Retirement Planning Services in San Mateo

Planning for Retirement or Financial Freedom

If you don’t find a way to make money while you sleep, you will work until you die. – Warren Buffett.

Everyone should be saving and investing “…to make money while you sleep…” for retirement or financial independence. And you get to decide your definition of independence.  A comfortable retirement does not automatically happen at the end of a rewarding career or decades of hard work – it is up to you to start building your nest egg as far in advance as possible to benefit from compounding. The earlier you start, the less you might have to invest.

Gosho Financial Group offers financial planning services to help you plan for a secure stream of income “while you sleep.” The income might come from your social security (one-third of the average person’s retirement income), IRA, 401(k), 403(b), 457(b), profit-sharing plan, Roth 401 (k) plan, Roth IRA and/or taxable investments.

Some large employers offer a 401(k) plan with the ability to open a self-directed IRA within the 401(k). This opens the plan to a wide array of investments like individual stocks and bonds, and we can help you choose the right ones for your retirement objectives.

You might also be fortunate enough to be one of the approximately 30 million of 113 million (27%) working in private industry qualifying for a lifetime pension.ⁱ For more perspective, “there were 2,995,000 employed by federal, state and local government in the United States in August.”ⁱⁱ

Retirement planning should begin in high school as one factor when you are beginning to consider what type of work you want to do and identifying your passion.  During post-high school education be aware of the income potential of your work choices because that will affect your social security benefits.  Start monitoring your social security account to ensure an accurate tally of credits at www.SSA.gov.  The more you earn, the more social security benefits you could receive in retirement.

Gosho Financial Group offers 401(k) or 403(b) plan management because many plans only offer a limited choice of mutual funds with varying levels of expenses and incomplete or unhelpful performance reports. All investments must be monitored over time to avoid learning too late that after twenty years your investments will not meet your retirement income needs after tax.

Custom Retirement Planning from Gosho Financial Group

When engaging a new client in financial planning, Gosho Financial Group starts by looking at all the client’s financial resources, tax strategies, risk level, and time available to meet goals. We try to keep things simple and easy to understand.  Are you taking full advantage of what is available to you, including 401(k)s, Roth IRAs, traditional IRAs, and individual investment accounts? There are so many variables that “one-size-fits-all”-style retirement planning is impossible or at least suboptimal. Developing a custom retirement plan is part of a personalized financial plan.

A Tale of Two Investments

A young investor whose tax bracket is relatively low might be better off NOT maximizing her 401(k) or IRA contributions but instead contributing to a Roth IRA, Roth 401(k) or a taxable account. We must always consider the after-tax return on investments. The trade-off for getting a tax deduction up front, is converting capital gains into ordinary income and paying a higher deferred tax upon withdrawal from a retirement account.  Selling inside a retirement plan avoids capital gains tax but also denies you tax loss deductions.

Building a long-term portfolio of stocks that appreciate and increase dividends annually outside of a retirement plan could provide tax-advantaged dividend income for retirement.  And if the income continues to grow, one might not have to sell stock for retirement income. But if you do have to sell stock, you will pay a capital gains tax or be able to take a tax loss.   And ordinary dividends are taxed at long-term capital gains rates. That money is available outside of a retirement plan for you to do with as you wish with no mandatory withdrawal.

Building up investments from a young age means you don’t have to invest as much money because compounding and time are on your side.  Having different pools of taxable and tax-deferred assets along with social security benefits could allow for more flexibility with withdrawal and tax strategies.

Developing Your Financial Plan

It’s not just about investments, of course. What are your values, dreams, goals, and fears?  How can you maximize social security, manage your 401(k), plan for elder care, and still have fun in this lifetime?

People are living much longer – in San Mateo County, for example, in 2014 the life expectancy is 81.1 years for males and 84.9 years for females, well above the state and national averages according to IHME.

Young people are taking on multiple jobs and pursuing multiple careers over the course of their lives. They don’t end up staying with the same companies for the entirety of their careers, and those companies’ pensions are a thing of the past. So it is very important to keep track of 401(k) and 403(b) accounts and monitor performance.

If you are just starting out, understanding basic financial management will give you a great advantage for success in achieving financial freedom.

Whatever stage you are in now, having a clear financial plan tells you what you might expect to happen financially and makes it easier to adjust your course if needed.  It helps to minimize negative surprises later in life when it is too late to do anything more.

We ask this question of our clients: as you are accumulating and growing capital, what is the dollar amount that you will need to live on to be financially independent – that is to say, to not have to work? Though you may continue to work and pursue a career, you may want to know what it would take to leave the world of employment and follow your own interests. That dollar amount will vary from client to client, as everyone has a different level of spending. Some prefer to live frugally now and comfortably later.  Others prefer to enjoy a certain level of luxury to enrich their lives now but might have shortfalls in retirement savings later if not planned appropriately.

Once you’ve identified that dollar amount that you need for retirement income, we can help you create a roadmap for building up investment income while you sleep. Will it be enough for financial independence?

Whether you are one of those rare high-school students wanting to get a head start on your path to financial freedom or a 70.5-year-old senior citizen freaking out because of all the taxes you are going to pay on required minimum distributions, contact Gosho Financial Group in San Mateo today for a complimentary consultation with a Certified Financial Planner.  You talk, we listen.

[i] Pensions & Investments, Quartz-Janet Guyon, 8/15/16

[ii] According to the Bureau of Labor Statistics–Sep. 8, 2015