Retirement Planning? Think Taxes

It can be difficult to find a wealth manager who treats clients like family. At Prosperity Wealth Management, that’s not a problem.

“I began my career hoping I could help my clients achieve those dreams my dad was never able to — funding their children’s college educations, achieving financial independence, and leaving a legacy someday to their loved ones,” said Lauren Gidley, president of Prosperity Wealth Management.

Achieving financial independence presents a serious challenge for even the most diligent retirement saver. But the freedom to live, travel, and deal with financial complications such as long-term care throughout retirement make overcoming that challenge an essential part of investment planning.

But most savers, even the careful ones, often fail to consider one serious hurdle to effective retirement planning — taxes. After all, as Benjamin Franklin once said, the only certainties in life are death and taxes. If taxes are certainty, then investors need to think about them.

“I focus on mitigating taxes and applying those savings to financial independence … People are missing the bigger picture of the impact of taxes,” Gidley said. “Taxes have a far greater impact on client’s ability to achieve goals than they realize.”

Gidley recently shared with The Suit Magazine her views on retirement planning, the need to reduce investor’s’ tax burdens, and how financial independence is within reach.

Many of Prosperity Wealth Management’s clients are doctors or small business owners — two groups that chafe under heavy tax burdens. The firm does not set a hard minimum to invest, but clients’ values should align to the company’s belief in integrity, genuine caring, and loyalty. The firm’s belief in loyalty means they safeguard clients’ money, even if it means explaining difficult or unorthodox changes to a portfolio.

“One aspect of loyalty is protection,” Gidley said. “Those who work with us know that twice within the past two decades we proactively recommended for our clients to step out of the stock market when risk was high, avoiding two crashes in which the stock market lost half its value.”

Another aspect of loyalty is Gidley’s insistence that client money be treated as if it belongs to a family member. This is non-negotiable for Gidley, who worked throughout college after a bad investment left her father unable to fund her education.

Gidley gravitated toward finance at a young age, after her mother died of cancer. Gidley’s father, born in 1918, survived the Great Depression and never attended college. He invested his late-wife’s life insurance to fund Gidley’s education. Unfortunately, the investment collapsed. That experience left Gidley with a desire to help others achieve their goals through wise investment choices.

Gidley began her finance career in 1989 after graduating from Texas A&M University. Gidley’s 40 years in the finance industry saw the stock market rise and fall repeatedly. When the market was hot in 1995 until 1999, Gidley prioritized portfolio growth. She did the same during mid-2000s boom. But when the market began falling apart after each growth period, she made sure to yank her clients out of stocks and into safer investments.

People fail to realize how difficult recovering money lost to a stock market crash can be; consider that if the market loses 50 percent, an investor needs to make back 100 percent to break even. For aging investors, that’s a tall order.

“Most of these investors will not be able to postpone retirement long enough to try to recover their losses and grow their money back,” she told Forbes Magazine in 2014.
Gidley founded Prosperity Wealth Management in 2004 after realizing she could better serve investors if she was free from corporate mandates.

“I wanted to be able to recommend the products and services that would best help my clients achieve their financial goals,” Gidley said. “I wanted my advice to be based on the unique needs of each client rather than the directives of my employer; affiliating with an independent brokerage firm gave me the freedom to put my clients’ needs first.”

Gidley is a registered representative with First Allied Securities, Inc., and a member of FINRA/SIPC.

Prosperity Wealth Management’s focus on taxes allows Gidley to unlock extra funds to reinvest into clients’ financial independence. Clients often remain ignorant of this model.

For example, the required disclosures surrounding 401(k) accounts are “helpful,” Gidley said, but people rarely consider what the tax burden on those savings will be. Investors often lose a third of their 401(k) to Uncle Sam, which can be a huge blow for people expecting retirement, funding for long-term care, and other late-life needs. Lowering the tax burden on any investment frees up money that’s otherwise tossed down the drain as well, she added.

“I have not met anyone who thought tax rates would be lower in the future,” said Gidley, who started her career more than 30 years ago. “Yet they choose to defer tax on a smaller amount of money at a known tax rate today for a relatively minor current tax savings, only to face a major tax bill at an unknown ... tax rate on a considerably larger expected amount in their 401(k) account in the future.”

It is that sort of long-term planning that proves clients’ money is in good hands with Prosperity Wealth Management.

Good investment planning is more important now as people live longer, with retirements stretching out to 30 or even 40 years. Prosperity Wealth Management considers the possibility that a retiree could live to 100 or need expensive long-term care and plans accordingly.

One way Prosperity Wealth Management does that is by taking advantage of the tax-favored status of whole life insurance. Prosperity uses a special kind that grows tax-deferred while allowing clients to access their funds — meaning they can afford large expenditures like a college education. These plans can provide “income for life,” when structured properly, Gidley said, adding that a whole life insurance plan sidesteps the volatility of the stock market. Access to the funds also allows investors to absorb the draining costs of long-term care, she said.

“When a client entrusts me with savings that took them decades to build up … I will always put my client’s interests above my own in the management of their portfolio,” she said.

New Department of Labor fiduciary rules — which mandate all conflicts of interest be disclosed to potential clients and all commissions be explained in dollar form, as well expanding the definition of fiduciary to include insurance salespeople and brokers, among others — are how Gidley has operated since the 1980s. She has always put the client first, even when that proves challenging.

Prosperity Wealth Management might take a generally more conservative approach to wealth management than a traditional alpha approach firm, but the long-term gains pay off for clients big. Gidley described her biggest professional challenge as countering “market exuberance” during boom times; communicating with clients that a bust is on its way can be a difficult conversation that requires courage.

“My greatest challenge was persuading clients to lock in their profits and safeguard their portfolios in 1999 after five years of the most out-sized gains in stock market history,” she said. “My recommendation proven prescient when the stock market peaked early in 2000 and then proceeded to lose half its value over the next three years.”

Gidley’s careful approach has earned Prosperity Wealth Management a number of accolades. The firm has earned media coverage from Forbes Magazine, Business First of Buffalo, Buffalo Spree Magazine, and numerous television programs. Gidley also was chosen as a Buffalo-area “Five Star Wealth Manager” in 2011, an honor based on client satisfaction responses.

Gidley also is publishing two books this year —  10 Most Expensive Tax Mistakes That Cost Business Owners Thousands and 10 Most Expensive Tax Mistakes That Cost Doctors Thousands. A third book, 5 Keys to Achieving and Enhancing Financial Independence, is in the works.

Accolades are nice, but taking care of hard-earned money and helping clients meet their goals is better.

“My greatest reward is being told that I made a difference in the lives of the clients I serve, that I assisted them with pursuing their financial dreams,” Gidley said.

For more information, visit:

Securities offered through First Allied Securities, Inc. Member FINRA/SIPC. Advisory services offered through First Allied Advisory Services

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