Two people reviewing financial planning
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What is an Investment Manager? 

Navigating the ever-changing financial landscape can be complicated and confusing. Most people want to invest and plan for their future, but they don’t know how. From understanding stocks and bonds to retirement accounts, it can quickly become overwhelming for the average person. 

According to the Investment Advisor Association’s 2024 report, demand for investment management services has continued to grow, with the number of clients reaching 56.7 million in 2023, a record high. 

Many people end up with various investment accounts–a couple of 401ks from previous jobs, an IRA, or perhaps some stocks purchased after a few too many convincing financial influencer videos. Or maybe you’ve been investing for years and are unsure how to meet your financial goals ultimately. Either way, investment management can help guide you.

Key Takeaways

  • Investment managers manage a client’s investments and assets on their behalf.
  • An experienced investment manager will know how to diversify a client’s assets, and how to navigate challenging financial situations.
  • While there are inherent risks associated with trusting a third party with your investments, qualified investment managers are well-equipped to mitigate these risks.
  • While it is possible to manage your investments, many people find employing a manager saves them time, energy, and money in the long run.

What is Investment Management

Investment management is the handling of an investment portfolio, which is a set of financial assets that can include stocks, bonds, cash and other alternative portfolio investments. It generally involves creating both short and long-term investment strategies, buying and selling assets, asset allocation, developing a tax strategy and more. 

If these tasks seem daunting, hiring a professional investment manager could be the right choice for you. Investment managers conduct in-depth research and analysis on investment tools and market trends, leveraging years of expertise to inform their strategies. 

The terms “portfolio” and “asset management” are often mentioned in the same conversations, but these options are more narrowly focused while investment management takes a more holistic approach. Investment managers not only manage portfolios, but also assist in creating investment goals, determining an individual’s risk tolerance and conducting ongoing portfolio management, asset allocation and portfolio rebalancing. 

Benefits of Investment Management

Investment management can be helpful in several ways depending on your individual goals, including growing your wealth, strengthening your portfolio and reducing your tax burden.

Wealth Growth and Preservation

Wealth growth is accomplished using financial strategies to grow your net worth over time, and wealth preservation is about keeping the assets you already have safe. There are key strategies for both growth and preservation, and investment management can help find the right balance for individual situations based on personal goals and risk tolerance. 

Diversification and Risk Reduction

The primary purpose of portfolio diversification is to control risk. Generally, many small investments are considered safer than one large investment. By diversifying your portfolio into smaller individual investments, you suffer a smaller loss if one fails.

Optimized Returns and Tax Efficiency

Taxes are unavoidable, but the right investment strategy can help reduce your overall tax liability over time. Investment managers can help by using strategies such as maximizing contributions to tax-deferred accounts, holding investments to avoid higher taxes on short-term capital gains and tax loss harvesting.

Financial Security and Goal Achievement

Ideally, having your investment portfolio optimized by your investment manager will help create security through economic downturns and account for inflation. A well-managed portfolio will allow you to meet your financial goals over time.

Challenges of Investment Management

Investment management is not without challenges, especially when handling your finances on your own. Horizons Wealth Management offers a variety of wealth management services, working with you to develop an individual investment plan tailored to meet your goals.

Market Risk

Whether managing finances on your own or with an investment manager, market risk is always a concern. Market risk, also known as systemic risk, is the possibility of loss due to factors that affect the market. These factors include changes in stock prices, interest and exchange rates and political and economic situations (e.g. a recession). 

Credit Risk

Usually, bonds are considered a lower-risk investment. However, that does not mean they are risk-free. One of the main risks for bond investors is credit risk, which is the chance that a borrower fails to pay or meet the agreed-upon terms of a loan.

Liquidity Risk

Liquidity refers to how easily an asset can be converted to cash. When markets become or are predicted to become volatile, your first instinct may be to liquidate your assets to cash. 

However, this may not be the best option for achieving long-term goals. It’s difficult to know what the right choice is. Even professional investment managers cannot predict the future, but an experienced manager will have a toolbox of strategies to use in times of uncertainty.

Diversification & Concentration Risks

While diversifying your portfolio is generally considered safer than having concentrated assets, diversifying without proper research and understanding can also lead to loss. Conversely, some people concentrate their investments based on internet trends or advice from financial influencers, frequently leading to losses.

Behavioral and Regulatory Risks

Regulatory risk involves loss stemming from changes in regulations that affect a market, sector, business, or asset. The average person may not keep up with regulatory changes, and even with the information legal language can be difficult to understand and apply to your situation.

When to Hire an Investment Manager

Many people find themselves with several investment accounts—these could be from old jobs, family members or stocks purchased online. Or perhaps you have been intentionally investing for years and want to ensure you’re making the right choices. 

Whatever the source, investment management can be beneficial if: 

  • You are dealing with complex financial matters, such as tax strategy, inheritance planning, or retirement planning.
  • You are not certain about making investment decisions on your own, or would like a professional second opinion.
  • You want a service that can help manage other financial needs outside of portfolio management. 
  • You want someone else to manage your portfolio, rebalance assets, and provide guidance on updating your investment strategy over time.
  • You have experienced a significant change in income or a major life event, such as getting married, getting divorced, or having a child.

How to Choose an Investment Manager

When selecting an investment manager, several key factors should be considered, including their credentials, reviews, fee structures, and alignment with your personal financial goals and risk tolerance. A good place to start is by creating a list of your financial goals, ensuring the investment manager’s strategy aligns with your individual needs and circumstances. 

For example, are you new to investing? Do you already have many assets and need someone else to keep tabs? Are you looking on behalf of yourself or on behalf of an organization you’re part of? Do you know what specific areas you need help in? 

Finding the right match requires understanding your goals and aligning them with a manager who fits your needs. 

Is an Investment Manager the Same as an Advisor?

An investment manager is one type of financial advisor. Investment managers, portfolio managers, investment counselors, asset managers, and wealth managers all fall under the umbrella of financial advisors. Investment managers primarily deal with financial assets, such as stocks, bonds, and other securities. In contrast, financial advisors provide a broader range of services that encompass all aspects of an individual’s finances, including early retirement planning.

Bottom Line

Investing can quickly become overwhelming and complicated, leaving many people unsure of how to achieve their financial goals. This doesn’t mean you have to give up–professional investment management can help guide you. Horizons Wealth Management provides comprehensive financial planning, wealth management, portfolio management, and retirement planning services to help you navigate your investments and achieve your financial goals.

Investment Management FAQs

Is an investment manager the same as a financial advisor?

No, investment managers focus specifically on assets such as stocks, bonds, and other securities and how to use them to achieve financial goals. Financial advisors have a broader scope, looking at all aspects of an individual’s finances.

Is a financial advisor the same as a portfolio manager?

Financial advisors may provide advice on a client’s portfolio but typically deal in broader areas that encompass all aspects of financial planning. Portfolio managers are focused on advising, buying, holding, selling, and rebalancing client assets.

Do you need to hire a certified financial planner for investment management?

A CFP accreditation is not required to become an investment manager. However, the certification educates professionals on over 100 topics of financial management, ensuring they are educated in any areas or issues a client may have.

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50th birthday
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How to Build Wealth in Your 50’s

Key Takeaways

  • Focus on eliminating high-interest debt to free up resources for savings and investments, setting a solid foundation for retirement.
  • Trim excess expenses to increase funds available for investing in your retirement fund, laying the groundwork for financial security.
  • Maximize “catch-up” contributions to tax-advantaged accounts, enhancing your nest egg with the help of professional financial advice.

Navigating your 50s can be a critical period for financial planning, standing at the crossroads between active employment and impending retirement. This decade is an opportune time to assess, adjust, and accelerate wealth-building strategies to ensure a secure and comfortable future. In this guide, we will explore essential tactics for enhancing financial health in your 50s—from maximizing retirement savings with strategic contributions to diversifying income streams beyond traditional means.

Reduce Debt

In your 50s, paying down debt is crucial for building wealth and securing a financially stable future. This period marks a strategic shift from accumulating to eliminating debts, recognizing that each dollar paid off not only increases net worth but also frees up more resources for investments and savings. Reducing debt not only bolsters financial health but also alleviates the stress tied to high liabilities, paving the way for a smoother transition into retirement.

A strategic approach to managing debt starts by targeting high-interest obligations first—such as credit card balances or personal loans—which can lead to substantial interest savings over time. Additionally, consolidating debts into a lower-interest option can simplify repayment and help reduce overall costs more effectively.

A targeted debt strategy focuses on eliminating high-interest debts first—like credit cards and personal loans—to minimize long-term interest payments. Consolidating multiple debts into a lower-interest loan can also simplify your finances and lower your overall repayment burden.

Expenses Review

At this stage, fine-tuning your budget becomes crucial, as identifying and trimming unnecessary spending can free up significant funds for saving and investing. It’s time to critically evaluate your lifestyle habits—consider downsizing services you no longer need, shopping smarter by seeking discounts, or even switching to more cost-effective brands or providers.

Embracing frugality isn’t about sacrificing joy but rather choosing financial health over temporary pleasures. Many people use budgeting tools to gain insight into monthly expenditures, making it easier to spot areas ripe for reduction. For example, consolidating trips to save on gas, opting for home-cooked meals over eating out frequently, and canceling underused memberships can all contribute toward enhancing your financial situation. Investing the money saved from these strategies not only bolsters your retirement fund but also brings you closer to achieving lasting financial security. In essence, conscientious spending in your 50s lays down a solid foundation for wealth that supports both current needs and future aspirations.

Maximize Retirement Contributions

Maximizing retirement contributions in your 50s is crucial for building wealth as you edge closer to retirement. As you get closer to retirement, you enter into a period that allows for “catch-up” contributions in tax-advantaged accounts, offering a chance to increase your savings and benefit from compounding interest significantly. By prioritizing these additional deposits, you can enhance the growth of your retirement fund substantially.

Adjusting your budget to boost these contributions is essential. Whether it’s through an employer-sponsored 401(k) or an individual IRA, increasing your savings now can make a profound difference in the size of your nest egg. Consulting with a financial advisor could also optimize this strategy, ensuring that you’re making the most out of every opportunity to secure a financially comfortable future.

Carefully Manage Risk

Managing risk becomes increasingly important as you navigate through your 50s. This phase requires a strategic reassessment of your investment portfolio to ensure it aligns with your current risk tolerance and retirement goals. As retirement nears, the focus should shift toward preserving capital while still achieving reasonable growth. Diversifying investments across different asset classes—such as stocks, bonds, real estate, and possibly precious metals—can mitigate risk and reduce volatility in your portfolio.

In addition to diversification, consider adjusting the allocation of assets in your investment mix. While equities offer higher growth potential over time, they come with increased volatility. Gradually increasing the proportion of fixed-income securities can provide more stability as you approach retirement age. Regularly reviewing and rebalancing your portfolio ensures that it remains consistent with your evolving risk appetite and financial objectives, which is a critical step toward safeguarding wealth during this pivotal decade.

Establish a Retirement Plan

Creating a comprehensive retirement plan in your 50s is an essential step toward securing financial stability and building wealth as you approach the golden years. This process begins with a clear assessment of your current financial situation, including savings, investments, debts, and expected income streams in retirement. Understanding these elements allows you to set realistic goals for retirement living expenses based on your desired lifestyle. It’s also crucial at this stage to account for unforeseen costs such as healthcare, which can significantly impact spending needs.
To effectively make a retirement plan:

  • Evaluate Your Financial Status: Start by listing all sources of income (pensions, savings accounts, investment portfolios) and anticipated expenses.
  • Set Clear Retirement Goals: Define your retirement age and the lifestyle you wish to maintain—traveling, hobbies, and relocation plans should be considered here.
  • Calculate Expected Retirement Income Needs: Estimate how much money will be needed annually during retirement, considering inflation rates over time.
  • Develop A Savings Strategy: Determine how much must be saved from now until retirement to meet future income needs. This may involve maximizing contributions to tax-advantaged accounts like IRAs or 401(k)s.

A critical part of creating this plan involves regularly reviewing it—preferably annually—to adjust for any changes in personal circumstances or financial markets that could affect long-term objectives. Engaging with a professional financial advisor can provide valuable insights into complex areas such as tax planning and investment management tailored specifically towards achieving your individualized goals efficiently while navigating through the complexities of preparing for a comfortable retirement life.
Horizons Wealth Management can help you navigate your financial questions, no matter your age. Get in touch today to learn more about our wealth management, financial planning, retirement planning and managed portfolio services.

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Senior woman with grandchild
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What are RMD (Required Minimum Distributions) and What You Need to Know

After a certain age, individuals with retirement accounts must withdraw a certain amount from these accounts each year as a minimum. This withdrawal is known as a required minimum distribution, or RMD, and it typically becomes mandatory at age 73.

Key Takeaways

  • Required minimum distributions are the minimum amount you must withdraw from your tax-deductible retirement accounts.
  • These withdrawals are required by law after the age of 73.
  • RMDs can be donated to reduce or eliminate the tax burden created by the additional yearly income.
  • The amount of an RMD is determined by the total value of your qualifying retirement accounts and factors like age, beneficiaries and the original owner of the retirement account.

What Does RMD Stand For and When Does it Start?

Required minimum distributions have been a part of retirement planning in the United States since the mid-1970s with the introduction of IRAs as a new type of long-term investing mechanism. These withdrawals are required by statute for all types of retirement accounts except for Roth IRAs and certain similar types of accounts.

Most people with retirement accounts must start making these withdrawals at age 73, but there are some exceptions to this rule. You aren’t technically required to make your first withdrawal from your retirement accounts until April 1 of the year following your 73rd birthday, for instance. Qualifying charitable contributions from your retirement accounts are also counted toward your RMD, meaning you can offset some or all of your required withdrawal with certain philanthropic contributions.

What If I’m Still Working?

There are also RMD exemptions for individuals who are still working at the company sponsoring their retirement plan, as long as they own less than 5 percent of the company administering the account. This allows people who continue to work past the minimum retirement age to take full advantage of the benefits offered by an IRA or similar account.

What Accounts Require RMDs?

RMDs are required for many types of employer-sponsored retirement plans. The most common types of accounts subject to RMD rules are:

  • Traditional IRAs
  • Rollover IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k)s
  • 403(b)s

It’s worth noting again that Roth IRAs, Roth 401(k)s and other types of Roth accounts are not subject to the same RMD requirements as these retirement plans.

How to Determine RMD Amount?

How much you’ll need to withdraw from your accounts each year is calculated by dividing each account’s balance as of Dec. 31 by a life expectancy factor calculated using tables provided by the IRS. These life expectancy factors are determined based on a number of factors relating to you, your beneficiaries, and the original owner of the retirement account. 

How to Handle Multiple IRAs

RMDs are calculated for each individual account—if you have more than one IRA, you will need to calculate the RMD for each one based on all the factors considered by the IRS. Once you’ve determined your total RMD for the year, however, you can withdraw that amount from any one IRA or combination of accounts as long as the total withdrawal meets or exceeds your minimum requirement.

How are RMDs Taxed?

Assuming all of your retirement account contributions were tax-deductible, the income gained by withdrawing your RMD will be treated like any other income and taxed accordingly.

In some cases, an individual might make contributions to an IRA or other retirement account that are not tax-deductible but are still subject to an RMD after age 73. In these cases, you will need to work with the IRS or your tax professional to determine how much of your RMD income must be taxed and how much is exempt for the year.

How to Use RMD Assets

Funds withdrawn from your retirement accounts through an RMD can be used in a variety of ways, and some of these uses can help reduce your tax burden or make the assets more useful to your beneficiaries. 

Reinvest the funds

One common use for RMD funds is to reinvest the money elsewhere simply. This can help protect the money from inflation and continue to make it work for you even once it’s no longer in a tax-protected retirement account.

The only caveat to this approach is that the funds cannot be placed back into a typical retirement account—if they are made using RMD funds, the investments must be made into a taxable form of investment account.

Donate to Charities

Charitable donations are another common use of RMDs, and if they’re done correctly, you can avoid paying taxes on some or all of the money withdrawn for the year. Donations made to charitable organizations directly out of your RMD funds are called qualified charitable distributions, or QCDs, and up to $100,000 of these funds each year can be omitted from your taxable income.

Support Education for Your Family

If you have young family members planning to go to college, a 529 education savings plan might be a good use of your RMD funds each year. These savings plans allow your money to continue to grow tax-free and will remain tax-deductible as long as the funds are used for a qualifying educational expense in the future.

Bottom Line

While an RMD can seem confusing at first, especially if you’re recently retired or haven’t had to make withdrawals from your retirement accounts yet, the process is relatively straightforward and doesn’t have to be a financial burden if done correctly. By using your withdrawal wisely through reinvesting and charitable contributions, your RMD can become an opportunity rather than a burden each year. At Horizon Wealth Management, we can help you ensure your financial future is clear with retirement planning services and financial planning services. Schedule a discovery call today!

RMD FAQs

What is the biggest RMD mistake?

Probably the most common mistake people make with their first RMD is failing to withdraw the correct amount or missing the withdrawal deadline. These errors are sometimes accompanied by substantial fines from the IRS, but they can be easily avoided by working with a qualified investment professional to ensure the process is followed correctly and in a timely manner.

Is it better to take RMD monthly or annually?

In the long term, there is little difference if any in an individual’s finances if they choose to withdraw their RMD monthly, quarterly or annually. This decision should be made based on an individual’s needs and personal preferences, and will likely be informed by what other forms of income, if any, the person has.

Do RMDs affect Social Security or Medicare premiums?

RMDs do not directly impact social security payments but can affect Medicare premiums. If your RMDs raise your tax bracket, this can have a secondary effect on the amount of taxes paid on social security income and the Medicare surcharge premiums calculated based on your Modified Adjusted Gross Income.

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How Gen X’s ‘Latch Key Kid’ Mentality Propels Their Financial Success

Does this generation have a unique financial perspective because of how they were raised?  Find out here.

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How to wean grown kids off your payroll, freeing up more retirement cash

Are your adult children still relying on you financially? Here’s how to help them find independence.

Just because your kids have moved out of the house doesn’t mean they’re out of your financial life. Six out of 10 (61 percent) parents with at least one adult child over 18 said they provided them financial help, according to a Pew Research Center survey.

But, eventually, empty nesters face the delicate job of shifting the bill-paying burden to their grown children. Covering your kids’ cellphone bill, car payments, credit cards and other monthly costs can’t last forever. Doing away with those bills, if possible, is a budget-friendly move.

Learn how here.

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A New Benefit: Some Companies Help Workers Pay Down Student Loans

Many companies now help employees pay off their student loans. Is this the wave of the future?

 

Student loan debt has not only become more common, but the size of the average loan has nearly doubled over the past decade or so. Collectively, Americans carry more than $1.5 trillion in student loan debt.

Learn more here.

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How to Budget Like a Millionaire

Most millionaires aren’t driving Lamborghinis and eating caviar. They’re driving reliable used cars and eating mashed potatoes and meatloaf. Millionaires aren’t wealthy because they’re lucky. They’re wealthy because they follow simple money habits year after year.

Click HERE to learn more about Dave Ramsey’s 6 Surprising Habits of Millionaires. 

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How Cars Affect your Financial Freedom

It’s not that I don’t want a really fancy car, it is just that there is something I want a bit more: financial freedom. Car payments are many times the #1 obstacle that causes the average family not to achieve financial stability. Spend some time thinking about your current car situation.  Are your car purchases making your bank richer or you?

Here is a great read about “How Your Car Affects Your Financial Freedom.”

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10 Reasons You’re Not Rich Yet

No matter how much you earn you could be creating your own barriers to financial success without even knowing it. Here are 10 things you might be doing that are preventing you from achieving financial freedom.

Click here to read Money Magazine’s 10 Reasons You’ll Never Be Rich. 

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Financial Habits That Will Make You Sexier

Ditch the makeup and hair products. Your budgeting skills might be the thing you should really show off on your next date.  Money skills are more important than even good looks when seeking a mate!

In a recent survey about relationships and finances, MONEY found that both baby boomers and millennials agree on the three most attractive traits in a potential mate: a sense of humor, compassion, and—yes—financial responsibility. For both groups, those qualities all rank higher than physical chemistry, diligence, and even intellect.

Click here to find MONEY’s survey results on the most attractive traits.

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