Most people invest for specific reasons. Some are putting money aside toward retirement, others toward education funds for their children and/or grandchildren. They may be building a rainy day or second home fund. There are a fortunate few who wish to endow charitable foundations or provide peace of mind for generations to come.
As soon as a client becomes able to fund whatever goals they’ve chosen, many advisers are too quick to ask, “What’s next?” as if reaching a significant wealth milestone is like passing a train stop. And most clients will go along with this because we’ve been taught from an early age to never stop competing. Maybe we’ve been told that when we stop growing, we start dying.
We’re taught to see our net worth as a score card. As I’ve said before, that’s great; that’s the kind of competitive drive that keeps America going. But in your pursuit to run up the score, you may miss the point of goalsetting. Once upon a time, that goal you set might have appeared unreachable. You did what you set out to do. In a pursuit of ever higher goals, you may also be taking on the risk, for lack of a better way to put it, of “unachieving” what you’ve already accomplished.
Pause before you act
Novice scuba divers are always taught to stop and think, even for a fraction of a second, before taking any dramatic action. That’s a good idea when it comes to wealth management, too.
When you finally hit your number, whatever it may be, hit the pause button. Decide whether the goal you set is still relevant. Do you really want that second home you dreamed of 20 years ago, or is simply having enough money to buy it satisfaction enough? Is your child or grandchild ready for a fully paid college education?
No matter what the goal, you should reevaluate it. If you are satisfied the goal is still important, don’t let some market outlook report distract you. Be mindful of taxes and costs but take that win. If it was important enough to start working toward it over a decade ago, it will be hugely satisfying to finally see it come to fruition.
Put a ring around it
If you hit your goal number earlier than planned, great! Consider protecting your portfolio by shifting money from riskier investments and into safer ones. You won’t be able to rule out all risks by moving to cash. There’s still purchasing power risk. Inflation will eat away at your dollars. In today’s low-interest rate environment, that likely means keeping some money in stocks, but it’s worth speaking with a financial planner about what proportion is right for you.
Those who have managed to accumulate more wealth than needs or wants face different concerns. One of them is Uncle Sam. Next week, we’ll begin to look at how ultra-high net worth families protect and grow their assets.
Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or firstname.lastname@example.org. Read more of his insights at heraldtribune.com/business. Securities offered through Avantax Investment ServicesSM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, insurance services offered through an Avantax affiliated insurance agency. 8225 Natures Way Suite 119, Lakewood Ranch, FL 34202.
This article originally appeared on Sarasota Herald-Tribune: RETIRE ON TRACK: Are your wealth management goals still relevant?