Bob Dylan was on to something in 1963 when he suggested that The Times They Are A-Changin’. In 2025, the sentiment is more relevant than ever.
In recent years, we have seen a worldwide pandemic, numerous wars and conflicts with global implications, the advent of artificial intelligence (AI), political upheaval, all-time stock market highs, massive international trade policy shifts—and the list goes on.
Securing your financial future amid all this change can make anyone’s head spin. The key to navigating this complex and rapidly evolving environment is to focus on what you can control. Not everything is entirely out of our hands, especially in the two areas that have the greatest impact on securing your financial future: market crashes and taxes.
The first thing most people want to secure is their retirement savings, but how should it be invested considering the current times? There are many potentially lucrative areas to invest in—AI, self-driving electric cars, bitcoin, etc. However, these same investments can turn south in a heartbeat. Implementing a tested strategy that taps into market upside can significantly improve your retirement funding, but it is also important to mitigate downside risk.
Advancements in investment-management technology have created new and compelling opportunities to optimize this tradeoff. Imagine being able to identify a diverse group of securities based on criteria such as "maximum drawdown over the last three years" and then rank them based on their returns. This enables investors to target a specific maximum drawdown and select securities most likely to deliver the highest return for a given level of risk.
Selecting multiple securities diversifies the risk (not having all your eggs in one basket). Automation of this process allows it to occur frequently across the entire universe of investable assets. Leveraging technology like this can streamline the search for an optimal risk/reward mix in a portfolio. The result? A better-performing portfolio with a lower risk quotient.
In addition to optimizing your investment strategy, there’s a second area that is 100% within your control: long-term tax strategy. Of course, everyone must pay taxes; however, there are many variables surrounding when and how you handle taxation on your traditional retirement accounts. In many cases, paying attention to this can:
- Substantially lower your lifetime tax liability.
- Remove or reduce the risk of unfavorable future tax code changes.
The primary tool for accomplishing these goals is the Roth IRA / Roth conversion. Developing a thoughtful strategy for converting your traditional retirement savings into a Roth can often result in a significant reduction in your lifetime tax liability. In addition, it can remove the threat of future tax hikes.
There are also other tools for developing tax-free or tax-advantaged income during retirement, which can create a diversified long-term tax strategy that yields significant tax savings in your retirement years.
Although we are living in turbulent times with rapid ups and downs, there are still many things within your control. Identifying an investment strategy (or advisor) that leverages advanced technology to maximize market growth opportunities while minimizing risk is achievable.
Secondly, developing a long-term tax plan to optimize your tax strategy and reposition your retirement assets into predominantly tax-free vehicles is well within your control as well.
Bill Overton is a Certified Financial Planner and can be reached at Advanced Financial Solutions.
Focusing on what you can control is key to securing your financial future.