Personal Finance column: Rebalance your life portfolio, optimize your financial portfolio

Danielle Howard
Personal Finance
Danielle Howard

I use a Wheel of Life with clients to help them look at their life portfolio as they shift gears towards the fall season. To simplify it, let’s look at passions, personalities, places and physique. It incorporates acknowledging where you are and deciding what a 1 percent change would look like to move you in the right direction.

Passions: What meaningful activities or pursuits will fill your days? What areas of your life do you have an expertise in or truly enjoy that you want to cultivate?

Physique: How do you stay proactive in staying healthy? My husband and I like to bike, boat and hike together. We also have our individual activities to focus on staying healthy. I love to cook and create healthy meals for ourselves and guests. Yes, meniscus tears happen and cancer rears its head, but we are grateful for our health every day and do the best we can to steward the bodies we have been given.

Personalities: Who do you want to hang out with? Isolation in our aging demographic is growing at a rampant rate, and you need to be intentional about surrounding yourself with people that are important to you, or those who will keep you engaged and thriving. Seek out people or groups that give you a new perspective or challenge you in your thinking. Check out the 100 Club Colorado and keep an eye on social media or the events page of our local papers.

Places: Where do you want to live and how will that change as you age? If you want to travel, what type of experiences or places will nurture your soul, not simply provide Facebook Fodder? Look at our amazing community and where you want to get involved using all that wisdom and experience you have accumulated over your lifetime.

You then want your financial portfolio to support you to optimize your life portfolio.

As your human capital (ability or desire to bring money into your life from working) starts to wane, how do you discern and direct other financial tools to maximize sustainability of your financial resources?

There are four areas to consider:

Liquidity: You want cash that is easily accessible for emergencies or opportunities, or to supplement income from other sources in the event of a market correction. How much? It depends. There are a variety of factors to look at. How much do you have coming in from Social Security or pensions? Does this cover your fixed expenses? Do you have upcoming onetime expenditures (i.e. a car purchase, or vacation)? There are financial vehicles best positioned to provide you with this liquidity. Start with vanilla flavored savings accounts, money markets or laddered CDs. Shop around for a good interest rate.

Lifestyle: Your spending patterns will change as you shift gears in life. Many people want to travel, spend time with family, pursue hobbies, or get involved in community. You should anticipate long-term care expenses down the road. You will have variable expenses (such as travel) and fixed expenses (mortgage, medicare supplements, etc). Investment accounts, retirement accounts, and new opportunities through the “gig economy” (Air B&B; Uber, Task Rabbit) can provide you with income streams that can be creatively managed for tax-efficiencies. You need to incorporate inflation as you look at the go-go, slow go, and no go years.

Longevity: With a healthy lifestyles and medical advances, you can anticipate a long Indian summer of life. Social Security, pensions and annuities are three of the tools to use optimally to hedge against a long-life and will guarantee that you won’t outlive your income. There are many considerations to assess before turning on these spigots of income. Is it just income for yourself, or is there a spouse involved? Is there an age difference? When is the best time to start taking these income streams?

Legacy: Financial tools positioned to optimize financial legacy would include ROTH IRAs; real-estate and brokerage accounts. The Roth IRAs pass on to your beneficiaries tax free and can be set up for “stretch” distributions. Real estate and brokerage accounts currently get a “step- up” in cost basis, making them tax efficient for legacy purposes. Life insurance proceeds also pass on to beneficiaries income tax free. However, depending on the size of your estate, if you personally own the policy, proceeds may be subject to federal and state estate taxes.

Heading into your fall season of life cannot be done in a vacuum. To fully embrace opportunities to flourish, delve into what you want your life portfolio to look like, then optimize the financial portfolio together to make it happen.

April is Social Security and Financial Literacy month. We are co-hosting four webinars with the Social Security Administration at the New Castle, Glenwood, Carbondale and Basalt libraries. Check out their websites for more information.

Danielle Howard is a CFP® and QKA®. Wealth By Design LLC, an independent advisor is located at 23300 Two Rivers Rd in Basalt. Visit her at 970-927-3909 Advisory Services offered through Cambridge Investment Research Advisors Inc., a Registered Investment Advisor. Securities offered through Cambridge Investment Research Inc., a broker/dealer, member FINRA/SIPC. Cambridge and WBD are not affiliated.

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