How do you plan to innovate and personalize your approach to wealth management in 2024? Successfully navigating the financial landscape demands strategic planning and adaptability. At Penta Wealth Management, we recognize the unique challenges and opportunities that lie ahead for affluent individuals and families. In this blog, we explore the nuanced risks high-net-worth clients face and the importance of having a well-crafted plan that aligns with your personal goals and timelines for the year.
Navigating Potential Market Volatility
2024 is positioned to be a year marked by fluctuations in interest rates and potential market shifts in the broader economy. Recognizing these dynamics is crucial, as they may induce short-term and long-term stressors both emotionally and financially. The Founder and Managing Director of Penta Wealth Management, Jonathan Penta, shares “In anticipation of market volatility, people tend to make reactive decisions on what they think will happen. However, it’s crucial to exercise caution and avoid hastily deviating from established strategies. In times of uncertainty, thoughtful and measured responses tend to yield more favorable outcomes.”
Penta Wealth Management works closely with clients to develop personalized plans that anticipate and navigate the challenges posed by economic fluctuations. Being proactive allows you to explore opportunities, protect your wealth, and navigate potential obstacles that will have an impact on your financial outcome. This approach aims to equip you with the resilience needed to thrive amidst economic uncertainties.
Asset Allocation
During periods of market volatility, asset diversification emerges as a key strategy, spreading investments across a variety of assets to mitigate risk. At Penta Wealth Management, we work hand-in-hand with our clients, providing actionable recommendations and crafting custom plans that anticipate and navigate the challenges presented by market fluctuations. The goal is to create a well-balanced portfolio that is not overly reliant on the performance of a single asset or industry.
Investment Planning
Investment planning takes on heightened significance during periods of potential market volatility, emphasizing the need for a broadened perspective in navigating financial landscapes. The inherent unpredictability and fluctuations in market conditions underscore the necessity for a broadened perspective in navigating financial landscapes. By adopting a comprehensive approach that extends beyond short-term market trends, investors can better position themselves to weather the uncertainties and capitalize on potential opportunities.
Tax Preparation
Taxes impact every aspect of financial planning, saving, and investing. High-net-worth individuals must contend with evolving tax regulations and codes that can impact financial strategies and outcomes. Tax laws, subject to change at both national and international levels, affect areas such as income tax, capital gains tax, and estate tax. By taking strategic steps in the following key areas, you can help to increase your after-tax wealth:
- Income Tax Management: For business owners or those with diverse investment portfolios, it is important to maximize deductions and credits. Business-related deductions, depreciation schedules, and intricate investment strategies all contribute to one’s overall financial picture. Understanding fundamental tax principles, such as the distinction between ordinary income and capital gains, strategic income distribution, and proper deduction planning, provides the foundation for informed decision-making. This is why it becomes essential to work with a financial advisor who understands the unique nuances of your tax bracket.
- Tax-Smart Account Selection: By leveraging tax-advantaged accounts wisely you can strategically manage finances to reduce current tax burdens, defer taxes, or even eliminate taxes on savings set aside for specific purposes. 401(k)s, IRAs, Roth accounts, HSAs, and 529 plans, can be leveraged with careful consideration to lead to reduced, deferred, or eliminated taxes on savings for retirement, healthcare, or college. Optimizing the use of these accounts wisely can ensure that every opportunity to maximize wealth is utilized to its fullest potential.
- Retirement Tax Planning: How much money will you require to maintain your lifestyle in retirement? Choosing retirement accounts wisely, including tax-deferred (IRAs or 401(k)s), tax-free (Roths and potentially HSAs), and brokerage accounts, enhances tax diversification and flexibility during retirement. A tax diversification strategy paired with thoughtful timing and combining withdrawals from these accounts can significantly optimize tax efficiency and longevity of your wealth when you decide to stop working.
- Optimizing Charitable Giving/Gifting Strategies: Incorporating tax-efficient gifting strategies, such as Donor Advised Funds, 529 Education Plans, and other financial gifts, is a way to help others and increase your overall wealth.
- Donor Advised Funds (DAF) – One of the primary advantages of a DAF is the ability to claim a federal income tax deduction in the year you make the contribution. Especially during high-income years, this can be a strategic move to offset taxable income while supporting causes that align with your values.
- 529 Education Plans – In the 2024 tax year, the allowed contribution amount increased to $18,000 for individuals ($36,000 for married couples electing to split gifts) without incurring federal gift tax or using the federal lifetime gift tax exemption. Also beginning in 2024 is the SECURE 2.0 Act, allowing for the rollover of unused 529 assets, up to a lifetime limit of $35,000, into the account beneficiary’s Roth IRA, without incurring the usual 10% penalty for nonqualified withdrawals or generating any taxable income.
- Reducing Estate Taxes with Financial Gift Giving – In 2024 you have the ability to give up to $18,000 ($36,000 for married couples electing to split) per recipient to an unlimited number of individuals without incurring a federal gift tax by making use of your annual gift tax exclusion amount. The annual gift tax exclusion doesn’t count against the federal gift tax exemption of $13.61 million for individuals or $27.22 million for married couples.
- Estate Planning: Ensure that your amassed wealth is not only preserved but utilized precisely as intended during both life and after death. Far beyond the distribution of assets, estate planning involves thoughtful consideration of financial legacies, personal values, and the impact one wishes to leave on future generations.
In the intricacy of economic downturns, market volatility, and policy changes, high-net-worth individuals require a comprehensive and adaptive approach to wealth management. Penta Wealth Management offers a holistic strategy that combines asset allocation, risk mitigation, and tax planning to safeguard your wealth from any challenges that may arise. We distinguish ourselves by offering a fully integrated wealth management plan that is centered around you and your family’s specific needs. Our time-tested, collaborative process involves understanding your goals and values, enabling us to tailor a comprehensive plan specific to your situation. We not only address current challenges but also strategically plan for the future, working hand-in-hand with our clients to explore opportunities, protect wealth, and navigate potential obstacles. Being equipped with the knowledge and strategies you need will help you to navigate the complexities of 2024 and beyond.
Charles Schwab. “2024 Market Outlook: Widening the lens.” 15 December 2024.
Disclaimer: The information provided in this blog is intended for general informational purposes only. It is believed to be reliable; however, we cannot guarantee its accuracy or completeness. It is essential to understand that laws, regulations, and circumstances may change, and the content provided in this blog may not always reflect the most up-to-date information. Readers are strongly encouraged to consult with qualified professionals, including attorneys and financial advisors, to ensure that any actions or decisions made align with their individual needs, objectives, and overall estate plan. Investment and Advisory services provided by Penta Wealth Management LLC and Empirical Asset Management LLC (“EAM”), a registered investment advisor. Advisory services are only offered to clients or prospective clients where EAM and its representatives are properly licensed or exempt from licensure.
