Financial Planning for High-Income Earners in Akron Canton Ohio
Wealth is more than having plenty of money to spend. Handled wisely, it can provide a family legacy of independence to last for generations. However, the higher your income, the more vital it becomes to have a solid financial plan in place: Particularly during inflationary periods, even the affluent can lose significant sums to carelessness.
This article will discuss some of the basics of investment strategy for high-net-worth individuals. We hope that you can use them to help you ensure that your wealth continues growing toward your financial goals in all economic seasons.
Please join us in exploring the following:
- Why is financial planning essential for the affluent?
- Can it help you protect your wealth during volatility?
- What are financial planning’s potential benefits?
- Could a financial advisor in Akron or Canton, OH help?
Why Is Financial Planning Essential for the Affluent?
It can seem almost maddening at times: The more your business thrives, the busier you get, leaving you less and less time to keep track of your financial life. The very money you labor for (and sometimes make sacrifices, short-term, to earn) can become almost as much of a challenge to keep tabs on as it is a prize.
Similarly, the more money you inherit, the easier it can get to mistakenly think you never have to worry about it. When wealth has always been there, it can seem like a natural resource that your family can never run out of. In times like these, however—when inflation and market volatility can have dual destructive impacts on everyone’s wallet—that is not necessarily the case.
Inflation, put simply, tends to diminish the value of money. Let’s say that you have $10 million in a savings account: If inflation is minimal, every one of those dollars can purchase a lot. Meanwhile, when inflation rises within an economy, it takes more and more of the local currency to buy the same things.
The same account ledger might read “$10 million” in 2019 (before inflation struck) and now. However, in reality, that money may only buy what $8 million (or even $5 million) would have gotten you previously. In other words, you can look wealthier and more financially secure on paper than you actually are.
Unfortunately, market volatility doesn’t wait until your bank account is at its peak monetary value. In fact, looming inflation can act as an emotional catalyst to Wall Street fears. That, in turn, can lead to increasing volatility, lowering the value of certain types of assets in anticipation of the higher interest rates that typically follow. Put another way, your portfolio can potentially start to decline at the same time, as well.
Can It Help You Protect Your Wealth During Volatility?
One of financial planning’s most valuable benefits is that it can help investors keep a more weatherproof portfolio. While no mortal can predict what next year’s economy will look like with 100% accuracy, an accredited and experienced wealth manager can often tell where current trends are likely to be heading.
Seeing inflation’s storm clouds on the horizon, they may recommend, for example, that you rebalance your portfolio to favor floating-rate assets for your retirement planning. This is because, unlike fixed-rate bonds, those investments gain value in tandem with how high interest rates rise. If you already have an ongoing professional relationship with an advisor, they may be able to make these kinds of adjustments well ahead of your needs.
Conversely, investors holding long positions in fixed-rated assets may see concerning losses. That diminishing equity might have been prevented, had they not been careless or waited until the last minute.
What Are Financial Planning’s Potential Benefits?
A gifted team may be able to minimize the damage that inflation and volatility can cause. Generally speaking, a long-term relationship is always preferable: The longer that you work proactively with an advisor, the better they can help you strategize to keep your savings and investments stronger through twists and turns in the market.
For instance, a fiduciary financial advisor can help you leverage tax-advantaged savings accounts. These financial vehicles allow you to defer taxes by placing money into them, opting to pay those taxes only once the money is withdrawn. For instance, if you have a 401(k) or 403(b), your employer may match a portion of your contributions on a pre-tax basis. Meanwhile, the remainder could go into an (after-tax) Roth account.
A Roth IRA is also a retirement savings account. However, its contributions aren’t deductible because you’ve already been taxed on them. As a result, you may enjoy growth on both your earnings and your contributions, tax-free. When you finally do withdraw your money, assuming you’ve adhered to the guidelines, you get to keep it all.
HSA and FSA Accounts
If you have an HSA and FSA account, those are tax-advantaged, as well. This means they can help you save money on your taxes by lowering your taxable income. The rules and regulations for each differ though, so it’s important to understand how each works.
If your company has health insurance with a high deductible, it can offer a health savings account (HSA). An amount is withheld from account holders’ paychecks, before taxes, for use on medical expenses that qualify. You, as the holder, own this account. That means that both your contributions and interest earned are yours, even when you no longer work for the employer.
A flexible spending account (FSA), meanwhile, is owned by the company. Consequently, when you leave employment with them, any money remaining in the account does not get refunded to you. Otherwise, it works similarly to an HSA, helping employees fund medical expenses as needed.
Could a Financial Advisor in Akron or Canton, OH Help?
As you consider defensive investing options, remember that there are two main types of investment vehicles: stocks and bonds. Stocks are shares representing ownership in a company; they tend to be more volatile than bonds but have the potential for greater rewards over time. Bonds are, essentially, I-O-Us issued by companies or governments that pay regular interest payments until they mature (reaching their payoff date).
Many investors choose mutual funds, which are essentially portfolios containing many different investments grouped together under one name, as their primary investing vehicle. A variety of other options exist as well, such as exchange-traded funds (ETFs), real estate trusts, annuities, and many others.
As a high-income earner, don’t forget that you can utilize contributions to tax-advantaged retirement accounts such as 401(k)s and IRAs. This strategy does not only help reduce your gross income for tax planning purposes—it allows you to boost your retirement savings over time, as well.
McGervey Wealth Management is an experienced fiduciary financial advisory firm. We are specialized for high-net-worth financial planning in Akron-Canton, Ohio. Contact us today to learn more about how a comprehensive financial plan could help you achieve your financial goals.