Why High-Net-Worth Individuals Should Consolidate Investments Before Retirement
If you’re an older, affluent individual, you’ve likely been saving/investing for retirement for many years, reaping the benefits of compound growth and interest. You probably have a diversified portfolio that includes a traditional pre tax IRA and/or 401(k), perhaps an annuity, and maybe even non-traditional investments like real estate, cryptocurrency, and collectibles.
While this is great–and obviously, saving for retirement as early as possible is key–as a high-net worth individual retirement isn’t just about accumulating wealth and having the ability to retire. It’s about preserving a quality lifestyle you’ve worked hard to maintain. As you approach retirement, it’s essential to ensure that your investments are working efficiently so you can pursue your passions without financial stress. For this reason, it is in your best interests to consolidate your investments sooner rather than later.
Here at Olympic Wealth Management, our Certified Financial Planner, Eric Cumley, doesn’t just help seasoned investors and soon-to-be retirees consolidate their investment assets. He also works with investors to plan for retirement by calculating the probability that their accumulated savings will fund their spending in retirement. Consolidation is key to answering a pair of vital questions: 1) Do I have enough to retire? And 2) Can I remain comfortably retired for the rest of my life?.
Here’s a closer look at why consolidating your investments for retirement is so important.
How Can Consolidating Investments Help You Better Prepare For Retirement?
Provides a Holistic Overview of Investments
The main benefit of consolidating your investments is straightforward: It brings everything into one place, eliminating the stress of managing scattered accounts. When your money is spread across various accounts, it can be challenging to grasp the full picture of your portfolio, making prudent investment decisions more difficult. By consolidating your investments with a single financial firm, you gain a clearer understanding of your overall financial standing, the diversification of your investments, and the tax implications of spending your money over time.
Help Determine Your Withdrawal Rate
A big aspect of retirement planning is determining your “withdrawal rate.” Simply put, your withdrawal rate is how much you will need to withdraw from your retirement account each year to live your desired lifestyle. One key point is that this rate must be sustainable enough to last throughout your lifetime. If your account is going to be drained after five years, you’re in trouble.
Returning to our earlier point: When all of your accounts are consolidated under one roof, it’s much easier to see a comprehensive picture of your income and assets. This clarity allows you to determine your withdrawal rate and identify how much more you may need to save to achieve your desired financial goals in retirement.
For example, if you plan to keep traveling or make large purchases year after year, you’ll need a higher withdrawal rate than if you were going to downsize and cut back on expenses.
Fee Reduction
Money in various places often means incurring more fees than necessary. Each of your accounts may charge various fees such as management, transaction, or maintenance, which can quickly add up. When you consolidate your investments under one roof, you can reduce the amount of fees you’re paying and potentially see higher returns.
Easier Estate Planning
Another key reason to consolidate your investment accounts as you approach retirement is to simplify estate planning. When your money and assets are spread across multiple accounts or financial institutions, it can complicate the process for your beneficiaries, making it more challenging for them to access and manage those assets. By consolidating your accounts, you streamline the process not only for yourself but also for your heirs. This simplification becomes even more crucial if you have significant assets to pass down, such as real estate, business interests, life insurance policies, and savings accounts.
Avoid Penalties
Another reason consolidating your investments becomes crucial as you head toward retirement age is that starting at 73, you must take out a minimum amount from your retirement accounts each year. If your retirement accounts are scattered, it’s more difficult to calculate your required minimum distributions (RMDs), and if you miscalculate and take out too little, you’re opening yourself up to costly tax penalties.
How Retirement Planning Works
When it comes to planning your finances in retirement, partnering with a financial planner can be invaluable. A skilled professional can evaluate your current investment strategies, assist you with consolidating accounts, and craft a tailored retirement plan that aligns with your desired lifestyle.
At Olympic Wealth Management, we help you define your future retirement spending goals and develop an investment strategy that supports your passions—whether that’s travel, hobbies, or simply living the life you desire. Starting this process early ensures that you can fully enjoy your retirement years without financial worries.
Here’s what you can expect from your retirement planning process:
1. Request a Consultation: First and foremost, reach out to Eric Cumley, CFP®, our financial planner to express interest in our retirement planning services and discuss your goals.
2. Submit Transfers: Eric will submit for transfers and rollover distributions from old accounts to ensure everything is consolidated and properly transferred to your new Charles Schwab & Co. account.
3. Integrate with MoneyGuide: Next, Eric will integrate your investment accounts at Charles Schwab & Co with Money Guide, the industry’s leading retirement planning software. It has the power to calculate and project your retirement income based on the holdings of your investment plan.
4. Retirement Planning: This is where you’ll meet with Eric to review his proposed retirement plan. He will encourage you to provide feedback and ask questions.
5. Follow-Ups: You’ll be offered a meeting with Eric on a bi-annual basis, and you’ll receive questionnaires so you can share your feedback and discuss changes in your financial priorities.
Seeking Personalized Advice on Retirement in Seattle? Contact Olympic Wealth Management
If you’re a discerning investor seeking to consolidate your portfolio in preparation for retirement, look to Olympic Wealth Management in Bothell. Our privately-owned, independent Registered Investment Advisory (RIA) firm is here to learn about your retirement planning goals and help create a strategy for you to meet them. Schedule a consultation today for more information.