Long-Term Planning: Protecting Your Family’s Financial Security

Think of long-term financial planning for your family like planting a tree. At first, it may seem small and insignificant, but with time, care, and attention, it grows strong and provides shade, beauty, and fruit for future generations. Without this early and sustained effort, your family may not have the foundation to weather life’s storms and enjoy what you have worked so hard to build.

Asking the right questions is crucial when planning your financial future. For example, identifying your goals helps us create the perfect plan. At SGL Financial, our Buffalo Grove financial advisors and CFP® professionals can help guide you through every increasingly complex stage of your financial journey. 

In today’s blog, we’ll explore some common long-term planning challenges and look at possible solutions you can implement for you and your family.

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Family Financial Planning: Advice from a Buffalo Grove, IL CFP® Professional

1. The Volatility of the Securities Markets

Securities market volatility can pose a significant risk to achieving long-term financial goals. For families with substantial assets, fluctuations in the market can lead to considerable financial gains or losses, making it more challenging to pursue your goals: a college education for children, a comfortable retirement, and financial security later in life.

Solutions:

• Diversification: One of the most effective ways to reduce the financial impact of market volatility is through increased diversification. By spreading your investments across various asset classes, sectors of the economy, and geographical regions, you can reduce risk and increase your potential for more stable returns. This approach ensures that a downturn in one asset class does not impact an excessive portion of your invested assets.

• Regular Reviews and Rebalancing: Consider regularly collaborating with Chicagoland financial advisors to review and rebalance your portfolio as needed. This proactive approach helps ensure your investments align with your risk tolerance and longer-term financial objectives.

Are you worried about market volatility? Watch our Co-Founder, Steve Lewit, discuss how to prepare for the unexpected on WG9 News.

2. Inflation

Long-term inflation can significantly impact a family’s achievement of long-term financial goals. You already know that inflation erodes the purchasing power of your assets, but you may not know that your investments should be able to offset its erosive impact and still produce a positive rate of return. This can affect the achievement of your savings and investment goals, which in turn impacts your financial goals.

For example, if you plan to save for your children’s college education and your retirement, you must account for the rising costs of tuition, healthcare, and everyday expenses. The cost of these services may be increasing faster than the inflation rate. Failure to consider inflation can lead to a shortfall in funds, making living the life you want harder.

Solution:

• Investment Planning: Look into investment options that hedge against inflation, such as a diversified 60/40 stock/bond portfolio or certain ETFs that offer inflation protection. 
• The real rate of return that is produced by your investments should be the gross rate of return minus inflation. This way you are always mindful of the erosive impact of inflation on your purchasing power.

3. Longevity Risk

Longevity risk is represented by the possibility of outliving your assets, which can significantly impact your family’s financial future. With advancements in healthcare and healthier lifestyles, people are living longer. While this is positive, your retirement savings must last much longer than your parents, up to 30 years or more, if you retire at 65 and live well into your 90s.

Solutions:

• Long-Term Care Planning: Long-term care insurance can help cover the costs of assisted living, nursing homes, or in-home care, ensuring you don’t deplete your retirement savings. This planning provides you and your family peace of mind and financial security.

• Withdrawal Strategy: This strategy involves setting up a sustainable withdrawal rate from your retirement savings. This rate is carefully calculated to provide the income you need while preserving the principal as much as possible. The principal spent on the cost of living is no longer available to produce income (dividends, interest, capital appreciation). Regularly reassessing and adjusting the withdrawal rate based on market performance and changing financial needs ensures that you don’t deplete your assets prematurely, providing long-term financial peace of mind.

4. Estate Planning

Without proper estate planning, your wealth might not be distributed according to your wishes, and your heirs could face unnecessary tax burdens due to insufficient planning. An effective estate planning strategy will ensure your family’s financial future and legacy.

Solutions:

• Wills and Trusts: Establishing a comprehensive estate plan that includes well-thought-out provisions in wills and trusts is vital. These legal documents ensure your assets are distributed according to your wishes, minimize estate taxes, and reduce angst among family members.

• Gifting Strategies: Implementing gifting strategies can help reduce the size of your taxable estate. By gifting assets to family members or setting up trusts, you can effectively manage your estate’s value and provide for your family’s financial future.

Listen to our podcast, “Stocks, Stress, and Smiles”

5. Health Care Costs

Rapidly rising healthcare costs, faster than the inflation rate, can significantly impact your retirement savings and overall financial plan for later life. Excessive medical expenses can deplete your assets and jeopardize your financial security without adequate preparation.

Solutions:

• Health Savings Accounts (HSAs): A Health Savings Account (HSA) is a good way to save for health care costs while leveraging the tax benefits only an HSA can provide. Did you know that HSAs offer triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free?

• Comprehensive Health Insurance: Ensuring you have comprehensive health insurance coverage is essential. Evaluate your coverage options, including Medicare and supplemental insurance, to ensure you have adequate protection against rapidly rising medical costs.

• You do not want to be denied advanced healthcare services due to their out-of-pocket expenses.

6. Tax Efficiency

High-income families often face substantial tax liabilities. Again, as you already know, taxes are another form of erosion because that’s money no longer available for your future use. Without proper tax planning, taxes will erode a significant portion of your wealth, impacting your long-term financial well-being.

Solutions:

• Tax-Advantaged Accounts: Maximize contributions to tax-advantaged accounts such as 401(k)s, IRAs, Roth IRAs, and HSAs. These accounts offer tax benefits that can help grow your wealth more efficiently.

• Tax-Efficient Investment Strategies: Work with Buffalo Grove financial advisors to implement tax-efficient investment strategies. This might include tax-loss harvesting, investing in municipal bonds, or utilizing qualified dividends and long-term capital gains, which are taxed at lower rates.

The Importance of Professional Guidance With SGL Financial

At SGL Financial, we understand that one-size-fits-all for long-term financial planning may not always address your unique needs and concerns because of your anticipated financial situation:

• Our focus is 100% on you
• We act as fiduciaries – your best interests always come first
• We provide holistic services – fully integrated based on your needs
• We are your proverbial one-stop shop
• We are transparent about our fees and other information that impacts you
• We value and appreciate our relationships with clients
• We can become your personal CFO – coordinate services for you under one roof
• We deliver experience and value that exceeds our fee

If you need a long-term plan for your family, connect with us today.