PMFA Says Now is Time for Financial, Estate Planning Tune Up
While many investors wait until year's end to update their financial and estate plans, late summer offers an excellent time for a "tune up," according to a partner at Plante Moran Financial Advisors.
GRAND RAPIDS, MI, September 22, 2010
While many investors wait until year's end to update their financial and estate plans, late summer offers an excellent time for a "tune up," according to a partner at Plante Moran Financial Advisors.Scott Carano notes that PMFA, a wealth management firm with more than $5 billion in assets under management, has been working with clients to review their long-term financial plans in light of changing market conditions. An annual financial tune up starts with a review and realignment of investing strategies, he says, to ensure the investor has a solid plan to serve as a roadmap.
"We still face a greater deal of uncertainty every way we turn," Carano said. "Indications are that the economy is in the early stages of recovery, but it also appears likely that we have multiple years of slower growth. The mid-term elections bring political question markets. And we still have no clarity on tax policies, including the estate tax.
"While much is in flux, some things have stayed the same - including the fundamentals of the markets.
Investors can benefit from meeting their advisor to review and recalibrate long-term financial plans."
Carano recommends:
• Cast a broader net: In past years, investors have done well by focusing on traditional securities and bonds. But Carano says that today's markets demand less investor rigidity and greater flexibility. PMFA has been talking with clients about adding "alternatives" - such as commodities, gold, hedged equities, higher-risk credit and convertible bonds - to further diversify investment portfolios.
• Re-evaluate risk tolerance: After the market fluctuations of the last two years, investors need to take a hard look at their risk tolerance. Many exited the market entirely and continue to remain on the sidelines. Carano said it is a good time to review what you have in your "lower-risk" bucket of assets vs. your "growth" bucket.
• Know what you need: What rate of return will you need in order to meet your financial objectives and retire with a level of income you want? As a rule of thumb, Carano notes that investors who spend less than 4 percent of their net wealth every year will be fine. But if your retirement planning is contingent on 10 percent return each year, it may be time to recalibrate your plan.
• Keep Roth IRAs in mind. Unlike traditional IRAs, where contributions are made tax-free and distributions are tax-deductible, Roth IRAs are made with after-tax dollars - and distributions are typically not taxable. Carano notes that Roth IRAs are a good hedge against rising taxes.
About Plante & Moran, PLLC
Plante & Moran (www.plantemoran.com) is among the nation's largest certified public accounting and business advisory firms, providing clients with tax, audit, risk management, financial, technology, business consulting, and wealth management services. Plante & Moran has a staff of more than 1,600 professionals in 21 offices throughout Michigan, Ohio, and Illinois with international offices in Shanghai, China; Monterrey, Mexico; and Mumbai, India. Plante & Moran has been recognized by a number of organizations, including FORTUNE magazine, as one of the country's best places to work.
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