A Mid-Year Checkup: Three things to consider and discuss with your wealth advisor

  1. If you are saver, are you on track to reach your financial goals? Tally your various contributions across all accounts so far in 2020: A decent baseline savings rate is 15%, but higher-income folks will want to aim for 20% or even greater. You will also need to aim higher if you are saving for goals other than retirement, such as college for children or a home down payment. See Goals for every stage of your financial life to gauge where you should be at various life stages.
  2. If you are a spender, one of the key gauges of the health of your financial plan is your withdrawal rate – your planned portfolio withdrawals for the year divided by your total portfolio balance at the beginning of the year. You have often heard us say that 4% is a good baseline assumption and starting point. However, to come to the best and most appropriate withdrawal rate takes a bit more work. Spend too much and you have to prematurely cut back on some lifestyle expenses. Spend too little and you may not be living the life of your dreams and inadvertently leaving money in your estate. A financial plan and review meeting with ZRC can hone in on a withdrawal strategy that works best for you.
  3. How are your reserves and emergency plan? If you’ve suffered an income reduction amid the pandemic – and many people have – it’s wise to think through your options if you’ll need to tap your portfolio for additional funds for living expenses. A dedicated emergency fund is, of course, the best option and why we recommend that working people hold three to six months’ worth of living expenses in liquid reserves. Higher-income earners should target an even larger cushion. It’s also worth noting that the CARES Act passed this Spring opened up additional alternatives for people who have suffered coronavirus-related hardship.1

1Natalie Choate – Morningstar, Inc.