The Span of Investments

• Are you
• Directing your children’s education fund’s growth ?
• Wondering how to invest your trust fund/corpus?

In most financial decisions, the investment aspect typically plays a key role. Since investments span many other fields it is necessary to ensure that the professionals in these related fields understand the impotance of the investment aspect and engage a sound investment advisor rather than making that decision themselves. Shown below are related financial decisions that include a key investment decision. There are many more…..

Retirement Planning

Investment strategy as it relates to retirement planning must be backed by a comprehensive plan in order to insure that the client will be successful in reaching retirement objectives. Several factors affect the investment strategies and tactics that a planner will employ in order to execute the retirement plan. The planner must first consider when the clients began saving for their retirement and how much has been accumulated versus what is required for their retirement years. Depending on the amount that must be saved, the planner must consider the remaining work life expectancy (RWLE) of the client in order to assess the required savings amounts in the limited window of time available to the client.

The planner must also consider the age of the client and appropriate investment vehicles that balance the risks and returns with the client’s needs. When an individual is closer to retirement, lower risk investments are generally preferred by the planner in order to minimize any losses due to market risk. The converse is true when an individual has a long RWLE.

The age-banding model is an innovative retirement planning solution from 101 Business. This model provides a new approach to planning for retirement needs. The model reduces errors in estimating expenses, provides an algorithm to calculate the replacement ratio, allows easier incorporation of long term care benefits and significantly reduces funding needs. Two case studies are used to elaborate the model. Results, as compared to the traditional approach, show funding needs of an elderly couple are reduced by over 16% and contributions, for a 35 year old, are reduced by 42%. In neither case is the consequent increase in risk exposure greater than 2.5%. Finally, the model also incorporates case-specific risk management tools. Visit the software page for more information.

Education Planning

Educational planning is similar to retirement planning in that, the planner must first consider when the clients began saving for their children’s education and how much has been accumulated versus what is required to fund the education. The planner should also note that future funding needs will vary by the type of institution (private vs. public), its status, location, etc. The number of children and the remaining time they have before beginning college is another important consideration. Depending on the time frame and the amount that must be saved, the planner must calculate the required savings amounts in the limited window of time available to the client.

The planner must also consider appropriate investment vehicles that balance the risks and returns with the client’s needs. When an individual is closer to beginning college, lower risk investments are generally preferred by the planner in order to minimize any losses due to market risk. The converse is true when the child has many years left before beginning college.

Estate Planning

Depending on the objectives of estate planning, investment planning may be an important consideration. (Annie: something here about how client’s often use living trusts to store wealth and generate income to meet everyday needs and its investment implications) At death, a decedent may want to insure that any assets left behind are conserved and invested or preserved on behalf of any beneficiaries. In order to meet the objectives set by the decedent prior to death, a proper investment plan must have been developed during the decedent’s life.

Individuals who have estates in excess of $1M must consider how to minimize taxes and maximize the funds left to beneficiaries. The planner must also help the client to determine whether debts will be paid off by life insurance, sale of existing assets or through other investment vehicles. Tax implications if any, must be weighted against these investment strategies. An investment planner should also assist the client in determining how assets are owned and registered so that efficient transfer can occur.

And then there is insurance, tax and many such related decisions….