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Wealth Column: 3 sensible financial moves for 2023

Planning for taxes across these horizons gives you peace of mind by providing for yourself and your family no matter where taxes are headed in the future.

Bruce Helmer and Peg Webb sit next to each other at a table.
Bruce Helmer and Peg Webb, financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on KLKS 100.1 FM on Sunday mornings.
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We recently assembled seven of Wealth Enhancement Group’s most experienced and knowledgeable financial advisers and asked them to share their No. 1 most impactful piece of financial advice for 2023 and beyond.

We’ve picked three of these financial moves that you can make in 2023 to better manage risk in your portfolio — and take advantage of market opportunities that are present in every market.

Don’t follow the media’s take on volatility

The media reports on market volatility would have you believe it’s something to fear. That’s not always the case — sometimes the very opposite is true . Fear keeps people glued to their screens remember, and those eyeballs sell advertising. You need to tune out this noise and focus on your long-term goals, financial or otherwise.How do we define volatility? It’s how fast and unpredictably the stock market or bond market goes up or down. If you have long-term investment goals and a sensible financial plan, you should be able to tolerate — even embrace — periods of market volatility. But should it be feared? Markets go up and down every day, sometimes by a little, or a lot.

It’s understandable to have a negative response to falling markets. Investors crave predictability. And think about it: Stocks are either “overbought” (that is, expensive); “fairly priced” or “oversold” (or cheap). If this weren’t the case, stock prices would simply go up and up and there would be no such thing as risk.

Volatility can be a powerful indicator that stocks are oversold — or trading below their intrinsic or fair market value. You can take volatility as one of many indicators that it’s time to rebalance your portfolio and add exposure. Of course, you have to have a long enough time horizon to weather the occasional storm. If you’re not sleeping well because of your feelings about volatility, that could be a strong indication that you’re taking too much risk in your portfolio, and it may be time to dial some of it back.

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Work with an adviser to help navigate changing markets

Typically, when I ask people why they don’t use a financial adviser, they usually answer in one of four ways. They think they can do it themselves or they don’t want to pay for advice. They don’t know whom to trust or are embarrassed by their situation or the poor choices they’ve made. The financial firm Schwab surveyed a group of investors in 2021 and it revealed something interesting: People who worked with a financial planner were less likely to carry a credit card balance or to have any debt, were more likely to have an emergency fund, and were more likely to regularly rebalance their portfolio than those who didn’t work with an adviser.

What value would you put on this comparison over a lifetime of investing?

That said, if you are interested in the financial markets and enjoy spending time managing your affairs, by all means, do it. But if you’d rather free up time to focus on other areas of your life, hiring a financial adviser in 2023 could be a good move. There’s no great mystery to choosing one. Ask friends and family for referrals. When you have two or three candidates, interview them to assess their qualifications and experience. Just as important, gauge your comfort level and personal chemistry. Does one adviser seem to care more about you than the others?

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With stock market tickers scrolling constantly on cable TV, you need to think about how these channels are paid: by Wall Street firms that promote their services on those very same channels.

Also, pay attention to how the adviser or planner is paid. Do they charge a flat fee for planning services, or do they charge an annual percentage based on the assets you have them manage? Or do they sell products on commission, or through a hybrid fee-based and commission structure? Knowing how the adviser is compensated will indicate whether they are working in your best interest, or whether there could be potential conflicts of interest to sell you certain high-fee products that are more lucrative for them.

Visualize your future financial success using your money matrix

Your Money Matrix is a proprietary tool that Wealth Enhancement Group developed decades ago to help clients visualize how they will be able to sustain income over their lifetimes. You can set it up easily on a sheet of paper. To construct Your Money Matrix, plot three rows with the time frames in which you’ll need money:

  • The short-term: This is money you need during the next five years. These should be low-risk investments.
  • The medium-term: This is the money you need between six and 10 years from now. You can afford to take a bit more risk with this money, because you’ll have more time to recover from the market’s inevitable ups and downs. 
  • The long-term: This is money you may need more than 10 years in the future. Since you don't need this money for at least 10 years, these investments should be focused on growth.

Planning for taxes across these horizons gives you peace of mind by providing for yourself and your family no matter where taxes are headed in the future. Put your three primary options of investment accounts described above into three additional tax buckets:

  1. Taxable accounts: These are typically brokerage, bank savings and other liquid accounts, where gains and interest income are taxed at year-end.
  2. Tax-deferred investment accounts: With a Traditional IRA, 401(k) or 403(b) plan, you get an immediate tax deduction and tax-deferred growth. However, distributions are taxed as ordinary income (and withdrawals made prior to age 59½ usually trigger a 10% IRS penalty).
  3. Tax-advantaged investment accounts: With these accounts, like a Roth IRA, you get no tax deduction on contributions, but withdrawals can be tax-free.

With a well-constructed financial plan built to withstand market volatility, and by working with an experienced and knowledgeable adviser who can help create a tax diversification strategy using the Your Money Matrix, you’ll be able to plan for a future with greater confidence in 2023. Reach out anytime to a Wealth Enhancement Group adviser to get started.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on News Radio 830 WCCO on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment adviser. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL.

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