Timely Recalibration
  • Life Events Reset

Do you know what it means to find your North Star? Read our blog to find out.

Our process does not discriminate between uniqueness and commonalities and therefore is well-adjusted to serve our audience. We place importance on our passion for finding and solving complex problems. 

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein.  All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice.  We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).   Please read the disclosure statement carefully before you engage our firm for advisory services.

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How to Optimize Your Retirement Plan

Senior couple doing home finances using laptop indoors

At Centura Wealth Advisory one of our core values is stewardship. We believe in partnering with our clients to liberate their wealth management process. 

Part of our role as stewards to our clients is walking them through the entire financial planning process, from present-day to the coming years.  One of the main areas we address with our clients is optimizing their retirement plans.

Listen to the Live Life Liberated Podcast for a detailed perspective from Derek Myron and Kyle Malmstrom, as they discuss how the potential estate tax changes may affect your retirement plan distributions.

One question we often ask our clients is, “Are you ready to overcome the complexities and burdens that come with your success?” Learning how to optimize their retirement plans is one of the foundational steps in overcoming the complexities that come with wealth management. 

The two also share effective strategies to help transfer your accumulated wealth to your desired beneficiaries in a tax-efficient manner. Here are a few of the topics covered in the podcast linked above. 

  • A brief overview of the proposed Build Back Better Act
  • Different ways to take your money out of Individual Retirement Accounts (IRAs)
  • “Live-on” assets versus “leave-on” assets — what is better for you?
  • Reasons to start planning your wealth transfer as early as possible
  • And more

*It should be noted that the information about proposals is subject to change from the time this article is published.

Employee Retirement Income Security Act 

Prior to 1974, employees who worked at one or two companies their entire life would generally be given a pension. A pension is a defined benefit plan.

Some of the factors that would define an employee’s pension plan include: 

  • Years of contribution 
  • How much they made

These factors would determine how much money the employee would receive in the event of retirement, death, or become disabled or unable to work. 

 In 1974, however, the Employee Retirement Income Security Act (ERISA) was introduced. ERISA was the advent of the Individual Retirement Account (IRA). 

The main difference between ERISA and IRA is that ERISA plans are defined benefit plans. The IRA, on the other hand, was a defined contribution plan. This means that the employee can make investments that they control: stocks, bonds, and mutual funds.

Roth IRA

Since then, the rise in popularity of contribution plans has introduced other factors like a Roth IRA, which as far as optimizing your retirement plan, is a great starting point. 

A Roth IRA is a retirement account that grows tax-free and can have tax-free distributions (as long as you hold it for five years and are above the age of 59). 

There are two ways to optimize your retirement plan with a Roth IRA. The two ways are to contribute on an annual basis or to convert Converting your Roth IRA  is taking your existing, non-Roth IRA asset and converting it into a Roth IRA in order to reap the tax benefits.

A Common Challenge

The challenge, however, is getting wealth from a traditional IRA into the Roth IRA. If an individual is in a low-income tax bracket, it’s not a terribly painful process. However, if you’re in a high-income tax bracket, it can present more of a challenge. 

Due to the tax benefits that a Roth IRA provides, a large portion of people used this benefit. Because of this, the government did not predict the substantial amount of money put into these accounts. This brings us to the Build Back Better Plan. 

Build Back Better Plan

The Build Back Better Plan was proposed by Congress in 2021. It aims to place further restrictions regarding Roth IRA contributions on wealthier individuals. 

As stated by CNBC, “Wealthy individuals with more than $10 million in retirement savings would have to draw down their accounts each year, in a new type of required minimum distribution, or RMD. Lawmakers would also close “backdoor Roth” tax loopholes, used largely by the rich, and prohibit further individual retirement account contributions once those accounts exceed $10 million.”

One primary example of the reasoning behind the Build Back Better plan is the Paypal founder, Peter Thiel. Thiel has been able to amass $5 billion in his Roth IRA. Many people are upset and wondering, “How is this fair?”

How the Build Back Better Act Impacts Our Clients

Since 2019, Congress has been looking for loopholes to limit a plan owner’s options for optimization. In this case, “plan owners” include those who have a million dollars or more in their retirement plans and have an estate. Oftentimes, at this level of retirement planning, wealth transfer issues arise.

Plan owners are worried about how to optimize their distributions from their retirement plans because they know that Congress is looking to change the rules. 

What Now?

There are many ways to continue to optimize your retirement plan while you’re alive. 

You Can Make a Distribution

One option is to do a Roth conversion (depending on your facts and circumstances and the timing of income). You could then distribute from the Roth with the tax advantage.  There’s also a way to do an in-kind distribution of different assets out of an IRA that may be tax efficient.

Another option is a qualified charitable distribution. This method eliminates tax liability and the funds are sent to a charity of your choice. 

Set Future Goals

We believe your plan is not a one, two, or three-year plan.

Instead, we focus on a 10 or 15-year plan. The goal is to figure out how you’re intending to manipulate your cash flow and income tax, then to distribute your assets. This could mean distributing them to your spouse or even future generations.

In light of the potential changes coming from Congress, it’s important to start preparing for what’s to come. We encourage you to get in touch with your advisor and figure out a plan of action for your financial future.

As mentioned above, charitable giving is a great wait to improve your bottom-line, while also giving back to the community. Learn more about how charitable giving can improve your bottom line on our blog. 

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein.  All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice.  We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).   Please read the disclosure statement carefully before you engage our firm for advisory services. 

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An Insider’s Guide to Tax Deductions

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2022 is here, which means April 15th is not far behind. This considered it’s crucial to begin planning ahead for the tax season.

You have most likely exhausted most of your options as far as tax deductions go, but there may be some you might have missed with the potential tax changes on the horizon.

*It should be acknowledged that the information in this article is subject to change based on what may or may be altered with the proposed tax changes.

Corporate Gifts

Since the holiday season just passed, corporate gifting might have been top of mind for your company.

If you have employees who have birthdays, babies, or anything that requires a gift, corporate gifts can be deducted to a certain extent.

The Internal Revenue Service (IRS) states that “you [may] deduct no more than $25 of the cost of business gifts you give directly or indirectly to each person during your tax year.”

Sole Proprietor Tax Deductions

As far as deductions go, it’s important to be aware that half the cost of your 1040 form can be deducted if you are a sole proprietor (an unincorporated business owned and run by one individual). 

As defined by the Social Security Administration, you are considered “self-employed if you operate a trade, business or profession, either by yourself or as a partner.” There are two income tax deductions that can reduce your taxes.

  • The first is that your net earnings from self-employment are reduced by half the amount of your total Social Security tax. 
  • The second is as mentioned above, where half of your Social Security tax can be deducted from your 1040.

Educational Expenses

If there are any events that you or your company has participated in for educational purposes, those can be written off as well.

For example, if you’re a Digital Marketing agency, and your team attends a conference about the latest social media updates for 2022, the cost of the conference can be deducted.

General Business Expenses

While you likely know that most business expenses can be deducted from your tax return, you may be leaving some unknown deductions out. But what is considered a business expense? 

  • Any cost that is helping a business grow
  • Any cost that is helping your team improve their performance

For example, if your HR Manager purchased an audiobook on human nature and communication styles, that can be useful for their role in the office – therefore deducted from your tax return. 

Office supplies also fall into the business expense category. (As we’re sure you know, that printer ink cost can really add up!) This also includes office supplies like pens, electronics, paper, organizational tools, and more. 

Home Office

Since hybrid and remote workforces have become the new normal, assisting your team in creating a home office that breeds productivity can be pricey. The good news is that cost can be considered a write-off for your 2022 tax returns.

In fact, this might even mean deducting a portion of your mortgage or rent as your office space. Of course, this calculation requires the square footage that is actively being used as a home office and applying that to your total rent or mortgage.

Travel Expenses

Your first thought might be, “Of course I can deduct the airfare for business travel,” but don’t forget about all the other expenses that come with travel. You can often deduct:

  • Food
  • Wifi fees
  • Parking
  • And more

Entertainment and Meals

Networking is a large part of most industries.

Networking usually consists of some form of entertainment or food. Any meals that are shared with prospects and/or current clients can be deducted. Any entertainment (or events) hosted by your company can also be deducted.

Donations

Lastly, charitable contributions are tax-deductible. Be sure to keep your records of charitable contributions in order to utilize the tax benefits of your company’s effort to give back.

At Centura Wealth, we have tools in place to assist our clients in using charitable giving tools to not only improve their bottom-line but, more importantly, to give back to their communities.

As you look towards the next year, it’s important to take a look not only at the upcoming tax season but also at your financial planning as a whole. At Centura, we understand that the intention behind your planning can positively impact your wealth management, read more in our article here about how intention can influence your financial planning.

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein.  All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice.  We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

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Up and Coming Technology for Wealth Advisors

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As a wealth advisor, you want to provide the best service to your existing clients and prospect for new clients in the most effective way. That can be a challenging balance without the proper technology in place to support you.

The big wirehouses have access to behemoths of technology that supports wealth advisors; however, they can lose the personal touch and the collaboration that a wealth advisory might offer. These technology systems require intense customization and onboarding, which can be difficult to handle on your own. 

At Centura, we prioritize being both innovative in our advisor’s access to technology, while also providing that personal collaboration that drives success. In an effort to display this priority, we have pulled together a list of the top-up and coming technologies for wealth advisors to start implementing.

A La Carte Your Tech

At Centura Wealth, we found that building a tech stack with three different ‘a la carte’ solutions matched our needs more specifically than one ‘do-it-all’ program (like EMoney).

All three solutions we decided on integrate with our hubs to create a specialized approach that works for us.

Our tech stack is made up of:

  • Salesforce
  • Orion
  • Right Capital
  • Hidden Levers
  • Wealth Access

This a la carte approach to technology is one we’ll likely see become more common in the future depending on your size, clientele, and resources.

Most Common Technologies Used to Support Wealth Advisors

With today’s current technology environment, there will always be ‘the next best thing’ which can make it challenging to narrow down what technology actually works for you and your client’s needs.  As we said above, a combination of softwares can really enhance the way you do business. Here are a few of the most popular technologies we see used in the industry.

eMoney

While eMoney seems to be the program that does it all, there are certain restraints with using this software.

eMoney claims “financial discussions don’t have to be difficult. Neither do tech solutions that power them. At eMoney, we’re committed to delivering innovative, planning-led solutions that power your business. Our comprehensive financial program is built for the way you work and designed to scale and meet the growing needs of your firm.” 

With eMoney, a client has access to: 

  • A “Financial Feed” of data, providing news and alerts
  • Planning and Analytics for “conventional retirement and education planning, cash flow-centric planning, estate planning” 
  • Reporting on Data
  • Balance Sheet
  • Client Portal
  • Third-Party Integration and Data Aggregation

This software is used on a large scale, which can have a downside. With lots of notifications that can disturb client relations and research, it can be a challenging software to personalize your process.

Advicent

Advicent, also known as NaviPlan, is another major contender for a program that might work for the masses. This software is great to get you started. 

Some of the main features that are listed for Naviplan include: 

  • Account aggregation
  • Advanced tax planning
  • Asset allocation & risk tolerance
  • Business planning
  • Cash flow planning
  • Client portal
  • Collaborative financial planning
  • Compliance workflow
  • Custom client reports
  • Equity Compensation
  • Estate planning
  • Financial fact finder
  • Goals based planning
  • Guided retirement 
  • Insurance Planning
  • Monte Carlo analysis
  • Retirement income modeling
  • Scenario analysis

A Wealth Advisory Tech Stack

As mentioned above, we use Salesforce, Wealth Access, and Orion. Choosing to mix and match our tech stack has created the balance of using tech and affordability. 

Wealth Access

Wealth Access is used for data aggregation. Although there are predictions that data aggregation is the future of technology in wealth management, there are some flaws to the system that will hopefully be resolved in the near future. 

Wealth Access uncovers “clear, consistent, and complete stories about your customers when you unify your data,” leading to hyper-personalization that turns existing customers into loyal fans.”

Wealth Access focuses on four pillars: 

  • Complete Customer Information
  • Deep Insight
  • Hyper-Personalized Experiences
  • Serious Savings

Wealth Access is Centura Wealth Advisory’s most useful data aggregator. 

Orion Advisor Tech

Orion is the key to earning back your time. “From billing to compliance and reporting, these daily responsibilities eat up the clock, leaving a short window to focus on prospects and clients. Through innovative tools, easily complete your tasks at hand and leave time for scaling your business.” 

Orion helps with household and portfolio data and gathering information quickly. The tech works seamlessly with advisor needs to serve a number of roles, including: 

  • Independent advisors
  • Chief Compliance Officers
  • Chief Operations Officers
  • Financial Planners
  • Breakaways
  • RIAs
  • Broker-Dealers
  • Banks
  • TAMPs
  • Aggregators

Orion says in regards to financial planning, “even the best financial blueprint is useless unless you have the tools and the technology to bring the vision to life.” 

Orion has helped Centura Wealth create a loyal client base towards the systems we use and adds value. 

Salesforce

Salesforce is a customer relationship management (CRM) software that allows Centura Wealth to keep automation at the forefront.

Along with data organization, the specific tool in Salesforce, named Pardot, allows Centura Wealth to provide marketing information to our clients. This is where we build stronger relationships with our clients because we answer the common questions we get as advisors (on our blog and through workflows).

While technology can assist with your client service and prospecting, it is not the entire picture. Adding value in ways that go beyond the basics is a way we differentiate ourselves from other advisories. Learn more on the blog.

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein.  All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice.  We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).   Please read the disclosure statement carefully before you engage our firm for advisory services.

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