Answering the Question: How to Protect My Savings in an Uncertain World

Post Written by: Paul B. Elfner, CFP®, MSFS

Whether economics, global news, or market changes: it seems like there’s always something to be concerned about. How can I protect my savings and my future?

As a wealth management firm in business for more than 25 years, we’ve navigated many different types of markets and trends. With our depth of technical expertise, access to nationally renowned resources, and focus on each individual’s financial plan, we often act as a guide and help to protect our client’s legacy and family’s future.

Our advice when you’re feeling uncertain or anxious about changes that might affect you financially: be prepared. This can help you protect your savings. A detailed financial plan that acts as a roadmap helps you navigate any curve in the road. At Domani Wealth, we don’t stick it on a shelf – we regularly converse with you and take action steps to make sure everything is still supporting you and aligned well for your future.

We recommend these six steps you can take to help protect your savings and feel confident and comfortable with your plans.

  1. Devote More Time to Financial Planning

Just as an engineer building a complex bridge would devote time on design and stress-testing upfront, you should allocate time to financial planning for your future. It’s hard to know how you’ll reach success unless you’ve defined what your ‘final design’ is going to look like and made sure you’ve detailed out the path to get there. And just like a bridge design needs to be aware of pitfalls and possible challenges, your financial plan can also identify vulnerabilities or secondary goals to keep you on track.

To get started: Your financial plan should revolve around achieving your goals. So first, it is important to identify what you are trying to achieve. For example, is your intent to protect your savings so you can afford the lifestyle you want in retirement? Or to leave a legacy for your family? You could also weave in goals such as funding for travel, a second home, a top-of-the-line retirement community, helping to pay for education for your children or grandchildren, or supporting your favorite charities. Whatever the goal(s), they should be clearly outlined.

Then, a critical but often forgotten element is to stress-test your plan. What will happen to your financial picture if inflation rises or interest rates drop more than anticipated? Qualified financial planners can help you run the numbers so you can see the expected result. Your goal is to be prepared, not surprised, so stress-testing is an essential part of the process of how to protect my savings.

Lastly, remember that financial plans are living documents. Creating a plan and putting it in a binder in a closet won’t do you any good. Making sure you’re regularly discussing the plan with your advisor and making updates as markets change and your life may change are all key to making sure you’re still on track to reach your goals.

  1. Consider Waiting to File for Social Security

With the possibility of rising inflation and taxes, some of us could use a larger cushion in our monthly income.

Fortunately, there’s an easy way to accomplish that and it’s simply to wait to take your social security benefits.

By waiting until you are 70 years old, you can increase your monthly benefit by an equivalent of approximately 8 percent per year.

Here’s an example. Let’s say you turn 62 this year. If you filed today, your benefit would be $708 per month. However, if you wait until you turn 70, you will receive $1,253 per month….77 percent more per month. [i]

Again, that’s just an example. Here is a calculator from the Social Security Administration that can help you see exactly how much you’d save by waiting.[ii]

Remember, social security will be paid to you monthly for as long as you live. In times of increasing life expectancy, it can serve as a valuable offset for additional years in retirement (or increased cost of living).

The key here is that this strategy is available to everyone who is eligible for Social Security benefits. It is your choice and an easy way to bump up your retirement income.

However, this only applies until you are 70. Waiting longer doesn’t help you and can result in lost benefits.[iii] So if you choose to utilize this strategy, be sure to file for benefits promptly once you turn 70.

And keep in mind, this strategy is entirely dependent on your own financial situation: when you retire, income needs before age 70, how long your life expectancy may be (breakeven age around 80), your style of living, and your individual financial goals. It’s best to speak with a well-trained financial advisor before making this decision to see if it’s fitting for you with how to protect your savings.

  1. Always Look for Ways to Minimize Your Taxes

“A penny saved is a penny earned.” That old adage still rings true, especially when it comes to your taxes. Finding the right tax-saving strategies can save you money today and potentially every year going forward. This is a critical and sometimes unrealized aspect of wealth management.

That is why strategic tax planning is a core aspect of what we do for our clients here at Domani Wealth. We have several CPAs on staff and are continually following tax law updates. Depending on the updates and subsequent consequences, we may make tax-advantageous portfolio adjustments (part of our commitment to acting in your best interest to help give you peace of mind).

Ways you can work toward reducing your tax liability:

  • Along with annual tax preparation, you should schedule a yearly tax planning review meeting too, either with your accountant or with your financial advisor who specializes in tax planning. It is critical that you work with a firm with the credentials to recommend solid solutions and keep up with today’s fast-changing tax law.
  • Where you hold your assets matters and can impact the amount of tax you pay. Our recent article about investment location covers how to optimize your investment location for tax purposes.
  • In light of possible tax rate hikes in the U.S. for high-income earners, Roth accounts can play a strategic role in helping you reduce future tax liability. See our recent article about Roth accounts to help you determine if these are right for you.
  • If you’re eligible, consider a health savings account. With health care and medical costs on the rise, these expenses can have a significant impact on your future budget. Health Savings Accounts, also referred to as “HSAs,” can give you a rare triple tax advantage while helping you save for medical costs before and after retirement.
  1. Don’t Forget to Rebalance

Long-term investing does not always involve significant activity, but that doesn’t mean you can set it and forget it. Instead, it is critical to monitor your holdings and make periodic adjustments.

One important periodic activity is rebalancing.

Rebalancing is the act of adjusting your holdings on a regular schedule to reset your portfolio back to the proper risk allocations. Let’s say you and your financial advisor have determined that you should hold 50 percent of your money in domestic stocks, 20 percent in international stocks, and 30 percent in bonds. Well, as some holdings increase in price and other holdings drop, you may find that those percentages are now quite different.

Rebalancing is the process of selling some of your winners and buying more of the ones that dropped to return to your proper “balance.” In the process, you may notice that you’re selling high and buying low, which is a key tenet to successful investing. (You can learn more about this topic in our rebalancing article.)

So check to make sure your financial advisor is rebalancing on a regular schedule. If this is not done consistently, you may be taking far more risk than you should, making you vulnerable to more significant losses.

  1. Consider a Bigger Cash Cushion

With uncertainty can come increased volatility. If this causes you stress, then a very prudent strategy is to increase the amount of cash you hold. While it’s wise  to keep three to six months in cash to cushion against unforeseen issues (usually called an ‘emergency fund’), it can be wise to increase that, especially in retirement.

It can be appropriate to hold one, two, or even three years’ worth of living expenses in cash (or similar investments) so that you can be ready to withstand more prolonged periods of uncertainty.

While there is a cost for this since you can’t earn much on balances in a term deposit or savings account, this can go a long way in terms of peace of mind. Depending on your financial goals, this may or may not be a fit for your situation in life.

  1. Work with an Independent, Qualified Expert

It is often said, “no enemy is worse than bad advice.” This holds doubly true when you are planning your financial future. The older you get, the harder it is to recover from mistakes or bad advice. That’s why this last step is a critical one.

Help your future by being selective with whom you choose to partner. First, always work with independent advisors who are willing to act as your legal fiduciary. As a fiduciary, they are required to put your interest first. By limiting your help to independent advisors, you can avoid the conflicts of interest that come with firms that primarily sell products to generate profits. While their advisors may seek to provide advice, they may very well get pressured to sell more of their firm’s proprietary products.

So be sure to look for a fee-only financial advisor with significant experience and credentials who is willing to act as your legal fiduciary. Your future is too important to consider less.

Check out our blog on Tips for Finding a Financial Advisor for more thoughts on how to select someone who will be a good fit for you.

Conclusion

These six steps can help you prepare and identify a strong plan to help protect your savings.

If you’d like some qualified assistance, Domani Wealth has been helping people achieve their financial goals for more than 25 years. Our credentialed staff combines deep expertise in financial planning, retirement planning, tax strategies, and estate planning to help you make the most of your resources and feel confident about the future. Contact us today at 855-855-5545 or info@domaniwealth.com to start a conversation! You can also book an appointment easily for a no-obligation consult or second opinion here: https://calendly.com/domaniwealth/consultation

 

 

[i] https://www.ssa.gov/pubs/EN-05-10147.pdf

[ii] https://www.ssa.gov/OACT/quickcalc/

[iii] https://www.cnbc.com/2021/05/10/getting-these-social-security-benefit-questions-wrong-could-cost-you.html

 

 Important Disclosure

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Domani. A copy of Domani’s current written disclosure brochure discussing our advisory services and fees continues to remain available upon request.

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