We commonly receive questions from new clients that stem from a “squirreling away” kind of perspective on their investments. Some come to us with many accounts and investments—each with their own unique purpose. A standalone mutual fund was purchased ten years ago for a future vacation or to help with a grandchild’s education. We see investment accounts meant to “pay the bills” in retirement, and we’ve even seen clients with their own “beef jerky habit” account or “fancy tie” fund.
Each account originally had its own purpose and was treated separately from the others. While completely understandable and often convenient, it can lead to inefficiencies and higher tax bills. And for family members who aren’t in our own heads, it can be confusing!
Of course, there are times where separate accounts are not only helpful, but critical. Separating a checking account from an emergency account, for example, keeps us from dipping into emergency funds.
But we don’t want to be like squirrels, tucking away little acorns left and right. We can wind up with accounts and investments spread apart, not working in concert with each other.
We love helping with this. By stepping back and looking at everything, sometimes we can increase expected investment returns AND reduce how much risk someone is taking at the same time!
The difference in a big picture perspective? It can translate into retiring sooner, paying for an entire child’s college instead of a couple years, or maintaining one’s income with fewer investment scares.