Columbus Monthly: Wealth Management Special Section (Aug. 2021)

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By David Rees

Post-Pandemic Planning Building a foundation for your financial future

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The COVID-19 pandemic has impacted economic sectors at levels not seen since the early 1970s.

According to The Washington Post, 10 percent of Americans ages 25 to 54 lost their jobs between February and April 2020, contributing to employment’s lowest percentage since 1975.

A year later, employment is rising and hardship rates are falling due to job growth and government benefits.

Still, according to the Center on Budget and Policy Priorities, 20 million adults live in households that did not get enough to eat at some point over the previous 12 months, and 10.5 million adults are behind on rent.

The pandemic has wreaked havoc on the financial world, with wild swings that left many wondering, where do we go from here? As vaccines roll out and the world begins returning to normal, Daniel Roe, chief investment officer and co-CEO of Budros Ruhlin & Roe, has advice on how individuals of all ages can protect their wealth and ensure it continues to grow in the years to come.

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Roe has been advising clients in the financial services industry for more than 30 years and was recognized by Barron’s magazine as one of the top 100 advisers in the United States.

The pandemic was not the first crisis the firm has guided clients through, but this recession was unlike any other. Having learned from 2008’s Great Recession, the government’s response was massive and immediate, says Roe. “There were certainly some lessons learned,” says Roe, who thinks there will be a general expectation that government response to future crises will be larger and faster.

Early Career Student loan debt is now the second-highest consumer debt category, at about $1.56 trillion, as 2020 saw a 2 percent increase in the average student loan debt.

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For individuals early in their careers, likely with student debt and little to no savings, Roe advises building a plan that involves working toward paying down student loans.

But paying down loans should not prevent an individual from beginning a savings plan as well. Roe recommends using a personal savings plan, an IRA account, a Roth IRA account or an employer-sponsored retirement plan to begin saving.

It’s well-known that starting a retirement savings account early results in larger savings over time, thanks to compound interest.

A very simple example might look like this: Person A starts saving for retirement in 2020, putting away $1,000 each year into an account that earns 5 percent compounding interest annually. Person B, on the other hand, waits until 2035 to start saving, but sets aside $2,000 each year into an account with the same compound interest rate. By 2050, Person A will have nearly $71,000 in their account, while Person B, despite saving twice as much each year, will only have reached just over $47,000 in savings.

The lesson: Start saving as early as possible, and continue saving at that rate—or increase the annual contribution to the retirement plan—throughout young adulthood.

Mid-Career Individuals in their 40s and 50s should be focused on saving via their company retirement plans. These plans often come with contributions from the employer, so Roe recommends maximizing those benefits. Also at this age, individuals want to avoid overpaying for life insurance and disability insurance.

Families planning financially for children in college need to build a practical plan for those expenses. Attempting to save every last nickel is not a realistic outlook, says Roe. Instead, individuals should make a clear plan for necessary expenses and evaluate how much the student will cover.

“Too often, people get to the age of sending their kids to college and they’re paying everything out of cash flow, and that really precludes them from being able to save during that time,” says Roe.

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First Steps Having faced this year with so much instability, how can individuals and families begin financial planning? Roe says the first step is to establish a reserve—a savings account set aside to meet unexpected costs or financial obligations—that can provide for basic expenses for three to six months.

For those wanting to build upon their investments and create a stronger financial future, Roe says individuals should also find an adviser who holds to a fiduciary model, meaning the adviser always puts the client’s interests first. Having an adviser that acts as a fiduciary on clients’ behalf removes any conflicts of interest from the advice he or she gives. “[Budros, Ruhlin & Roe] believes in complete transparency,” says Roe. “You want to know what advice you’re paying for and make sure that interests are aligned on both sides and that you feel you’re being treated fairly.”

Advisers can act more rationally and less emotionally than many individuals would on their own. Particularly in a time of crisis, an adviser can recognize opportunity that may be easier to miss when one has an emotional investment.

Organization is vital before meeting with a financial adviser, says Roe. Being able to quickly pull information from any investment statements, banking statements or legal documents will make the process much smoother.

Roe also recommends giving thought to one’s objectives. A client’s first few conversations with their adviser should be about what they are trying to accomplish, so the adviser can head in the right direction when assisting.

There is nothing generic about what we do. We develop and recommend comprehensive financial strategies from the ground up for every client with whom we work.

We believe in long-term relationships founded upon trust and open communication. As your trusted advisors, we believe it is important that we communicate to you what you need to know, not just what you would like to hear.

And we believe that providing you with professional guidance and advice starts with a thorough understanding of your desires and goals. In developing your plan we work with you and your other professional advisors to ensure complete and fully integrated consultation.

CHORNYAK & ASSOCIATES FINANCIAL PLANNING CONSULTANTS Janney Montgomery Scott LLC 716 Mt. Airyshire Boulevard, Suite 200, Columbus, OH 43235 614.888.2121 | jchornyak@janney.com | www.chornyak.com W W W. J A N N E Y. C O M | © J A N N E Y M O N T G O M E R Y S C O T T L L C | M E M B E R : N Y S E , F I N R A , S I P C | R E F. 3 3 5 9 4 3 - 0 6 2 1

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Retirement According to the U.S. Census Bureau, the number of Americans working in their 70s has risen over the last 20 years, from less than 10 percent to 15 percent. Roe has noticed that his clients’ view of retirement is changing; he describes this period as a transition from one’s core career to another opportunity that continues to earn income.

To get started, Roe advises calculating how much money will be needed to be financially independent. Roe recommends increasing annual investments into a personal investment or retirement account to reach financial independence.

“Twenty to 25 times [the annual need to maintain lifestyle] is a good calculation to start to think about, ‘How much do I need

before I can consider myself financially independent?’” he says.

Roe says he has new clients walk in almost daily who are eager to achieve financial independence. Almost as frequently, he has clients who have reached that point and can make new decisions for their lives and their family that reflect the progress they’ve made.

“There is really nothing more fulfilling that we do than seeing [clients] either check off objects like financial independence or smaller ones like their children graduating from college with a fully funded plan,” says Roe. “These are important milestones in our client’s lives, and we get to be a part of that.”

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To avoid frustration, start saving early and in small amounts to build a fund that can be used toward college or unexpected expenses. Ohio’s 529 CollegeAdvantage plan allows contributions to grow, tax-free, until a child is ready for college—and it stays untaxed when spent on qualified expenses associated with college, as well as trade schools, apprenticeships and more.