How to remain on track toward your goals in any market or economic environment

As market and economic conditions continue to change, investors are encouraged to stay the course and focus on the long term. But what does that really mean for you and your financial goals? According to Shelly Eweka, CFP®, ChFC®, a Financial Planning Strategy Director at TIAA, staying the course doesn’t mean sitting still and doing nothing. In fact, it’s just the opposite.

"It's about positioning yourself to help protect your assets and secure the opportunities that best align with your goals, time line and risk tolerance in any economic environment," Eweka said. "That requires careful planning, especially when faced with challenges such as ongoing market volatility, lower returns on fixed income investments, or tax policy changes."

In recent weeks, Eweka says a number of clients have expressed concerns about the potential impact of the Biden administration tax proposals on their planning. Taxes were a central theme of President Biden's first State of the Union address in April, as well as his campaign platform throughout 2020, which included the promise of a massive infrastructure bill to be paid for with higher taxes on wealthier Americans. As a result, IMG Chief Portfolio Strategist, John J. Canally, Jr., CFA, believes taxes will play a significant role in driving the markets and economy in the months ahead.

However, Canally says it's important to remember that any administration's proposals are just proposals until Congress creates and passes legislation, which can take some time. He cautions that it’s a mistake for investors to guess at tax policy or make investment decisions based on proposals or legislation that may not materialize until much later in the year, or never.

Canally also emphasizes that while federal taxes matter, when it comes to investing, everything else matters more. That includes economic growth, inflation, earnings growth, interest rates, etc. However, Canally believes taxes should always be considered from a planning perspective.

"Managing your tax exposure is critical when it comes to planning," Canally said. "It's why we offer both taxable and tax tax-managed investment models and engage in tax loss harvesting on a regular basis at the individual account level."

So what should investors concerned about future changes in tax policy be thinking about now? According to Eweka, the single most important step you can take is to meet with your advisor to review your asset location strategy. That helps to identify ways you can optimize your planning to not only help protect your assets but take advantage of new opportunities that may arise.

"The types of challenges savers and investors face today are exactly what the asset location review process is designed to help solve," she said. Asset location organizes your assets by account types based on how you plan to use them, as well as when they'll be taxed."

Eweka says that reviewing the location of your assets can be particularly beneficial during periods of change, because it helps to ensure:

  • You have the right kind of asset in the right accounts
  • Each asset has a purpose in your overall financial plan
  • You're using smart strategies to help reduce the impact of taxes and market volatility

Asset location review process

1. Classify your assets

The first step in an asset location review is to organize your assets by account types and when they'll be taxed. Using TIAA's asset location worksheetOpens pdf in new window, you and your advisor can decide if the asset belongs in the "now," "later" or "never" bucket. For instance, let's say you have an asset that is taxed before it's used—investment gains may be impacted. Instead, it may be more efficient to move the asset to a different account to better match when it will be used and taxed.

2. Identify the purpose of your accounts

Now, it's time to decide how you'll use your money to pursue your financial goals. You'll likely use different assets for your needs—the essential costs of living that can't be compromised; your wants—things that are important to you, but you might be willing to forgo; and your wishes—your vision for an ideal retirement and legacy.

3. Locate your assets

Ask your TIAA advisor to conduct an asset location review of your accounts—those you hold with TIAA and any you may hold elsewhere. When the review is complete, you should have a clearer idea of whether your assets are in a suitable location—and if your strategy is as tax smart as it could be. Consult with your tax advisor prior to making any changes.

Learn more about using asset location to pursue your goals

Eweka urges investors who are concerned about the changing market, economic or political climate to reach out to their TIAA advisors. "Our advisors are here to help you locate your assets in the right accounts and do all the proper planning relative to your retirement, tax and legacy planning goals," she said.

To learn more about how an asset location review can help you remain on course toward your important goals, contact your TIAA advisor today to schedule time to talk. Your advisor is available to meet with you in person or via phone or, web conferencing, based on your preferences.

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This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances.

The views expressed in this material may change in response to changing economic and market conditions. Past performance is not indicative of future returns.

The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor.

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Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.