Wealth Management Texas:
The Complete Guide to What We Do
When it comes to planning for retirement, high net worth, and ultra-high net worth individuals might think it’s all about saving, saving, and saving. As important as that is, there’s more to wealth management Texas and retirement planning than just saving your money. Depending on your age, financial goals, desired lifestyle, and other factors, you also need a qualified wealth advisor to help you plan for hassle-free retirement. If you have more than $10 million in liquid assets that you wish to invest or manage, we suggest you read our handy guide on how you can choose a suitable financial advisor for wealth management and retirement planning.
Pillar Wealth Management has a team of experienced and dedicated fiduciary advisors who closely work with individuals with $5 million to $500 million in liquid assets. We offer a wide range of financial services, such as investment management, retirement planning, estate planning, tax management, risk management, and a lot more. Instead of asking the same questions and offering the same investment packages, we take time to understand your financial goals and aspirations in life to design a customized investment portfolio that not only allows you to maximize your portfolio performance but also get you closer to attaining your desired lifestyle and financial serenity. If you want to find out further about maximizing portfolio growth strategies, you can check out this helpful guide for families worth $5 million to $500 million.
When planning for retirement, you’ll often hear about investing, including fixed income and bond investing. Today, we’ll be discussing what this is and whether fixed income investments are good for retirement planning. Let’s get to it.
Table of Contents
Why are Investments Important When Planning for Retirement?
Savings are definitely important for retirement planning. They can serve as a safety net later on when you don’t have a steady job anymore. However, if your entire retirement plan is based just on your savings, it won’t be an effective plan. The value of money will depreciate over time, so your savings won’t be worth as much ten or twenty years later. Moreover, just relying on savings will also not help you live the lifestyle you want after retirement as you’ll have to spread out your limited funds over your life expectancy.
This is why investments are a crucial part of retirement planning. Savings are only part of the equation, and if you want a sound retirement plan, you’ll need practical investments, too. Investments help you create a stream of income for yourself that not only adds to your assets and grows your wealth but also helps you maintain a source of earnings after you’ve retired and are fulfilling your post-retirement dreams.
Our experienced wealth managers at Pillar Wealth Management help high net worth and ultra-high net worth clients design investment portfolios that best suit their needs. For individuals who already own an investment portfolio, they can read this comprehensive guide to learn how to maximize their portfolio performance.
What are Fixed Income Investments?
As the name suggests, fixed income investments are investments that generate a fixed stream of income on a fixed schedule. They usually carry a lower risk than stocks but can have limited returns as well. There are various types of fixed income investments, some of which have their own benefits as well. A good investment portfolio does not need to be entirely comprised of fixed income investments.
However, a healthy proportion of these can make your portfolio more diverse and optimize its growth and performance. You can learn more about investment portfolios and asset allocation by ordering a free hardcover copy of our book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million.
Types of Fixed Income Investments for Wealth Management Texas
If you’re thinking of going for fixed income and bond investing, it’s a good idea to take some time and research the different kinds of fixed income investments as well. Alternatively, you can also reach out to one of our trusted financial advisors to learn about these investments and figure out the best one for yourself. Here are a few types of fixed income investments:
Treasury bonds, also known as T-bonds, are government-issued debt securities. These usually have a term of more than twenty years and pay a fixed interest rate till maturity, after which you receive your principal amount back.
Municipal bonds are another form of government bond. While treasury bonds are issued by the federal government for the federal debt, municipal bonds are meant to fund more local and state projects. Individuals who fall under high marginal tax brackets can benefit from these bonds as they pay tax-exempted interest.
Corporate bonds are issued by large corporations who need to borrow funds for extended periods. These bonds usually have a slightly higher yield than government bonds like treasury bonds. However, corporate bonds come with their own risks. That’s why it is important to check the corporate credit ratings of the company before investing in their bond. You should try to go for corporations with an AAA rating and avoid corporations below a BBB rating. To learn more about which bonds and investments are safe and suitable for you, click here to start chatting with one of our experienced financial advisors.
Preferred stocks or securities are a mix of stocks and bonds. These are also issued by corporations, so they carry some of the same risks, such as interest rate risk. Investors with preferred stock receive their interest or dividend payments before the common stock investors. Moreover, like bonds, they carry a fixed payment rate.
Certificates of Deposit
Certificates of Deposits are issued by banks that require a steady source of deposits for longer periods to fund their own loans. These don’t necessarily carry as long a term as some of the other types of fixed income investments. However, these also pay at a fixed rate for the length of the deposit and are considered as one of the safer short-term fixed income investments. Interest payments from these are subject to taxes and can not be withdrawn before their maturity without a penalty.
Pros and Cons of Fixed Income Investments
Now that you know more about these, are fixed income and bond investing right for you? Are they good investment opportunities when planning for retirement? Before you decide to include them in your retirement plan, take a look at some of the pros and cons of fixed income investments.
Here are a few reasons why these investments are great for your portfolio.
Lower Rate of Risk
Fixed income investments usually carry a lower rate of risk as compared to other forms of investments, such as stocks. They are not as sensitive to other macroeconomic conditions and factors, and therefore, can maintain low risk levels for safer investments. Of course, they tend to have lower returns as well.
However, with a good combination of fixed income and stock investments, you can have a sound investment portfolio that pays you high returns and keeps a steady stream of safe income as well. This can be hard to execute without the guidance of an experienced Texas fiduciary advisor, such as those found at Pillar Wealth Management.
Fixed income investments can be beneficial for retirement planning if you’re adopting a capital preserving investment strategy. This is usually ideal for high net worth and ultra-high net worth investors who are close to retirement and can’t afford too many losses or risks. This strategy aims to preserve the investor’s principal amount or capital while maintaining a safe source of income and avoiding any chances of losses close to retirement. Such affluent investors usually go for treasury bonds and certificates of deposits at such a time in their retirement planning. If you’re not sure which stage of retirement planning you’re at, click here to reach out to one of our wealth managers.
As mentioned earlier, some types of fixed income investments, such as municipal bonds, offer interest payments that are exempted from income tax. Therefore, along with the constant source of income, these investors can enjoy higher total returns on their investments.
At Pillar Wealth Management, we offer many financial services, one of which is tax management. We help affluent clients with $5 million to $500 million in liquid assets to maximize their investment returns and grow their wealth by avoiding excessive tax burdens. If you want to know more about tax management for your wealth, click here to start a conversation with our wealth managers.
Depending on the type of fixed income investment, they come with some drawbacks too.
As safe as they are, fixed income investments do carry some inflation risk. A bond pays a fixed amount of income over regular periods at a fixed rate. This is all fine and good till the inflation stays in control. However, if the inflation does rise, and the inflation rate goes over the interest rate of your bond, that investment doesn’t stay that beneficial anymore. Even though you do get your principal back, essentially, you lose money as the inflation causes you to lose purchasing power.
Interest Rate Risk
Bonds have a directly inverse relationship with interest rates. This means that anytime the interest rates rise, the bond prices subsequently fall. Therefore, any bonds that you hold at the time will lose value and will fetch you a lower price in the market than what you paid for initially.
Some types of fixed income investments also come with liquidity risk. This risk means that there is a chance that when you go to sell the fixed income investment, there is no buyer willing to purchase it. This leaves you with the investment, missing out on potential gains.
Bonds usually don’t carry a high liquidity risk, and there’s always someone willing to buy them. However, there are certain other types of fixed income investments that can come with liquidity risk. Therefore, whenever you’re deciding to pour your funds into such investments, it’s a good idea to consult a financial advisor first. If you are not sure how to choose one, you can read our ultimate guide on choosing a financial advisor for yourself.
Choosing a Texas Fiduciary Advisor
As you must have gathered by now, fixed income investments are relatively safer but not entirely easy to choose or manage. Therefore, you need a good, experienced Texas fiduciary advisor who can understand your unique financial position, concerns, aspirations and design a customized investment portfolio and retirement plan accordingly. When searching for such an advisor for wealth management Texas, some of the factors you can evaluate them on are:
- Track Record
Wealth managers and advisors at Pillar Wealth Management carry over 30 years of experience in this industry. Their expertise and knowledge allow them to cater to high net worth and ultra-high net worth clients in growing their wealth and assets. Through their broad list of services, they design low-risk and high-performing investment portfolios and sound retirement plans. Click here to consult one of the expert fiduciary advisors at Pillar Wealth Management.
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