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The Top Five Financial Planning Challenges of Accumulators

At Accumulation Wealth Partners, we specialize in serving people in the accumulation phase of their life. These include people at the start and middle of their careers who seek to find a stable financial footing in order to reach higher financial confidence and eventually (sooner than most think) financial independence.

After years of focusing on this select group of clients, we’ve found that many of them face similar financial challenges:

1. Determining Net Worth

A consistent question accumulators ask is “how much am I actually worth?” As they begin building their wealth and earning more each year, they want to understand how this translates to their financial worth.

This is one of the first and most essential steps in financial planning, as it defines what steps one must take to pursue their goals and address any challenges they face. With clients, we begin by helping them build a Household Balance Sheet. This entails identifying their income, savings, and spending, as well as short-term and long-term expenses and needs. This allows us to find opportunities to potentially reduce spending and increasing savings and earnings. Today, we are able to lean on technology and link investment, retirement and bank accounts as well as add private investments and real estate to an online vault that stays up to date and grows with you. This allows us to track the process and optimize for taxes and fees along the way.

2. Cash Flow Optimization

Once accumulators understand their net worth, the next step is to develop a way to track and optimize where their cash flows are going. During the accumulation years, your rate of savings is more important than your rate of return. The goal is to turn your cash flow (HUMAN CAPITAL) into net-worth (FINANCIAL CAPITAL) by saving somewhere between 15 and 20% of your gross income into appropriate investments that match your risk tolerance, time horizon and liquidity needs.

Rather than depending on riskier investments in hopes of securing a higher rate of return, we believe it’s more appropriate to focus on the appropriate percentage of income to save. It’s also important to diversify your investment strategy between tax-deferred, taxable and tax free investments (ASSET LOCATION). By doing so, you will be in a position of choice when it comes time to turning your net-worth into cash flow.

3. Risk Management

From life and disability insurance to debt management, it’s essential for accumulators to pay attention to their risk management needs and strategies. Too often, we see young couples and families assume they don’t need life or disability insurance due to their age, or don’t realize the importance of building an emergency reserve for unexpected expenses.

Working together, we help them review their insurance options that fit within their budget while still offering a level of protection that helps them feel more confident in their future. We also evaluate strategies for paying off debt, be it school loans or a mortgage, and contributing to an emergency fund.

4. Employee Benefits and Retirement Plan Review

It’s not easy navigating the world of employee benefits, and many employees don’t realize what they’re actually investing in, let alone know how much they’re saving each year (or spending in fees). Some employers actually give you free money through matching programs in 401(k) accounts and unfortunately not all employees take advantage of this. Free money (a 100% return) is often more important to take advantage of than even debt repayment. For accumulators early in their career, it’s crucial to take strategic steps with their employee benefits and maximize their contributions and investment choices to save more for retirement. Bundled together as part of your Holistic Financial Plan, the compounding of these simple choices over 20-30 years can really pay off.

We work with clients to take a comprehensive review of their retirement plan and employee benefits to help them understand their current savings and how they may be able to make improvements for greater growth and lower fees.

5. Tax Optimization

Many accumulators pay too much in taxes because they assume tax planning takes too much time and money. But here’s the truth: because of taxes, you actually have to earn two dollars for every one dollar that you spend. Conversely, every dollar you save in taxes is worth two earned dollars.

Through tax optimization planning, we aim to help accumulators save money in taxes paid. We view a client’s tax return as sort of a “Financial MRI”, meaning by just looking at that one document we can get a really good look at your financial health for that given year. From maxing out retirement contributions to reevaluating investments, we can help our clients identify legal ways to lower their tax bill. One question I always ask prospective clients is “When is the last time your financial adviser/broker asked to see your tax return?” The answer is unfortunately almost always “Never.” We find this to be almost criminal in nature as often half the value we provide to our clients comes from our Tax Optimization/Overlay strategies.

Take the Next Step

As it says in our name, we focus on the accumulation years, so we work with a diverse range of clients, from young Millennials to experienced professionals. Wherever they are in their career, they seek to make the most of the current and future earnings. However, wealth management is complex, and doing it “right” is time-consuming.

At Accumulation Wealth Partners, we aim to offer clients confidence that they have a place to turn to with their financial questions. If you’ve yet to find a financial advisor you feel can serve your needs, we encourage you to contact us. We’d be happy to talk and see if we may be a good fit for one another. Schedule a free 15-minute introductory phone call, call us at (858) 255-4475, or send an email to scott@accumulationwealth.com.

About Scott

Scott Melbrod is the founder and CEO of Accumulation Wealth Partners, an independent wealth management firm in San Diego, CA. Working with a wide array of clients, from families to young Millennials just starting their careers, his mission is to provide impactful and targeted financial advice at a transparent cost to people in their accumulation phase of their lives. With more than 15 years of industry experience, he uses his knowledge to develop for his clients a structured and tailored plan designed to guide them toward financial freedom. Learn more about Scott by connecting with him on LinkedIn or emailing him at scott@accumulationwealth.com.