Retirement Planning Canton, OH

If you’re looking for a financial advisor to help with retirement planning, there are a variety of factors to take into account. These include whether the advisor offers comprehensive planning and how they manage investments, among other factors. Before selecting an advisor, it’s important to have some knowledge of what goes into the retirement planning process, from setting and analyzing your goals to selecting an investment portfolio designed to help you meet those goals.

To provide a comprehensive picture of the process, let’s first take a look at what it means to plan for retirement.

Chapter 1

What Is Retirement Planning?

Retirement planning refers to outlining and analyzing all the steps necessary to put yourself in a position to retire. The key goal is financial independence, meaning you no longer depend on your income from employment, whether you work for a company or are self-employed, to meet your living expenses. Whether you actually retire or simply decide to work less is up to you, of course, but retirement planning is crucial to giving yourself the ability to make that choice

This process involves asking fundamental questions about your financial position, goals, and what you are looking for from life, including:

1) Who are you?

2) What do you want from retirement? 

3) How can you get there? And

4) Where are you on your journey?

It involves specifying retirement goals that help determine what it will cost to live your preferred retirement lifestyle. This can involve asking questions such as:

  • Where do you want to live?
  • How much income do you expect to have?
  • What expenses do you expect to maintain your standard of living (food, lodging, etc.)?
  • What type of lifestyle would you like to lead?
    • Travel?
    • Hobbies?
    • Entertainment?
    • Group memberships?
  • What other financial obligations will you have?
    • Helping kids and grandchildren financially?
    • Giving to charity?
    • Membership fees for social, charitable, or athletic groups?
Chapter 2

When should a person start the planning process?

The saying “there is no time like the present” certainly applies to saving for retirement. Given the power of compounding on investing, the sooner you can start planning the better. This doesn’t mean that you shouldn’t plan at all if you don’t get started until later in life. Given its vital importance to enabling you to live the retirement lifestyle of your choice, it is crucial to take the time to plan for retirement whether you start the process early or late.

While planning for retirement should begin as early as possible, generally the process begins at some point after a person acquires steady employment. While it may seem like other goals such as purchasing a house or a vehicle should take precedence at this point in your career, this doesn’t mean that you can’t also be taking steps to prepare for retirement.

For instance, many employers offer 401(k) retirement plans you can contribute to soon after joining a company. So, even if you aren’t setting aside other funds for retirement early in your career, you can jumpstart your retirement savings by contributing to these plans.

Whenever you start planning, it’s important to understand the why as well as the what. Doing so increases the likelihood that you will approach the process with the seriousness it deserves, thereby increasing your chances of attaining your retirement objectives.

Chapter 3

Why should people plan for retirement?

The old saying “to fail to plan is to plan to fail” is especially relevant to achieving your retirement objectives. While it’s always possible that a person makes so much money during their career that a comfortable retirement is a foregone conclusion, this is by no means typical. Given the rising cost of living and ever-changing economy, simply assuming you will have enough money to live the lifestyle of your choice in retirement is not a prudent approach.

Your chances of success in just about any complex endeavor can benefit from planning, and retirement is no exception. If you want to boost your chances of living a comfortable lifestyle in retirement, planning is essential. A major reason for this is the impact of inflation on your purchasing power and standard of living, which will be covered in detail in a later section.

Another factor in favor of planning is the combination of a volatile economy and any potential employment or career changes you might make. In the modern economy, working a lifetime for a single employer, with all the certainty that offers for retirement planning, is no longer the norm. While moving from job to job, and sometimes industry to industry, may provide opportunities for personal and income growth, it also increases variability with regard to compensation. If the industry you work in falls into a slump, it can negatively impact your income.

Whether your compensation rises or falls as a result of personal changes or fluctuations in business conditions, it should be reflected in your retirement planning. For this reason, it’s important to both set initial retirement spending and savings goals and also to periodically review them in order to account for any changes from your original assumptions.

Chapter 4

How do you get started?

The first steps to planning for retirement typically involve collecting information and making projections. This process is at the heart of wealth management strategies designed to help you build sufficient savings to fund a comfortable retirement.

Doing so involves asking questions such as the following:

  • How much of your current income can you put aside for retirement now and how is that likely to change over time?
  • How much do you already have in savings that you can use for retirement?
  • What sources of retirement income will be available to you aside from your savings (pension plans, Social Security, annuities, passive income, etc.)?
  • What retirement plans are available to you (401(k)s, IRAs, etc.)?

One of the most important questions to ask in the retirement planning process is how much income you will need to live on when you retire.

The following process can be used to compute this figure:

First, estimate your retirement expenses:

  • 70-90% of current levels is one guideline
  • More specifically, look at current expenses and estimate how they will change when you retire
    • Will your mortgage be paid off?
    • Higher or lower living expenses? No commute? Less expensive work clothing?

Then, estimate retirement income:

  • Pensions, social security, IRAs and 401(k)s, annuities, passive income from real estate, etc.

The difference between your estimated income and expenses in retirement is how much must be covered by extra savings prior to retirement.

Once you’ve determined this number, analyze current and projected future income to determine how much you can set aside for retirement. If this amount is lower than needed to fund your goals, the next step is to evaluate those goals and decide whether they need to be reconsidered or whether you prefer to cut your current spending instead in order to fund them.

Chapter 5

Types of retirement accounts

Tax-favored retirement accounts can provide a big boost to your ability to save for your retirement. These accounts offer a variety of tax benefits, including tax-deductibility, tax-deferred growth, and, in some cases, tax-free withdrawals.

Company-sponsored retirement plans

The most common types of company-sponsored retirement accounts include:

  • Defined contribution plans: Profit-sharing plans, including the popular 401(k) version, are included in this category:
    • The traditional profit-sharing plan enables employers to set aside funds for their employees, at their discretion, on a pre-tax basis.
    • In a 401(k) plan, employees can contribute pre-tax funds on their own – with employers having the option to match all or a portion of an employee’s contribution. The maximum employee contribution for 2022 is $20,500 ($27,000 for those age 50 and up).
    • Less often used are money purchase plans, where an employer agrees to set aside a specified percentage of funds per employee each year.
  • Pension plans: These plans are rarely used by private-sector corporations these days. They enable employers to set aside funds for employees to be used to deliver a monthly pension payment once they reach retirement age.
  • 403(b) plans: These are restricted to employees of particular non-profit, tax-exempt organizations: 501c(3) Corps, including schools, universities, hospitals, etc. Contributions are made on a pre-tax basis and, as with 401(k)s, an employer has the option to provide matching contributions.

Individual retirement plans

There are two main types of individual retirement plans:

  • Traditional IRAs: These plans allow for tax-deductible contributions of up to $6,000 in 2022 ($7,000 for those 50 and over). Any earnings on these accounts are tax-deferred. Required minimum distributions (RMDs) from traditional IRAs must begin the year you turn 72.
  • Roth IRAs: While the contribution limits are the same, unlike traditional IRAs, contributions to these accounts are not tax-deductible. Roth IRAs offer tax-free growth. Additionally, taxes are not charged on withdrawals from these accounts as long as they meet all applicable qualifications.

Self-employed and small business owner retirement plans

Small business owners have several options for setting aside retirement funds for themselves and their employees. These include:

SEP-IRA (Simplified Employee Pension): SEP-IRAs are typically used by small businesses that only have a few employees to cover. These plans are easy to set up and administer. Only employer contributions are allowed, as employees can’t make contributions to their SEP accounts. Employers aren’t required to make contributions to these plans every year, but if they do, they can’t just contribute to their own accounts – they must make them for employees as well. Catch-up contributions for those over 50 years of age aren’t allowed in these plans. The maximum contribution for 2022 is $61,000 or 25% of compensation, whichever is less.

SIMPLE-IRA (Savings Incentive Match Plan): These plans allow employees to set aside salary-deferred contributions of as much as 100% of their compensation up to a specified amount ($14,000 in 2022, $17,000 for those 50 and up). Employers have the option of contributing to employees’ accounts in the form of matching contributions of up to 3% of compensation or making contributions to the IRA of each employee (up to 2% of compensation). While these accounts don’t offer savings limits equal to that of a solo 401(k), they do feature higher limits than traditional and Roth IRAs.

Self-Employed 401(k): Business owners with no employees (other than a spouse) can set up a self-employed 401(k). These plans enable you to make pre-tax contributions to the plan as both employer and employee. The funds you contribute grow tax-deferred until they are withdrawn in retirement. The plan allows you to contribute up to 100% of your earned income up to a maximum of $20,500 in 2022 as an employee, while as an employer the contribution limit is up to 25% of compensation with a maximum of $40,500 in 2022. Thus, the total contribution limit is $61,000, or $67,500 for people aged 50 and up.

SIMPLE 401(k): These plans function as a mix of a self-employed 401(k) and a SIMPLE IRA, with the following added factors. Employers are allowed to offer loans as an option in a SIMPLE 401(k). Also, employee contributions are limited to $14,000 in 2022, $17,000 for those age 50 and higher. Employers are required to make contributions to these plans each year, either by matching contributions of up to 3% of each employee’s compensation or by making a non-elective contribution equal to 2% of each employee’s compensation. Discrimination testing is not required for SIMPLE 401(k)s.

Chapter 6

Taxes and retirement savings

Avoiding or deferring taxes on your retirement savings pays big dividends down the road when it comes to increasing the amount of funds available to you in retirement. In an account that grows tax-deferred, even if you have to pay taxes on the growth in the account when you start taking withdrawals, the total dollars available to you are likely to be significantly greater than would be the case if you had paid taxes on the growth each year.

Accounts like Roth IRAs offer tax-free growth and withdrawals, offering you flexibility in the sequencing of account withdrawals in retirement. Depending on your tax bracket at retirement, you may want to take withdrawals from a Roth while your bracket is high and wait to withdraw taxable funds from retirement accounts until your tax bracket drops.

In the opposite situation, if your tax bracket is low at first but is expected to rise later, it would make sense to withdraw funds from your traditional IRA first, while waiting until later to take distributions from your Roth IRA.

Chapter 7

How does inflation impact retirement savings?

If you plan for your retirement without taking into account inflation, you may be in for an unpleasant surprise when the time comes to retire. Because inflation chips away at the purchasing power of the dollar (and other fiat currencies such as the euro, yen, pound, etc.), the dollar you have to spend today generally won’t buy as much years down the road. In times ln times of low inflation, the erosion in the value of the dollar may not matter all that much if you are planning to retire soon. However, even low inflation, say at the Federal Reserve’s target rate of 2% per year, can cause significant damage to your purchasing power given enough time.

In times of high inflation, such as the 1970s, those on fixed incomes, as many retirees are, can find that their standard of living is dramatically diminished by the impact of inflation. With the price of nondiscretionary goods soaring, paying for food and shelter can become a struggle during such times.

While it’s impossible to know the exact level of inflation to expect in the future, it is prudent to consider the potential impact of high inflation on your future standard of living when planning for retirement. One way to combat inflation is to invest at least a portion of your retirement savings in growth-oriented investment vehicles. While CDs and government bonds may be safe from market risk, the risk that the stock market as a whole declines, they typically don’t offer the same growth potential as equity (stock) investments. For this reason, they are subject to inflation, or purchasing power, risk – the risk that the return you make from these savings vehicles is not much higher than, or is even lower than, inflation.

Because the stock market has typically turned in superior performance over longer periods of time, diversified equity-oriented investment vehicles such as mutual funds and ETFs (exchange-traded funds) are often used to provide an investment portfolio with the growth potential to provide returns far enough above the rate of inflation to help you make progress in saving for retirement in real terms.

Chapter 8

Employer-sponsored retirement savings

While setting aside as much of your own money as possible to save for retirement is important, building up retirement savings from employer-sponsored plans can be a key factor in meeting your retirement objectives. If you are self-employed, there are a number of retirement plan options you can choose from for the same purpose.

Some employers sponsor profit-sharing plans or SIMPLE 401(k) plans that enable them, at their discretion, to set aside a percentage of an employee’s wages in a pre-tax retirement account. Less common are money purchase plans that require an employer to set aside a certain percentage of salary on a regular basis.

401(k) plans often feature employer matches of employee contributions, typically up to a certain percentage of an employee’s compensation. For instance, let’s say an employer matches employees’ contributions up to 3% of compensation. This effectively means that if you, as an employee, set aside 3% of your earnings in your 401(k) account, that amount will double due to your employer’s matching contributions.

Needless to say, earning what effectively is a 100% return on your money due to employer matching is an attractive proposition. This makes taking advantage of matching by contributing as much as your employer will match the optimal retirement savings strategy.

Chapter 9

Comprehensive Financial Planning Canton, OH – How to find a qualified advisor to help with your retirement planning

If you are looking for a qualified financial advisor in Canton, OH, it’s important to first establish what type of advisor you want to work with. If you need help in the planning process, including goal identification, plan development, and strategy selection, it’s vital to look for a financial advisor who offers this type of comprehensive approach to planning. It’s also important to look for a fiduciary advisor who is required to put your best interests first at all times.

How to find a fiduciary?

Most advisors working for an RIA (registered investment advisor) are considered fiduciaries, meaning they must follow the “best interests” rule rather than the less stringent “suitability” rule that some brokers, advisors, and registered representatives are subject to. In addition to asking prospective advisors if they are considered fiduciaries, it’s also important to consider the services they offer: do they provide truly comprehensive financial planning services that enable them to fulfill their fiduciary obligations?

The following are approaches to planning and service offerings to look for when evaluating a financial advisor:

  • Proactive, broad-based financial planning
  • Disciplined investment management, all handled in-house (not outsourced)
  • Tax, estate, and business planning strategies to enhance your wealth-building efforts
  • Transparent communication
  • Make the complex simple:
    • You don’t have time to learn a lot of technical jargon
    • That’s why your advisor should take care to translate complex financial concepts into plain English
    • Your advisor should also use easy-to-understand, clear reports, so you can quickly grasp the big picture without having to wade through endless pages of details
  • Fee-only
  • Classified as a fiduciary
  • Relevant professional designations including CFP®, CRPC®, CPA, MBA, CFS®.
  • Develops totally customized plans
  • Uses a holistic approach

Qualified Financial Advisor Canton, OH

At McGervey Wealth Management, we offer all of the above services. Our goal is to inspire clients to make informed decisions through communication, education, and service that exceeds their expectations. Our process features:

  1. Relationships are Grounded in Financial Planning
  2. 4 Step Full-Cycle Investment Process
  3. Proactive Client Experience
  4. Fiduciary Duty & Straightforward Fees

Investment advisor OH: Strategies designed to optimize the investment process

We take the following approach to investment management:

  1. Identify Macroeconomic Environment.
  2. Haystack with the Most Needles. Determine Sectors, Styles, and Regions that should benefit the most in the environment, and the ones to avoid.
  3. Security Selection within the above Sectors. Strong fundamental characteristics –best in class.
  4. Dynamically manage the process. Actions are made weekly based on the actual market environment and fundamental realities. Removes Emotion – Decisions are made on reason and not speculation about what someone thinks may happen.

To learn more about how we can help you optimize your retirement planning, contact us today for a complimentary, no-obligation consultation. At McGervey Wealth Management, we get to know you on a personal level and keep things simple, using common language everyone can understand. We look forward to meeting you and discussing how we can help you with your retirement planning needs.

By working with a fiduciary like McGervey Wealth Management, you can be assured you’re getting investment advice from a firm that has the obligation to disclose conflicts of interest and put your interests ahead of its own. We get to know you on a personal level and keep things simple, using common language everyone can understand. To learn more about McGervey Wealth, contact us today or get your wealth score to see how you stack up for retirement.