Time, Money, and Goals Make a Solid Financial Plan

The past year has shone a stark light on personal and business finance management and the consequences of being unprepared for the future. Partner F. Michael Zovistoski weighed in on some of the biggest concerns he's been hearing from clients regarding their financial futures.

When deciding to find a financial advisor, Zovistoski said step one is to find a financial advisor you trust. Consider factors like the advisor's experience, reputation, fee structure, and your personal comfort with the advisor before making a decision, he said. And while living longer is always a good thing, but smart investing is also needed. "Don't automatically switch your investments to an ultra-conservative portfolio," Zovistoski said. "We want to make sure the money's going to last your lifetime." Focusing on goals at retirement milestones can help guide effective planning, but above all, Zovistoski suggested finding a health insurance with a really good supplement plan.

Federal changes in tax laws will also require financial planning to preserve the wealth individuals have put aside for the future. Notably, he said, is that unemployment benefits tax exemption in 2020 did not carry into 2021, so any benefits earned since January should be considered as fully taxable in 2021. Required minimum distributions (RMDs) also make a reappearance in 2021, provided the individual started taking them and had not turned age 70 by July 1st, 2019.

Individual tax rates could rise to a top rate of 39.6% in an effort to recoup some of the deficit caused by stimulus spending which, when combined with the 3.8% investment income tax, could result in a top individual tax rate between 40.8% and 43.4%, according to Zovistoski. Other federal tax changes considered are the removal of the cost basis of step-up for capital gains over $1M million on inherited assets and a reduction of the estate and the gift exemption from $11.7M to $3.5M.

As for business owners, Zovistoski said to take advantage of the low interest rates. "[If] a company is solid and can borrow at low interest rates and put it to work for them and get a higher rate of return, take a look at that. Consider refinancing it if they haven't already," he said. Also, those with fixed income portfolios should take a look at rebalancing their investments for a higher rate of return.

Zovistoski also thinks the recent focus of environmental, social and governance (ESG) criterion for investment selection in federal retirement plans is a trend that will spread to the private sector. Though reporting on ESG is not required for U.S. public companies, Zovistoski believes companies with strong records in ESG will elect to disclose the information. "Consumers must be careful as far as what they're selecting, but I think ESG is the future if people want to invest in companies that are solid and have a social conscience," he said. Additionally, Zovitoski said he has found companies focusing on ESG have an element of loss prevention because, "[if] they're focusing on making sure the environment is protected and there’s good governance, accidents happen less."

Read the full article published by Albany Business Review.