Who is Taking a Bite Out of Your Retirement Account?

Don't Watch Your Retirement Account Savings Melt Away Like an Ice Cream on a Hot Day!

Our family has a vacation rule that our daughter loves: Unlimited ice cream! I remember our trip to Magic Kingdom, their special Mickey Ice Cream Bars were highly anticipated. As you can see in the picture, she was happily indulging in her treat, completely oblivious to a turn of events that would soon cause her smile to turn to tears of frustration.

Can you guess how much of the bar she actually ended up eating?

First, it didn’t take long for the melting to start. It began dribbling down her hands and even her arms. Then a big chunk of chocolate fell to her shirt and hit the ground. And of course you can see that Daddy snuck in for a bite. It even took the two of us to divert a worse disaster, because she nearly dropped the whole thing on the ground and lost it all. I think half of it was all over her face, hands, and clothes. She was a hot mess, and I had an emergency clean-up job with wet wipes.

Disappearing Retirement Accounts: The Real-life Culprits

Naturally this got me thinking how similar this is with retirement accounts. People are often happy with their earned savings as they head into retirement. But all too often they see their nest egg eroded by three culprits: taxes, inflation and fees. In addition, many are at risk from a market drop, which could have a huge impact on the value of their portfolio, and subsequently their retirement income.

When I look back at the experience of my daughter with her ice cream, it’s similar to what I try to protect my clients from:

The melting of the ice cream is like inflation that slowly eats away at the purchasing power of retirement income.
The big parts of the ice cream that fall to the ground remind me of the impact taxes can have on a portfolio.
Others getting a taste is akin to investment fees. Just like my daughter in the picture, many people don't even realize the bites that are taken out. Blissfully unaware, they may discover nibbles or even big bites are eating at the performance of their retirement accounts.
And the looming threat of the ice cream being dropped correlates to investment risk in the event of a large market drop without proper diversification.

Anatomy of Financial Erosion: Taxes, Fees, and More

Understanding the impact of various financial scenarios on retirement savings is essential. Whether it's the rate of returns from various investment accounts, the erosive effect of inflation, or the cost of investment fees, each can play a significant role in the overall growth or decline of your savings.

Taxes in particular, can significantly influence the net return of an investment portfolio. Even if retirement accounts grow tax-deferred, strategic tax planning is crucial. It's imperative to closely analyze all facets of a financial plan because a misplaced tax strategy can be costly in terms of both retirement income and the legacy left to heirs.

We all want lower taxes, lower fees, lower risk, and higher returns, right? Also, you’d probably like to lower your tax burden on those returns. Isn’t it just important to have peace of mind? How about a retirement plan that provides an income stream that won’t run out in retirement? What about being able to leave as much as possible for your family or a cause in which you believe?

Savoring the Dessert of Retirement: Our Solution

One of my primary responsibilities to my clients is to provide investment solutions that meet their goals. Not only do I strive to help them achieve their goals, but I go the extra step in seeking overall solutions that help manage their risk and improve their likelihood of success. I also want to help minimize unjustified investment fees.

We will always face taxes, inflation, and market risk associated with growth. Moreover, financial professionals will always be compensated for their expertise. And I believe that every investment professional should be able to justify the investment fees charged by providing value that outweighs the expense. At McBeath Financial Group, any fees are transparent in the amount and they are fully explained. We also strive to ensure that fees are strategic in achieving the end goal of reducing losses due to inflation or taxes. Furthermore, if the fees invested end up helping to prevent a market fluctuation disaster, you may possibly enjoy more of the money you worked so hard for!

In essence, it’s my mission is to ensure that retirement savings are maximized and potential losses minimized. After all, the primary objective is to enjoy more of the “dessert” without unnecessary spillage. At the day's end, if everyone is content and relishing their rewards, that's what truly matters.

Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance. She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help her clients avoid a future tax time-bomb. Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones with less tax burden, planning makes the difference.

Her Amazon best-selling book, The Generational Wealth System outlines a holistic approach to preserving lifestyle, wealth and legacy.

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