Planning for Financial Independence? Here’s the Only Benchmark That Matters

As Spring is finally here to bring us warmer, sunnier days, it calls to mind how that change of seasons can mirror our financial journey. After a “winter” of work and focus on accumulating wealth, the goal is to enjoy the warmth of a financially stable retirement and the joy of passing on a legacy.

As we move along that journey, we naturally look for benchmarks we can achieve to tell us if we’re on track to reach that goal. Many investors find themselves looking to the S&P 500 as the definitive benchmark to beat, and gauge their success by whether or not they are beating the market in any given moment.

While that approach seems like it might make sense, the hyperfocus on beating the S&P can lead to short-sighted and sometimes reckless decisions that have us taking permanent action based on temporary market conditions.

 

The only benchmark that matters.

In reality, there’s only one benchmark that matters, and it’s not the S&P. What matters is this: are you on course to achieve your financial goals and live the life you want – without the fear of running out of money to provide a legacy for your family and support the charities you care about?

Besides the fact that market victories are rarely sustainable over a lifetime, beating the index for a moment doesn’t get the job done because financial success is multifaceted. What good is it if you beat the S&P but your wealth is depleted because it was not set up to be tax efficient? How much of a victory is it if you jumped out of the market at an “opportune time” only to run out of savings because there was no sound spending plan in place? How much of your legacy will your family enjoy if the assets they inherit are tied up in taxes?

Financial success has many metrics. It also looks different for every individual based on their unique situation and goals. That is why the key to financial freedom is purposeful planning.

 

All dollars are not created equal.

Because financial success is multifaceted, a purposeful plan is one that takes all factors into account – not just whether a stock is hot from one minute to the next. Take how investors save, for example. A million dollars in a bank is not the same as $1M in a retirement account or an IRA where you’ll have to pay income taxes on every dollar withdrawn. The same nest egg is worth a lot more if it doesn’t have tax obligations attached.

Considerations like this are at the heart of what we do at N1 Advisors as we create your unique plan with you. It’s my job, and my honor, to get to know you and your family, and find your unique combination of answers to questions like:

  • What’s the most effective way to accumulate your nest egg? How can we balance vehicles that create current tax advantages like IRAs and employer-sponsored retirement plans with vehicles like Roth IRAs and after-tax accounts that decrease your future tax burden?
  • Will you have other sources of income we can factor into your saving and spending plan? Is there a pension? What are your Social Security benefits? What’s the most tax-efficient way to integrate these streams of income and make withdrawals from your portfolio over the course of your retirement?
  • What assets should be prioritized to spend during your lifetime? Do you have an IRA account or other financial vehicle that carries minimum distribution requirements?
  • What do you want your legacy to be? What is the most impactful combination of present interest gifts during your lifetime, and assets bequeathed upon your passing? How do you create a sound gifting strategy that matches different recipients – from family to charitable organizations – with the most tax-friendly type of asset?

 

Keep the main thing, the main thing.

Eagles quarterback Jalen Hurts famously said that if you want to win, “Keep the main thing, the main thing.” For an investor with long-term financial freedom in mind, the main thing is the plan. You may or may not be beating the market at any given point, but if your plan is strategically crafted to address all of those questions, you have a much greater likelihood of winning the financial freedom you are working for, and of passing on the legacy you want to leave to those you love.

Even the smartest investment strategy will likely fall short if not driven by purposeful planning. These two pieces – planning and investment – need to work hand in hand towards the same goal, which is your financial independence.

At N1 Advisors, our commitment to you goes far beyond transactional advice about the trending stock of the day. Our commitment to you is to provide that long-term perspective and disciplined strategy that takes your whole life and legacy into account. Having a solid plan to stick to means you’re not always chasing the continually changing benchmark of beating the market; the plan itself is your benchmark, and staying on track with it is your exclusive focus.

It’s our exclusive focus, too. Thank you for entrusting us with your plans and dreams for financial freedom; we look forward to the chance to continue to work with you toward that goal!