Tom Gehrmann Colorado Springs | Is It Expensive To Afford A Financial Planner?

 

Many people still believe that financial planners are for the wealthy. This is why many fail to use them simply because they don't want to pay any extra cost. Making financial plans requires an expert, that is someone with a good knowledge of finance. Before a plan or a goal is accomplished, it requires determination and discipline. If you choose to be your financial planner, you might not be able to follow your plans thoroughly. For this reason, it's preferable to choose an expert in this field. It is better to choose a financial planner (though it might be a little bit on the high side depending on your portfolio) but it's worth the expenses. The extra cost shouldn't be your first concern when considering a financial planner, rather the first question you should ask yourself is can I not afford to have a financial planner?

For clarity purposes, you don't need to be rich to have a financial planner. Sincerely, not everyone needs a financial planner, says Tom Gehrmann Colorado Springs. But if you feel your portfolio needs proper direction and guidance, you can opt for one. Because a good financial plan that is well-executed results in a better outcome. A well constructed financial plan allows you to be on track and gives you the ability to oversee your investment, profits and money spent. To help you understand the role of a financial planner, let's consider who they are, what they do, various types and payment options.

Financial Planners And What They Do

A financial planner is a financial expert that helps you meet your financial needs and long term financial goals as they come up with strategies to accomplish those goals. They help assist in various ways ranging from saving for retirement and investing to funding a new business, college and maintaining wealth. They are considered fiduciaries meaning they are bound legally to act in the best interest of their clients.

Types of financial planners

Financial planners can be categorized into three types based on how they are paid namely percentage-based, fee-based and fee-only financial planners.

Percentage-based financial planners

For this type of financial planner, they charged based on percentage. They collect a certain percentage depending on the assets they are managing. In most cases, they work with clients that have at least million-dollar assets in their portfolio and charge from 0.5% to 2%. Considering this type of planner might seem expensive but they will work to ensure the growth of your assets and investments since they collect a percentage based on the value of your assets.

Fee-based financial planners

They charge a flat rate for their service which can be based on the project, the assets they manage or hourly. So primarily their income is from what their clients pay them. They can sometimes also earn through commission when they sell certain financial products. It is advised to use them for certain services since they charge a flat rate so you don't have to worry about paying hourly. For individuals with simple financial situations who can easily manage their finances or those that just need general financial advice, the hourly financial service will be cost-effective.

Fee-only financial planners

When you compare this type of financial planner to the other two listed above it will cost you a lot more for upfront payment.

Advantages of financial planners

They help manage your retirement plans

They help manage reimbursement of complex student loan

They can help you with estate management

They help to ensure that you have savings for your children's college fees

They can be involved when your partner dies or is disabled

They also can be of help when you earn an inheritance

During a divorce phase, a financial advisor can be involved

If there is an IRS audit, financial advisors are of importance.

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How Financial Advisor Can Help with your Taxes?

 

According to Tom Gehrmann – financial advisor from Colorado Springs, tax money is mandatory contributions or financial charges by the government levied on individuals or companies so they can pay for public workers. Services like roads, schools, also programs such as social security, medicare, and pensions are paid using our taxes.

There are different methods to lessen the amount of taxes you pay monthly or yearly. One of the best ways is to employ an adequate professional financial advisor. You might wonder who is a financial advisor?

A financial advisor is a professional that helps individuals or companies to meet their long-term financial goals. It includes savings, insurances, budgets, estate and tax planning, pension, liabilities, assets, and others. A financial advisor is worthy of hiring because it adds value in growing our businesses and wealth such as:

 

●      Financial planning

●     Asset allocation

●     Rebalancing

●     Timing and withdrawal

●     Right investment and

●     Tax planning

Taxes are an inevitable part of entrepreneur life but when they feel like they are paying too much that's a problem. There is no reason to pay more than your fair share of tax and there are ways to minimize it and save your money.

In this article, Tom Gehrmann Colorado Springs gives some ways a financial advisor can save your tax money.

 

1. Diversifying Investment

One of the best strategies for tax is to have good investment. One of the best investment plans is diversification, it lowers your portfolio risk and generates more stable income, says Tom Gehrmann Colorado Springs. For instance, instead of only investing in one stock, try three or four. You can also move some of your investment into real estate.

By investing in a diversified way, you won't have a problem if one asset takes off and the other drops precipitously. The same approach can be used for tax diversification to save your tax money.

There are three boards of financial accounts which are recognized by the tax system, tax -free, tax-deferred, and taxable. Having all three tax systems is essential because of their advantages. A tax -free account is not utilized for short-term needs, it's a long-term investment often used for retirement funds. No taxes when withdrawing your investment and profit if you have met the rules that allow tax-free withdrawal.

A tax-deferred account is also a long-term investment but will be taxed when funds are withdrawn.

A taxable account is simple no-tax rules on when and how you tap your funds. It will pay much more but payment is immediate.

Maintaining a mix of taxable, tax-deferred, and tax-free accounts, a financial advisor can work with you to meet cash flow efficiently and save you some tax money.

 

2. Estate Planning

We all want to make an impact in our family by leaving something for them when we are gone. So, having estate strategies is very important. Estate state planning is likely the most essential aspect of tax planning on a professional level. The estate includes everything from homes, cars, furniture, tools to any money left unspent.

Family trusts, foundations, and other corporations are often used by financial advisors to reduce estate taxes. Currently, the law states that any estate with a worth lower than $10.5 million isn't subjected to estate taxes. They are subject to a capital gains tax.

 

3. Charity Donation

Charity donations are another common method used by the financial advisor to lessen taxes. Donating money to a non-profit organization is not only an honorable thing to do but it also lessens your tax budget.

Securities are donated directly to organizations by several investors because there are a lot of benefits, especially for a tax-conscious investor.

Make most of your donation in cash and to claim with the IRS you need to have proof such as a receipt. It also strengthens your tax record if you are audited.

All donations are not eligible for tax reduction except donations made to prescribed funds qualify or donations made in cash or cheque.

 

4. Dividends

One of the best ways to lessen taxes is dividends. A dividend is the allocation of cash or stock earned by a company to shareholders. It can be in cash, shares, property, scrip, bonus, or liquidating.

Dividends are mostly determined by the company board of directors. Corporate dividends are often paid after-tax business income. So, they are taxed at a much lower rate than salary or hourly wage by the government.

As a self-employed, moving your money from your business to your account will likely be of limited options. However, a financial advisor can help you structure your investment to help you earn a dividend instead of salary.

This can be complex, and it also depends on where you live and work. But a qualified financial planner will have up-to-date information with knowledge of the important law in your ci

 

5. Studying Old Tax

People often complain that the tax system is way too difficult for the majority of people to understand. Well, there is a lot of truth to the claims.

Yearly, money is left on the table by people who can't make use of every tax deduction they are qualified for. This happens when they don't have a proper understanding of the tax system.

But to have proper knowledge, the best option is to study the old tax return. Your financial advisor will also know what benefits you qualify for and will help you get it all, says Tom Gehrmann Colorado Springs.

 

The bottom line

Taxes can make an enormous difference in your post-retirement income. But paying a qualified financial advisor for advice and to help maximize your hard-earned retirement saving.

Originally Published