Planning and managing your financial future is not rocket science, yet it is as complicated and important. It starts with listening and understanding all of your and your family's goals. DWM planning is designed to help you wisely manage your finances so you can reach your goals and dreams, while negotiating the barriers and changes that will inevitably arise in every stage of life. It’s an area where we can add real value to your financial life:
DWM in action:
Jim and Sue’s first question to DWM was “when can Jim quit his job?” Jim was 48, an executive for a large company who worked 50-60 hour weeks, traveled a great deal and was quite successful financially. Jim liked to work, but had grown tired of the pace and constant travel of his current job. His wife Sue worked in a small family business. In addition, in 2008, before they were DWM clients, they had lost roughly 35% of their retirement funds in the financial crisis. That really bothered them and, when we first met them, almost all of their retirement funds were sitting in cash.
We showed them how their money sitting in cash was losing purchasing power each year due to inflation and this was causing their date of financial independence to be further in the future than it needed to be. We reviewed the need to stay fully invested in an appropriate asset allocation meeting their risk tolerance. We also showed them that the most controllable variable in financial planning is the amount of money spent each month. We helped them identify their expenses as needs, wants and wishes. With no changes, it appeared that Jim and Sue would not reach financial independence until age 65 and therefore had another 17 years with Jim in his current job. We recommended a scenario whereby they would become fully invested in a conservative allocation and modify their current and proposed spending; eliminating certain wishes that really weren’t that important to them. With these changes, they reduced their date of financial independence by 8 years. As we monitor the plan, we see that Jim and Sue should be financially independent at age 57, able to retire from the big company and pursue their passions for as many years thereafter as they want.
Reaching financial independence eight years earlier. Priceless.
There are many metrics that impact timing on financial independence and overall cash flow management. These include assets, annual additions to your investment accounts, your proposed date of financial independence, your expected “retirement income”, inflation, investment returns, tax rates, goals (including spending needs, wants and wishes), and expected longevity. After a thorough review and understanding of your unique metrics, we develop scenarios and choices for you for the future. Once we agree on your plan, it is implemented and then subsequently monitored and revised as appropriate over the coming decades.
DWM in action:
Laura was recommended to DWM from a local CPA after she had sold a large rental property and came in with a seemingly simple question: “How should I invest the proceeds?” Of course, we were happy to review her risk tolerance and talk about DWM’s investment philosophy of protecting and growing her net worth and how we can do that for her. But, knowing that investment management is about both asset allocation and asset location, we first asked her and her CPA a very important question: “What are the tax consequences of the sale and what will Laura’s overall tax status be for the current year?” The CPA informed us that the property was sold at a loss and that suspended rental losses were now available to be used to offset income. We suggested to Laura and her CPA that Laura convert part of her IRA holdings to her Roth IRA acount. The conversion could be done virtually tax-free in this circumstance and the Roth IRAs would provide Laura and her family with an asset that would grow tax-free for her lifetime, not require minimum distributions as Laura's IRA does and ultimately could be passed on to her heirs, who could continue to stretch out the tax-free benefits of the Roth IRAs over their lifetimes. The CPA and Laura agreed. DWM also suggested that, based on her tax bracket, Laura convert $35,000 per year from her IRA to the new Roth IRA, so that over time more of the assets in her estate would be Roth IRAs, the best form of asset ownership for an heir to receive. That program is in place right now.
Tax efficient conversion of hundreds of thousands of dollars from a traditional IRA to a Roth IRA which provides tax-free growth for Laura and her family for generations to come.
Your investment management and financial planning strategies and operations need to be tax efficient. DWM keeps your tax consequences in mind in everything we do. While DWM does not prepare tax returns, Les Detterbeck has prepared and reviewed thousands of tax returns. We have a regular process of obtaining copies of client tax returns, reviewing them and helping clients with projections of income taxes for the current year. As part of that process, we often make recommendations to clients and their CPAs of ideas that could reduce income taxes and increase family legacies.
Tom and Brittany were paying $14,000 for home, auto and umbrella insurance coverage with a large, well-known carrier. As part of our regular review of client’s coverage, we asked for their permission to get quotes from agents we know and trust. Ultimately, we found that a new, well-financed insurance company focused on high-net worth homeowners, could deliver identical coverage for $9,000. The new agent also worked with them to inventory Tom and Brittany’s personal property to provide backup in case of a future claim and to better categorize the items to save even more on premiums.
Tom and Brittany reduced their annual property and casualty insurance bill by more than 35% by changing to a new financially strong carrier. They also have now inventoried their assets and better categorized them for proper coverage and even lower premiums.
DWM overall approach:
We don’t sell insurance, but we know insurance. DWM collaborates with competent, trustworthy agents in every category, property and casualty, life, disability and long-term care. Our objective is to make sure your coverage is appropriate, not too much or not too little, and the premiums are as low as possible.
Robert started his business in his 20s and now he is in his 80s. Robert has a substantial net worth. In fact, as part of our on-boarding process with new clients, we determined that if there were no changes in his estate plan, Robert’s family would need to pay roughly $4 million on estate tax upon his death. When asked, Robert’s CPA and attorney told us that they had talked to Robert about this, but he wasn’t interested in doing anything. DWM felt that the adoption of a few key advanced estate planning techniques could save millions and put together a customized presentation for Robert, including plastic bins and index cards, to show Robert how these strategies would work to save taxes, while still allowing him to retain control. After Robert said yes, we worked with his estate planning attorney and his CPA to get these strategies documented and implemented. And, we continue to monitor these strategies and the various programs to make sure they are operating in the appropriate manner.
The advanced estate planning strategies identified by DWM saved Robert and his family roughly $3 million.
We want you to pay the least amount of estate tax possible, to make sure that your estate will be distributed in the manner you wish and that estate administration is inexpensive and hassle-free. We are not attorneys, but we do provide a recap of your estate planning documents in a simple format, the titling and beneficiary designations of your assets and our recommendations for your consideration and that of your estate planning attorneys. We act as the catalysts, collaborating with your attorneys and CPA's to put your estate plan in order.