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Guide to Retirement Accounts

Planning for retirement can be daunting. According to a 2025 Gallup survey, 40% of Americans report having no money invested in a retirement savings plan, and Social Security alone cannot provide sufficient retirement income. To ensure a comfortable retirement, it is essential to understand your retirement investment options and create a personalized plan.

Key Takeaways

  • Mutual funds, index funds, target-date funds, and exchange-traded funds are all types of pooled investments frequently used in retirement accounts.
  • Investing and planning for retirement is necessary to maintain pre-retirement income.
  • Diversified funds are useful to mitigate risk.
  • A financial advisor can be a valuable resource in navigating the complexities of retirement planning.  

How Should I Save for Retirement? 

Many do not realize they must choose where their money will be invested when contributing to retirement accounts. Several types of investment funds can be held within retirement accounts. Understanding the available options is crucial to maximizing your savings.

Target Date Funds

A target-date fund is an investment option that adjusts its asset allocation over time, starting with higher-risk investments and becoming more conservative as the investor approaches retirement age. Portfolio managers employ a long-term strategy of investing the fund in riskier stocks in the early years, and shifting to more stable assets such as bonds in the later years. 

Because these funds require more oversight, they frequently come with higher fees than other passive investments. However, active management allows for a hands-off approach to retirement investing and is suitable for those who prefer not to manage their own portfolios.  

Mutual Funds

A mutual fund pools money from many investors, then invests the money in stocks, bonds, other assets and securities, or a combination of those options. The combined holdings the fund owns are known as the portfolio, and each mutual fund share represents a partial ownership of the fund’s portfolio. 

Like individual stocks or bonds, a mutual fund is a type of investment you can purchase. A retirement account is not a mutual fund itself, but the account that holds the mutual fund. There are other ways to invest in mutual funds, but doing so through retirement accounts can help alleviate your tax burden. Money contributed to retirement accounts, such as 401(k) plans and individual retirement accounts (IRAs), is most frequently invested in mutual funds. 

Index Funds

An index fund is a type of mutual fund or exchange-traded fund designed to track the performance of a market index, such as the S&P 500. Some index funds invest in all of the securities in a market index, while others invest only in a sample assortment of securities included in the market index.

ETFs

Similar to mutual funds, exchange-traded funds (ETFs) are a type of investment that pools multiple assets rather than just one, but are purchased and sold as individual products. The primary difference is that ETFs are traded throughout the day, similar to stocks, whereas mutual funds are traded once per day at market close.

ETFs are sometimes preferred due to their trading flexibility and lower fees; however, while mutual funds tend to have higher costs, they offer more in-depth professional management. ETFs can also provide more tax advantages, as investors only pay capital gains tax when selling the shares.

Why Diversifying Your Investments Matters

Diversifying your portfolio means spreading your investments across asset classes and investment types. This is done to reduce risk, as diversity across investments means you won’t incur detrimental loss due to the poor performance of an individual stock or other asset. 

Target date, mutual fund, index, and exchange-traded funds offer diversification without the need to buy and sell hundreds of individual assets. These investment options make diversification much easier for the average person since the funds are spread across hundreds or even thousands of different investments without the individual having to choose and purchase them separately. 

Without diversification, you risk losing your invested money by putting all your eggs into one basket, which could set you back significantly when planning for retirement. Some people choose to take on more risk in investments when they’re younger and shift to more conservative options as they approach retirement age.

How much should you save for retirement?

It is generally recommended to save 10-15% of your income for retirement. This amount includes employer-matched contributions and assumes a starting age of 25 and retirement age of 67. The earlier you begin saving for retirement, the lower the percentage of your annual income needed. 

For example, the recommended 15% is based on the assumption of saving and working from the ages of 25 to 67. If you did not begin saving for retirement until age 35, you would need to save around 23% of your annual income. It is also important to consider that these are just average suggestions, and the amount you need to save can differ depending on individual circumstances. 

How can a financial advisor help?

A financial advisor can help you stay on track for retirement by considering your individual needs and guiding you through important decisions, enabling you to maximize your retirement income and minimize taxes with a strategy that maintains your lifestyle. Financial advisors are particularly beneficial for individuals with complex financial situations or a high net worth.

Proper retirement planning analyzes Social Security benefits, tax-advantaged withdrawal strategies, healthcare costs, and longevity risk to ensure you can enjoy retirement without financial stress. 

Bottom Line

Knowing what to invest your retirement account contributions in can be a confusing decision. There are several types of funds, each with its own considerations. Horizons Wealth Management’s financial planning services can help you make informed decisions and develop a personalized retirement plan tailored to your goals.

Retirement Investment FAQ

What is a good monthly retirement income?

Generally, it is recommended that your retirement income be 80-100% of your pre-retirement income.

Are pooled funds required to save for retirement?

While they aren’t required, many prefer to invest in pooled funds for retirement investing as they incur less risk than putting large amounts of money in individual stocks. These funds also enable a more hands-off approach compared to the constant oversight required for personal investments. 

Is it better to have someone manage my investments?

Managing your own retirement investments can quickly become overwhelming and time-consuming. Hiring a professional can alleviate that stress and provide you with insight into options you may not have been aware of otherwise.

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What is Wealth Management?

What is Wealth Management and Is it Right for Me?

Wealth management is a tool used by high-net-worth individuals to plan for their financial future and ensure their assets are being used safely and effectively. It is usually only necessary in cases where a client’s liquid assets exceed $1 million and their financial situation has complex, specific complications requiring specialist knowledge to navigate.

Key Takeaways

  • Wealth management is a set of services designed to grow assets safely, avoid costly setbacks, and minimize future financial obligations.
  • These services are typically only needed by high-net-worth individuals with more than $1 million in liquid assets.
  • When choosing a wealth manager, be sure to find a person or firm with experience relating to your specific needs. Specialization is key when it comes to challenging, complex financial situations.

What is Wealth Management 

 Wealth management is the means by which your money can be leveraged to generate more wealth as safely as is possible. This is accomplished by making wise investments, understanding how to diversify your assets properly, and planning for your financial future. 

What Does a Wealth Manager Do?

A wealth manager provides a diverse set of services to their clients, utilizing every available resource and technique to grow and protect the assets entrusted to them. 

Much of a wealth manager’s work is preemptive, including long-term financial planning, estate planning, and tax planning. Knowing what to expect in the future is a critical part of this job, and it allows them to make the best choices possible for their clients.

Another key job of an effective wealth manager is offering investment management and risk assessment. This often includes setting achievable goals and striving to meet them amid changing market conditions.

In many cases, a wealth manager will also be expected to provide some general assistance with financial literacy for their clients. Not everyone has a background in finance, and an experienced wealth manager can be an invaluable resource when dealing with any number of financial hurdles.

How Do Wealth Managers Get Paid?

Not all wealth management contracts are the same—some managers work on commission, others charge a percentage of the assets they manage as their fee, and others receive hourly or one-time fees for their work. When dealing with a larger wealth management firm, individual managers may receive a salary while the firm collects one or both of these types of fees.

How Do You Know if Wealth Management Services are Right For You?

Generally speaking, wealth management services are most useful to high-net-worth individuals with complex financial situations.

This could include business owners with complicated tax structures, individuals who have received sizeable but complex inheritances, those facing retirement planning decisions or any number of other financial arrangements requiring specialized assistance.

In many cases, the cost of a wealth manager is dictated by their experience with less-common financial proceedings that only impact individuals with substantial assets. The estate tax, for instance, only applies to inheritances in excess of $14 million, but an individual with assets of that size must be able to understand and fulfill their tax obligations for that money. That’s where a wealth manager comes in.

How Much Money Do You Need for Wealth Management?

There is no cut-and-dry answer to how much money you must have before a wealth manager is needed, but generally speaking, these services are used by people with over $1 million in liquid assets or investments.

Certain wealth management firms even have a minimum investment threshold, usually somewhere between $2 million and $5 million.

How to Find a Wealth Manager

Finding a wealth manager doesn’t have to be difficult. Depending on your situation, you may have certain circumstances that present unique challenges necessitating a wealth manager’s services. When searching for a manager, be sure to talk with individuals or firms with experience in similar financial situations to yours.

You’ll also need to confirm that you have enough assets to invest in the firm you wish to work with. Certain firms will only take on clients with exceptionally high net worths in the millions of dollars.

Horizons Wealth Management offers services to individuals looking for support in their financial journey. Set up a call to discover if wealth management or one of their many services is right for you.

What to Look for in a Wealth Manager

The number one qualification in any sort of financial planning role is trustworthiness—be sure you feel comfortable working with anyone you plan to trust with your financial well-being, and don’t be afraid to shop around if the first manager you meet doesn’t feel like a good fit.

It’s important to vet a possible manager before diving in, and this includes asking about things like professional certifications and past success managing clients’ assets for them. You want to be sure your manager is aligned with your financial goals and has the necessary specializations to take on any unique situations you might find yourself facing based on the structure of your assets.

Bottom Line

Wealth management isn’t a necessary service for everyone, but individuals with high net worths must maintain good financial health. A wealth manager will have the experience and resources essential to make your money work for you while minimizing risks and avoiding potential pitfalls. When selecting a wealth manager, be sure to choose someone you can trust and who has the right specializations for your particular financial needs.

Wealth Management FAQs

What is wealth management in simple terms?

Wealth management is a service that combines the management of existing assets with short- and long-term financial planning to maximize returns on investments and minimize exposure to risks. It is typically only necessary for individuals possessing liquid assets in excess of a million dollars.

What is considered high net worth?

An individual with between $1 million and $5 million in liquid assets is generally considered to be “high net worth.” Individuals with between $5 million and $30 million are described as “very high net worth,” and individuals possessing more than $30 million in liquid assets are considered “ultra high net worth.”

Are there other services that may benefit me if I don’t have enough money for a wealth manager?

Wealth management isn’t for everyone, but that doesn’t mean individuals with fewer liquid assets shouldn’t enlist the help of a qualified financial adviser. 

What are the disadvantages of wealth management?

While there can be some potholes to avoid when seeking your perfect wealth manager, generally speaking, these services are entirely beneficial to individuals who find the right manager for their needs. 

Because some financial matters relating to high-net-worth people are complicated and do not come up often, you can miss out on some big opportunities if you don’t employ someone with the right specializations and experience.

There are also no certainties when dealing with financial matters—using a good wealth manager can help you navigate difficult situations. Still, sometimes the market is unpredictable, and a manager’s job becomes more about damage control than growing your assets. With the wrong manager, this sort of situation can be damaging to an investor and their portfolio.

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4 Post-Work Life Tips

How to have a long and healthy retirement:

It’s a time when we’re supposed to find happiness, but post-work life is often associated with severe health problems. Below are some tips to help you live long and prosper.

Source: https://www.theguardian.com/lifeandstyle/2017/may/15/how-to-have-long-and-healthy-retirement

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