January 6, 2020

Leah Bennett '91 imparts her wealth of retirement planning wisdom.

Leah Bennett ’91, CFA & CIC, is president of Westwood Wealth Management Houston. With more than 26 years of wealth management experience, she assists high net worth and ultra-high net worth individuals in planning their financial futures. She leads a team that has been named to Houston Business Journal’s ‘top wealth management firms and practices with investment minimums of more than $1 million’ on more than one occasion.

Bennett uses her vast investment experience to serve others through leadership roles, such as being elected to serve on the CFA Institute Global Board of Governors (and is only the 5th governor from Texas to serve on the board since 1962) and a board member for the Jesse H. Jones Graduate School of Management at Rice University. She also serves on the board of directors for CHRISTUS Foundation for Healthcare and Society for the Performing Arts. In November 2018, the Aggie imparted her wealth wisdom to women of all ages at the Texas A&M Foundation’s Women, Wealth & Wisdom event in Houston.

When should I start planning for retirement?

It’s never too early to start retirement planning. The most important thing to stress is the power of compounding. Young people tend to participate in their 401Ks immediately, but often ignore Roth IRAs. People realize these benefits later in their life because of the fact that they don’t have to take required minimum distributions, and it grows tax free since its after tax monies. Matches on 401Ks are also often overlooked.

How much in retirement savings will I need?

This depends on each person’s scenario, so I would first advise partnering with a financial planner to discuss your specific requirements. With that said, there are some things to keep in mind when thinking about retirement. For starters, people are living much longer than they did 15 to 20 years ago. This means they need to own more equities later in life than what was once required.

Research has also shown that men tend to pass away due to something catastrophic like a heart attack, while women more frequently pass away from chronic diseases like cancer. This means women, on average, not only live longer, but they also assume more medical expenses. 

How much money will I spend during retirement?

Again, this depends on the person and his or her lifestyle, but one prevalent mistake we see is that people think they will spend a lot less money in retirement than they did while they were working. This is usually not the case. We see most people spending the same amount of money. If spending decreases, it’s usually only by 10 percent or so. The composition of spending is what changes, not the amount. Health care is a major spend that many people don’t consider. While Medicare currently covers most health care costs, major additional costs like home health services and skilled home nursing are usually not covered.

How will taxes impact my income in retirement?

I find what surprises many people is when they take out their required minimum distributions and they have a tax liability, even when they know it’s coming. Again, that is why Roth IRAs are so important: They present such tremendous flexibility that you don’t have through a traditional IRA. Tax rates decrease upon entering retirement, but you will still have taxable income from social security and retirement accounts.

High net worth is another factor to address. When taking taxable estates into account, any estate above $11.4 million per individual, is considered taxable. Planning as it relates to ultra-high net worth is crucial to ensure you can minimize those estate taxes as much as possible, which is where charitable giving can make a big difference.

In general, in tax planning for high net worth individuals, it’s important to have conversations around making gifts to children first to preserve family wealth.  The three big advantages are: the reduction of estate taxes, protection from creditors, and because divorce rates are high, it does always identify as separate property.

What are some easy tips I can use to begin saving money in the New Year?

One is maxing out your 401K. People love to talk about what kind of return they could potentially get with stocks, but if your employer is matching your 401K, it’s the best return you can get at 100 percent!

Additionally, you could do a cashflow analysis to understand how much you’re spending. Many people are good at creating budgets, but they don’t necessarily track their spending according to that budget. In cashflow analysis for our clients, we find they spend about 20 percent more than they realize. A lot of this relates to eating out and overspending due to the ease and accessibility of online shopping. Technology has removed the awareness of what we’re spending because we don’t have the accountability we once did when we balanced our checkbooks every month. Create a process to determine where you need to cut back.

How often do you recommend reviewing your personal finances and budget?

Annually. As a financial advisor, I update clients on spending and shed light on areas that might surprise them. People also tend to neglect reviewing their wills. We often see our ultra-high net worth clients complete their wills with an estate planning attorney and wait 10 years before reviewing it. Waiting that long can create a lot of issues if those assets grow substantially. The other problem we see is in outdated powers of attorney. We recommend reviewing wills and estate plans every two years, and powers of attorney every year. We also do beneficiary checks annually because there’s constant change in life, and people forget that any beneficiary designated on an IRA, or similar, supersedes a will’s direction.

How do I maximize my financial ability to make a significant charitable gift?

There are many ways to do this. The main suggestion I offer clients is to make a sizable charitable gift during a year in which they’ve experienced a large capital gain. This will help minimize taxes if the gift is made in the same calendar year.

Another method is to donate a low base of stock that you anticipate appreciating in value. This is an ideal way to give while taking advantage of a tax deduction. You don’t have to book the gain for yourself or pay the tax liability, and the charity will hopefully benefit from the stock’s appreciation much later in time.

A charitable remainder unitrust (CRUT) or charitable lead unitrust (CLUT) are also beneficial vehicles to make a significant charitable gift. A CRUT is an estate planning tool that provides income to a named beneficiary during the donor’s life, and then the remainder of the trust goes to the named charity. A CLUT, on the other hand, enables an individual to give variable annual amounts to charity for a fixed term of years or the life of one or more individuals, while the charity receives a percentage of the trust’s value each year.

For more information on how you can weave a gift to Texas A&M University into your retirement plans, contact Angela Throne ’03 at the bottom of this page.

Disclaimer: This article is intended to share general information on topics related to financial and retirement planning. This article should only be used or referenced as a source for general advice. Visitors/readers should seek advice from a professional representative to better understand the best plan for their individual needs.