Investments | August 15, 2016

Should Politics Play a Role in Your Financial Plan?

by  Laurie Wexler Gerber, MBA

Will having a Republican in the White House mean less tax regulation? Will a Democratic administration result in a thriving economy? These are compelling questions… without clear answers, which is part of the reason why politics should not play into your financial plan. It’s impossible to say which campaign promises will get passed, or how the markets will react (although, if you’re into macroeconomics and regression analyses, there are several interesting studies that explore how political conventions affect stocks).

The bigger reason, which is a guiding rule in wealth management,that is worth repeating here: it doesn’t pay to be reactionary. If you’re doing it right, financial planning isn’t driven by today’s headlines or even a four-year-long partisan agenda. Your best bet is to be prepared on key fronts, and check in with your wealth management team regularly, as tax laws and other financial realities change. Here’s how:

Build Retirement Goals into Your Financial Plan

This election year there’s been a lot of talk about health insurance, Social Security, the cost of prescription drugs, etc. These are important topics to follow, for sure, but they’re only one piece of a much broader retirement planning conversation. Your baseline questions should be:

  • What’s my vision for retirement?

How will my life change as I begin to approach the “red zone”? What are my plans for hobbies, travel, relocation? 

  • How much do I need to realize that vision?

Do I have a clear picture of my current expenses? Have I accounted for future expenses and variables like long-term care or aging-in-place necessities? 

  • How will I get there?

Am I leveraging the right mix of savings vehicles? Do I know how to build retirement accounts (and withdraw from them) with optimal efficiency?

If you haven’t already discussed these questions as part of the financial planning process, it makes sense to do so sooner, rather than later. The younger you are, the more options you may have.

Prioritize Tax Planning

According to IRS statistics, there were 4,430 tax code changes between 2001 and 2010, averaging more than one change per day. And the complexities that accompany each change are manifold. In fact, between 1984 and 2016, the length of the federal tax code nearly tripled. So regardless of who lands in the Oval Office next year, it’s safe to say you shouldn’t tackle tax planning on your own.

Proactive tax management is more important than many people realize. Conversations about taxes should happen at several times during the year , and should be integrated with other facets of your financial plan—including household budgeting, career change plans, charitable giving, estate planning (i.e. areas that are out of scope for the average CPA). In some cases, finding the right tax opportunity can be more effective than choosing the right mutual fund. So if you’re not already engaging in bi-annual tax reviews, it might be time for a tax planning consultation.

Practice Strategic College Planning

Will public colleges in the U.S. soon be tuition-free for certain students? Possibly, but we we suggest you don’t bank on it. Any number of hurdles still stand in the way, including one big sticking point within your own family… (Who’s to say your child or grandchild is best-suited to a public institution)? So regardless of the educational cost reforms we’ve heard on the campaign trail, there will almost certainly still be significant out-of-pocket expenses—particularly for affluent families.

An informed college savings plan is critical; that often means effective use of a 529 plan. Key considerations include:

  • Are you choosing the right plan?
  • Are you contributing ideal amounts?
  • Do you understand the different investment options?
  • Are you clear on account ownership implications (e.g. in cases of death or divorce)?
  • Do you know how 529 plans in some situations may be used as an estate planning tool?

When it comes to college planning, the simple answer will always be: save as much as you can. A much smarter answer is to save strategically with the help of an established wealth management firm

The information provided above is general in nature and is not intended to represent specific investment or professional advice.  Views expressed are those of the author and not necessarily those of GW & Wade.  GW & Wade does not assume any duty to update any of the information. No client or prospective client should assume that the above information serves as the receipt of, or a substitute for, personalized individual advice from GW & Wade, LLC, which can only be provided through a formal advisory relationship.   

Clients of the firm who have specific questions should contact their GW & Wade Counselor. All other inquiries, including a potential advisory relationship with GW & Wade, should be directed to:

Laurie W. Gerber, Client Development

GW & Wade, LLC

781-239-1188

lgerber@gwwade.com 

Investments

Laurie Wexler Gerber, MBA

GW & WADE CLIENT DEVELOPMENT MANAGER

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