September 24, 2023

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Question: I am 57 years old, have saved $450,000 for retirement and will soon be making $3-$4 million from business sales as a key employee. I will continue to work with the company at $350,000-$550,000 per year after the sale. I max out and make catch-up contributions to my 401(k), and my wife is a homemaker so I max out in a Roth IRA. I have $100,000 in student loan debt for my kids that I am paying off and no other debt.

I need a financial planner/advisor to help me manage my portfolio. I’ve read that it should be fee-only fiduciary, but does location matter? My boss and his family have invested with a representative of a large bank for decades and are happy, but they inherited millions and haven’t really evaluated the whole picture. I’m not sure that advisory would be a prudent decision. (Also looking for a new financial advisor? This tool can match you with an advisor who can meet your needs.,

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Answer: There are several issues here – whether or not to use your boss’s advisor and for whom not, the tax and estate implications of the $3-$4 million Roth IRA contribution, and more – and we’ll tackle them one by one. Let’s start with whether to use your boss’s advisor or someone else.

Have a question about your financial advisor or looking for a new one? Email [email protected]

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Your boss’s advisor may be great, or he may not be – and you’ll want to interview several advisors to find out who you feel comfortable with and trust, and who help people in similar situations to yours. are experts in doing. (Also looking for a new financial advisor? This tool can match you with an advisor who can meet your needs.,

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Generally, you want an advisor who is fee only, as they make money exclusively through the fees you pay, not from any sales or commissions on products. This helps ensure that they have your best interests in mind.

“Many financial advisors are compensated through the sale of financial products, investment commissions or fees, insurance commissions and managed money accounts,” explains David Edmiston, certified financial planner at Next Phase Financial Planning in Prescott, Arizona. If the advisor you’re considering is paid by the sale of a financial product or solution, you’ll want to understand this beforehand so you can determine whether that product is the best solution for you. And adds W. Michael Prendergast, certified financial planner at Altfest Personal Wealth Management: “Ask if they are a fiduciary every time they interact with you, not just some of the time.”

You can ask potential advisors these 15 questions to vet them, and to make sure they have experience dealing with the types of issues you have questions about. Some of the things you’re considering can help with financial goals, investing, retirement planning, taxes, risk mitigation, Social Security, Medicare, pensions, deferred compensation, and more. Make sure the advisor has experience with the issues you plan to tackle or is already dealing with. (Looking for a new financial advisor? This tool can match you with an advisor who meets your needs.,

You also want someone who has experience with taxes (or can work with someone who does) because business distribution provides an opportunity for tax planning. You will need to consider whether the dividends you are receiving are ordinary or qualified, which determines the rate at which they are taxed. While some preparers specialize in tax planning, it may make sense for you to find work with a certified public accountant (CPA) who is trained to help minimize taxes. “We often think of tax planning as filing our annual tax return. Instead, I would encourage you to think of it as the journey of a lifetime and reduce your long-term tax bill,” Anchor Pointe Wealth says certified financial planner Derrick Hodges.

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In addition, depending on your situation, there are certain estate planning and asset protection opportunities that can be availed. “Based on your net worth, I would prioritize taking a look at an estate plan that has your advisor in communication with your attorney,” says Joe Favorito, certified financial planner at Landmark Wealth Management. And beyond that, “a comprehensive financial planner, not just someone who manages investments, will help you identify what your assets will mean to you, your children, and the charity, if that’s a wish,” says Hodges. . (Looking for a new financial advisor? This tool can match you with an advisor who can meet your needs.,

Some things to note, says Favorito, are that if your income is between $350,000 and $500,000, you’re not eligible to make Roth contributions for your wife, because the income limits are based on joint adjusted gross income. “Currently you can circumvent the rule with what’s called a back door conversion. This strategy only works if you don’t have a traditional IRA in the name of the person you’re funding the account for. Otherwise, Pro-rate rules on conversions eliminate most of the profit,” says Favorito.

As far as finding a mentor goes, many companies are harnessing the benefits of technology to successfully work with clients across the country, regardless of their location. Experts recommend checking out the National Association of Personal Financial Advisors (NAPFA), the XY Planning Network, and the Garrett Planning Network. “Many advisors offer virtual meetings, so the one best suited for your quote may not necessarily be located in your area,” says Edmiston.

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Question edited for brevity and clarity.

Have a question about your financial advisor or looking for a new one? Email [email protected]

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