YOUNGSTOWN, Ohio – Individuals preparing for retirement might be myopic – looking too closely at their financial picture and not at what they should do for the long term, retirement planners say.
Volatility such as the financial markets have experienced over the last year always raises concern, especially about inflation, Dan Cvercko says. Cvercko is a senior vice president for wealth management at Farmers National Bank in Canfield.
People are coming in earlier in life to plan their retirements and to invest earlier than they did when he began his career, Cvercko says. But he is concerned about the tools they may use. With rising interest rates, instruments such as certificates of deposit appear more attractive. Younger people, however, should take advantage of opportunities in the markets and let people closer to retirement use tools like CDs and treasury notes.
“The inflationary period that we’re in is having an impact on how people are investing money. They’re looking more for a fixed-income vehicle because yields are finally going up,” he says. “The problem is that they’re not necessarily taking advantage of the opportunities they should be.”
Younger people should take advantage of the lower prices of stocks and bonds. While treasury notes and CDs are paying 4.5% or 5% interest, the Standard & Poor’s 500 has risen more than 10% annually on average over the past decade.
“It’s a tough conversation to have right now,” Cvercko says. “People don’t want to have that discussion about a volatile stock market when they can get something guaranteed at 5%.”
Adds Ryan Glinn, co-founder and managing partner of Tolmiros Financial Designs in Liberty Township, “We certainly want to be agile. But we don’t do a lot of market timing where we’re jumping in and out of the market. We want to have a detailed plan that is built to withstand volatile market periods like we had last year.”
With what Glinn labels an “appropriate plan in place [and] specific goals” for investment accounts, “you should be able to weather the storm. Some accounts will naturally be more conservative or defensive than others depending on the time that you’re going to utilize them,” Glinn says.
Tolmiros does what he calls “a lot of work in the tax bracket management space,” that is the time between when a client retires and when he is “either turning on Social Security or starting to collect required minimum distributions.”
Glinn says, “We look to see if we can find any areas of opportunity to pay taxes earlier but lay them out at a lower rate so we can smooth out the tax brackets over time for our clients and position assets in after-tax accounts or into Roth [IRAs] via the Roth conversion.”
This is particularly important given the requirements of the Secure Act, which says both Roth IRA and traditional IRA funds, once inherited, must be withdrawn in 10 years, he says.
Pictured at top: Ryan Glinn, co-founder and managing partner of Tolmiros Financial Designs.