April is financial literacy awareness month, so it’s a great time to assess your financial goals and determine whether you are using all the tools available to achieve them.

Is travel a part of your retirement plan?

Although there are many wonderful informational resources and guides available to teach you how to manage finances, it can be difficult to sort through everything to find answers to specific questions and see how it applies to your unique situation. Often, the advice may be great for most people but might not be the best advice for you. Here are some examples of good conventional advice, that may not fit everyone’s situation:


Conventional advice: When creating a budget, two key points that come to mind are the value of cost accumulation over time, and the importance of prioritizing needs over wants. The idea is simple – if you give up your habit of buying a $3 cup of coffee each workday, you’ll have $15 more per week, or $780 more annually. Then, you can put that additional money in a traditional IRA each year, save it for 30 years with a 7% average annual return, and use Arvest’s Traditional IRA calculator to see you could end up with $78,836.96 more for retirement. Hurray!

On the flip-side – There was a coffee commercial in the 1950s that featured a surprising value proposition. The wife proudly explained to her husband that she saved “a whole dollar” on the new coffee she bought for the household.  After one sip, the husband asked, “how many cups of this do I have to drink to save a dollar?”

Even though retirement planning is an important goal that shouldn’t be ignored, it is going to be challenging to stay on track if you incorporate only the essentials into your budget. In fact, budgeting should help reduce stress and guilt, not create more. Often, budgeting for luxuries keeps you happier and makes your budgeting process less daunting each month. More importantly, many recent studies show that employee burnout is on the rise. Although it may be unlikely that eliminating a daily cup of coffee would be the straw that breaks the camel’s back, the losses created by burnout would likely be greater than the gains recognized by saving that relatively small amount each year.

Home buying:

Conventional advice: When it comes to building wealth in the long-term, one possible path to pursue is homeownership. It is one of the few ways to leverage a large portion of debt at an early age, since the home itself backs the funds the bank lends you. In many cases, homeownership is how individuals build equity and a retirement nest egg. Why pay for someone else to manage where you live, when you can incorporate those responsibilities into your daily life? In some cases, the monthly mortgage payment ends up being less than the monthly rent payment, and you get to build equity at the same time!

On the flip-side – There is a reason landlords are paid for their services. They handle all the liabilities of owning a property, and the risk of ownership is real. In fact, the Federal Reserve Bank of Cleveland shared an interesting commentary recently on whether encouraging home ownership is a good way to fight inequality and encourage wealth building. They compared it to stock and other equity ownership and found that while home ownership is generally a path to accumulating wealth, the average total returns, including housing cost savings, have not been greater than those of the stock market. So don’t feel bad if you haven’t been able to take the leap to homeownership yet (although you might consider some kind of investing). The commentary also elaborates on risks associated with home ownership, such as timing risks, liquidity risks, and location risk, which can all throw a wrench in the wealth accumulation plans for homeowners compared to other investment options.

Retirement planning:

Conventional advice: Maximize your Social Security benefits by delaying them until you are 70-years-old. You receive an additional 8-percent each year you delay taking Social Security beyond full retirement age, and that amount is one of the few guaranteed investment vehicles adjusted for inflation each year. Given that one of the highest concerns for everyone approaching retirement is running out of money, this seems like a no-brainer.

On the flip side – One of the great goals of the vast American public is to retire early. According to the most recent survey of financial literacy conducted by Investopedia, each younger generation is expecting to retire earlier than the last. A few extra years working can mean more wealth and more options in retirement, but it might also mean the opposite. Many retirement activities such as golf, gardening, and hiking require a body with fewer creaky joints. Each year brings different levels of ability or limitation, based on your age and physical health. Some people can stay active even into their 80s or 90s, while others struggle even earlier. Looking at your family history might provide some guidance as you work to make the best decision about when to begin taking benefits. It can help you know how long your retirement years may be, to try and avoid running out of money during that time.

Income tax planning:

Conventional advice: Defer. Defer. Defer. When you defer income and accelerate deductions, you have less of a tax obligation immediately, which can mean more time to grow your assets.

On the flip side – Delaying your tax obligations also means you have more of them later on. Since the doubling of the standard deduction, an alternate strategy is to hold off on charitable giving and to bunch it all together to make the most of it in specific years.

Tax-preferred retirement vehicles, such as a traditional IRAs or traditional 401(k)s, are great because they allow you to contribute more money by deferring some of your income taxes. However, you do have to pay those taxes when you take the money back out. We’ve recently seen the age be pushed back for required minimum distributions from such accounts, but that doesn’t necessarily mean you should avoid taking that money out over the course of many years. If you wait and take more out each year later on, it might push you into a higher tax bracket and end up costing more than if you had taken some out each year.

Estate Planning:

Conventional advice: Treat each child equally to preserve familial harmony.

On the flip-side: Using preferential treatment in estate planning is difficult, but that doesn’t mean it is inappropriate or should be avoided. In many cases, it actually creates more harmony in the long run, by requiring individuals to confront assumptions early on. For example, there may be situations where some beneficiaries received more support during life, or maybe some beneficiaries have a greater need, such as a special needs child or grandchild. Perhaps there is a desire to move the family business fully into the hands of a child who takes an active role, excluding other children who have no interest in the business. Rather, they could receive a larger portion of the liquid assets of the estate.

More financial literacy?

Financial planning involves many different topics and many different strategies. We want to be a resource to you as you move through the financial planning journey in each stage of your life. Our monthly articles can help you understand the basics and more. Like Social Security 101, which explained how to discover what your benefit could be, or more complicated strategies such as How your Financial Reputation affects your Retirement, which explained the impact of your credit score on your financial plan over time.

You don’t need to understand entirely how the financial system works in order to make it work for you. That’s where Arvest Wealth Management comes in. We’d be pleased to meet and discuss your unique situation so we can understand your goals and help you make informed decisions about what solutions are most suitable for you.

This content has been prepared by The Merrill Anderson Company and is intended as a general guideline.

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Arvest Wealth Management does not offer tax or legal advice – consult a professional.