Wealth Management in Birmingham, AL: Strategies for Financial Success

Financial planning is an important part of the foundation for wealth management strategies: Accumulation, preservation, and distribution. Here’s why it matters so much:

• Financial planning helps you set clear goals for the future. It is hard to arrive at a destination if you don’t know where you are going and don't have a well-thought-out map for getting there. Whether buying a home, funding your child's education, or preparing for retirement, having a plan gives you a clear sense of direction. You should know your “plan” is achievable over time. 
• You already know life can be unpredictable. That is another reason you need a comprehensive financial plan that includes risk management strategies to protect you when the unexpected happens. Your financial plan may also include various types of insurance, emergency funds, and a highly diversified investment plan. 
• It is a fundamental part of your foundation to have an emergency fund in a fast, easy-to-access account for unexpected events that occur with little or no warning. The textbooks would tell you to have between three and six months of living expenses. Do you know what would make it three months and what would make it six? Some people need an even larger emergency fund. A financial plan determines what amount you should treat as though it is 0 in your bank accounts.
• When you have a well-thought-out financial plan, you can be sure every dollar has a purpose, whether covering the costs for immediate needs or investing for the future, thereby funding your financial independence.
• Your financial plan should be considered a living document rather than a set-it-and-forget-it document that graces a bookshelf in your home office. You should review your plan regularly with a Birmingham CFP® professional so you can track your progress over time and make adjustments as necessary. Frequent reviews help keep you on track to meet your goals.
• Budgeting and savings should also be included in your financial plan as key components of your financial journey. Your plan should be based on disciplined spending, saving habits, and goals, ensuring you accumulate additional assets throughout your working years. You might need a new set of disciplines for your transition years (five years before and after your retirement date) and early retirement years, when your expenses peak as you prepare for the rest of your retirement.

BCR Wealth Insights: Our financial planning process starts with understanding your current financial circumstances, identifying your goals, and developing strategies to reach those goals. We use our proprietary BCR Plan to Succeed℠ process to model different scenarios and the probability of their outcomes.

Once you have the savings part of your plan, the next step is to develop an investment strategy that reflects your goals, timelines, and tolerance for risk. This strategy can include domestic and foreign stocks, bonds, and other investments. Depending upon your age, timelines, and circumstances, it may be appropriate for you to use different investment strategies such as: 

Early in Your Career (20s to 30s)

At this stage, you typically have a much longer time horizon before you need the assets or income from the assets, so you can afford to take more risk. Our focus is on growth-oriented investments, with higher potential returns despite their potential volatility. While more aggressive while you are young, maintaining a diverse portfolio across different asset classes may help minimize your risk.

Mid-Career (40s to Early 50s)

As you age, you are more than likely able to accumulate more assets in your prime earning years. Your strategy often shifts to a more balanced investment strategy that includes a mix of more conservative stocks and bonds to minimize your risk of large losses. At the same time, you should maximize your contributions to your retirement savings accounts: 401(k), Traditional IRAs, Roth IRAs, and personal savings accounts.

Pre-Retirement (Mid 50s to Mid 60s)

As you near retirement, your savings ability is at or near its peak, and your focus may be shifting to determining the right moment to transition to retirement. This is not a time to get conservative as your portfolio still has a long outlook. 

Retirement (Mid-60s and Beyond)

The primary goal is to generate a replacement of your income with tax-smart expected returns.

At this stage, your investment strategy should include offsetting the impact of inflation, generating the necessary cash flow, and preserving any capital you wish to pass on. 

We would be remiss if we did not point out that you and/or your spouse may be retired for 30 or more years due to rising longevity. This is why it is important to have the right strategy in place during your late working and early retirement years.

It is also important to plan for rising healthcare costs later in life, which may include Assisted Living, Skilled Nursing, and Memory care. There is always the possibility that one or both spouses will need this level of care. 

You will also need a more complex estate plan to ensure that your remaining assets are distributed according to your wishes. This plan can include heirs, charities, and other institutions you wish to support.

If this sounds a little daunting, that is why we are here. At BCR Wealth Strategies, we believe in creating planning and investment strategies that align with your financial goals, timelines, and tolerance for risk. This involves a thorough assessment of your current financial circumstances and an understanding of your long-term objectives.

We manage diverse tax-smart investment portfolios. We focus on constructing a portfolio that balances the need for returns with the management of risk, which is based on current market conditions and future economic forecasts.

Here are five key reasons why retirement planning should be a primary component of your wealth management strategy:

1. A comprehensive retirement plan should include a plan to ensure you have a dependable income stream during all of your retirement years. This may include income streams such as retirement savings (IRAs, 401ks, Roth, etc.), Social Security, pensions, and other passive income streams you may have accumulated during your working years. 
2. You should plan for rapidly rising healthcare costs, which can be a significant concern for both spouses as you age. 
3. Your retirement plan should also account for Social Security benefits. It should outline the best time for you and your spouse to begin receiving benefits to ensure a sufficient income stream while addressing tax issues if Social Security benefits cause you to be in a higher tax bracket. 
4. Your retirement plan should include various tax-efficient strategies that will reduce your tax liabilities after you retire. 
5. A well-constructed retirement plan should include strategies for managing unexpected expenses and safeguarding against financial shocks. 

BCR Wealth Strategies: We provide guidance and advice on all retirement savings accounts, such as 401(k)s, IRAs, and Roth IRAs, helping you understand which options best suit your current and future needs. We also provide asset location strategies to maximize your after-tax returns. How you place your investments in the various accounts and take distributions can produce tax efficiency while boosting your portfolio performance.

Estate planning involves creating a will, setting up trusts, and ensuring that all your assets are transferred smoothly to the next generation and/or the charities and institutions you want to support after both spouses are gone. An effective estate plan secures your legacy and ensures your financial wishes will be honored by all involved in the process. It’s crucial to avoid legal complications and ensure your assets are distributed according to your wishes. A typical estate plan can include the following components:

• Wills and/or Trusts: Establish clear directives for asset distribution and minimize the risk of probate delays for heirs.
• Beneficiary Designations: Regularly update beneficiaries on retirement accounts and insurance policies.
• Gifting: Utilize annual gift tax exclusions to transfer your wealth more tax-efficiently.
• Power of Attorney and Healthcare Directives: Appoint trusted individuals to make financial and medical decisions if you become incapacitated.
• Estate Tax Planning: Use strategies like irrevocable life insurance trusts (ILITs) to reduce estate tax liabilities.

BCR Wealth Strategies: BCR Wealth facilitates this process through our Passing the Torch process. We provide strategies to minimize potential estate taxes, ensuring your beneficiaries receive the maximum possible inheritance. This can include using gifts, trusts, and other legal structures.

Here are five common tax planning strategies included in Birmingham wealth management services:

• Maximize Retirement Contributions: Contribute to 401(k) and IRAs to reduce taxable income while growing savings inside the accounts on a tax-deferred basis.
• Utilize Tax-Advantaged Accounts: Use Health Savings Accounts (HSAs) and 529 plans for tax-free growth and withdrawals for qualified expenses.
• Tax-Loss Harvesting: Offset capital gains by selling underperforming investments at a loss.
• Charitable Donations: Donate appreciated assets to charities for tax deductions while avoiding capital gains taxes.
• Strategic Asset Location: Place tax-inefficient investments in tax-deferred accounts and tax-efficient investments (for example, municipal bonds) in taxable accounts.

BCR Wealth Strategies: Our tax planning services include strategies to make your investment portfolio as tax-efficient as possible, utilizing tax-advantaged accounts and investments. We guide you through the complexities of tax brackets and deductions to help you plan your financial activities to minimize your tax liabilities during your working and retirement years.

If you have amassed $1 million or more in investable assets, there are several asset protection strategies you can deploy to safeguard your hard-earned wealth:

• Place assets in irrevocable trusts to protect them from creditors while maintaining control over their distribution.
• Alabama’s homestead exemption offers limited protection for primary residences against certain creditors.
• Holding assets in LLCs can shield personal wealth from business liabilities.
  
• Maximize contributions to 401(k)s and IRAs, generally protected from creditors under Alabama law.
• Purchase adequate liability, umbrella, and life insurance to cover potential claims and lawsuits.
• Prenuptial and Postnuptial Agreements: These agreements can safeguard assets in divorce.

BCR Wealth Strategies: We offer strategies to protect your assets from potential lawsuits, creditors, and other risks. This includes setting up appropriate legal structures such as trusts and family-limited partnerships. We can connect you with our Curated Resource Network (CRN) of vetted professionals, including attorneys and CPAs, to help establish the legal structures that best protect your wealth. 

Are you ready to talk to a team of Birmingham CFP® professionals about your wealth management plan? Contact us for an introductory conversation.