Financial Planning

Financial Planning

dog wearing eye glasses reading about finances
Cornerstone Wealth Management is recognized for its delivery of independent, comprehensive financial planning. This essential work goes beyond traditional investment planning. 
Cornerstone Wealth Management is recognized for its delivery of independent, comprehensive financial planning. This essential work goes beyond traditional investment planning. 
dog wearing eye glasses reading about finances

Comprehensive financial planning

Many financial advisors claim that they are planners. And some of those say they are comprehensive in their work. What does this mean, and how does this benefit you? What happens if you don’t work with a comprehensive financial planner.

First, most financial advisors do not create financial plans. It is hard work! But because a plan is what many clients hope for, some advisors position themselves as “planners” to increase their marketability. 

A comprehensive financial planner considers each financial decision’s merits to all other matters in a family’s finances. This is also known as looking at the big picture. Our experience is that clients who get help understanding their big picture have a greater sense of confidence and clarity in their financial lives.

By contrast, making a decision on a single matter (saving an arbitrary percent in a 401k plan, buying $1M in life insurance, investing in dividend stocks, purchasing real estate, keeping $100,000 in cash for a rainy day, and the list goes on) may inadvertently weaken your plan. For some families, the impact can be significant. 

An example of a significant setback is working full-time at age 62 and taking Social Security income benefits. 

Over 70% of recipients take Social Security income benefits at age 62 simply because they can. Having two streams of income can feel enriching. It can lead to a feeling of getting ahead. However, a comprehensive review of this decision may show that this may not be a good idea. 

Taking social security income while earning a full-time wage can reduce social security income, not what most people expect. It gets even worse. When taking Social Security income at an early age, the recipient will lose the benefit of an eight percent increase in Social Security income for each year they delay. For example, if someone aged 62 waits until age 67 to take this income, his/her Social Security benefit will increase by 40% for the rest of their life. And their survivor’s life. If they wait until age 70, this income rises 64%. Social Security is a long-term source of income, perhaps 25 to 35 years. The impact of reduced income in the early years and for life expectancy can be staggering. 

Another example of making a financial decision in a silo is a high-income earning client seeking passive real estate income. If this resonates with you, then you will find this example helpful. Real estate income that is not tax-sheltered is taxed at your highest marginal rate. This means that you will pay higher taxes. Even worse, this passive income can also bump you into a higher marginal tax bracket. This calculation is often not considered in the decision to generate real estate income.

This increased tax also reduces the real return on the investment. To illustrate, let’s assume that you have a 40% combined federal and state marginal tax rate. If your rental property produces a taxable 6% return, the 40% tax will reduce your after-tax return to 3.6%. Cornerstone likes real estate, especially in generating income in retirement. But for high income earning clients, holding real estate in an IRA account might be better. Holding income-producing assets in a retirement account would defer income taxes. 

These are two examples of how comprehensive financial planning can help a family make better big picture decisions. 

Your next question might be, “how would I know if I am working with a real deal – a comprehensive planner?” To some extent, you will be able to spot this during your first meeting: You are working with a comprehensive planner when they ask you about the following areas

If you decide to engage this planner, then you should expect to provide the following documents:

  • Statements for pensions, annuities, and other defined benefit or contribution plans
  • Account statements
  • Insurance policy declaration pages
  • Tax returns, the recent two years
  • Documents on business matters
  • Social security statements
  • Mortgage statement
  • Schedule of real estate
  • Employer benefit booklet
  • Paycheck stubs

This to-do list might seem overwhelming, but it does not take as long as you might imagine. Whatever the time needed, this work can feel liberating. Because what you are hoping would happen at some point in your life is finally possible. A professional is reviewing all your financial matters at the same time to make sure they are coordinated.

Cornerstone is the real deal. We can help you see the big picture, strengthen your financial outlook, and help you gain the confidence and security you seek in retirement.


Retirement income planning

As clients enter retirement, the most frequent concern is, “how does this all work? When I retire, which accounts should we drawing from first, and why?” The answer to this is part of retirement income planning.

Forget the rules of thumbs you have heard from media and well-intended friends about retirement income. Following this advice can weaken your financial condition. For example:

Taking Social Security income benefits at age 62 – the first possible year – is what 70% of recipients choose. As a result, they lock in a reduced income benefit for the rest of their lives. However, taking Social Security income at the maximum benefit age of 70 may not be the best idea, either. This is due to various reasons. The standard practice of taking these benefits too early, or the rule of taking Social Security at age 70, can weaken a retirement income plan. The best time to take Social Security income depends on each client’s situation and include factors like liquidity, risk-reward, and other income sources. 

Here is another rule of thumb that doesn’t pencil out for many: Electing to take the highest pension payout available rather than considering a lower payout that includes survivor benefits. If the pensioned spouse dies prematurely, this advice will leave the surviving spouse in a severe retirement income bind.

Let’s review another example: Not all income is good income. If I told you that one of your real estate investments was generating $20,000 after fees and expenses, that might sound great to you. That is what a tax preparer told one of my clients. The preparer was looking only at the $20,000 income. They did not consider the $1M in equity that was generating this income. When I pointed out to the investor that he was getting a 2% return on his equity and asked if this is what he was expecting, he did not share his preparers’ enthusiasm. Neither he nor his tax preparer looked at this as a return rate rather than pure cash flow. 

You can see from these examples that following the rules of thumbs are not ideal for many people. When evaluating sources of retirement income for your plan, Cornerstone will examine a variety of factors. 

  • Account types (retirement and taxable)
  • Entitlements and guarantees (Social Securities, Pensions, Annuities)
  • Passive income (real estate, notes, partnerships, businesses)
  • Deferred income (executive compensation, stock options)
  • Trusts and estates (Inheritance, trust income)
  • Taxation on these assets and income stream
  • Tax bracket management (Creating a combination of income flows that help keep a client below the next highest tax bracket)

A combination of these factors and current tax laws guide our retirement income recommendations. Cornerstone seeks the most income effective, tax-efficient, risk-reward balanced blend of income streams


Social Security

A frequently asked question in planning for retirement income is, “when should I/we take social security income?” 

Deciding when to take Social Security is a balancing act. According to the Social Security Administration, 70% elect to trigger this benefit at age 62 when it first becomes available, locking in a 25% lower income for the rest of their lives.

Of course, some people need Social Security income at a younger age to cover expenses. They should take benefits early. But most can wait a few years to qualify for a higher benefit.

Understanding the consequence of a wrong decision becomes more important as life expectancy increases. Taking income benefits early, and locking in lower lifetime income, can cause longevity risk. Longevity risk is defined as outliving your money. Running out of money in retirement and concerns about health care is top of mind for most retirees. 

According to AARP, when a couple reaches age sixty-five (65), only 20% can maintain their living standard. This means that 80% of retirees will have to make concessions in meeting their retirement expenses. The worst-case scenario in retirees’ minds is that they become dependent on others, including children, family, or government entitlements. People facing this possibility would be better prepared if they had a financial plan.

Another negative consequence in triggering early benefits is the impact of Social Security income to a surviving spouse? For example, Spouse A is a high-income earner. Spouse B did not work much and is entitled to the 50% spousal share. When one spouse dies, the survivor is entitled to the higher of the two benefits, but not both. If the higher-income spouse takes benefits early and then dies prematurely, the surviving spouse’s income is locked at the lower amount for the balance of the survivor’s life. This is not what couples intend to occur, especially after the loss of a spouse.

The other option to take Social Security income benefits until a later age may not be advantageous for others. But how can this be true if you delay results in an eight percent (8%) increase in benefits each year? Some of the reasons have to do with the availability of other income, taxation, health, and life expectancy. 

For example, for retirees who hold most of their investments in retirement accounts, drawing too early from these accounts and deferring social security can result in a weaker financial condition. This is because retirement accounts are taxed and the loss of tax deferral on money taken from these accounts early. Another example is a retiree who has pension benefits that grow at a rate greater than Social Security benefits. In this case, taking Social Security benefits early can improve a financial plan. 

It’s surprising how often rules-of-thumb can weaken a financial plan. What should matter is what is best for you and your circumstances? And how can you get help to avoid mistakes in your planning?

At Cornerstone, our comprehensive financial planning approach will help you make sound financial choices. We will review your Social Security benefits, the merits of each option, and help you understand which is best suited for you. We have seen the difference in options result in several hundreds of thousands of dollars of difference over a plan’s life. Cornerstone can show you which Social Security options are right for you.


Among the different retirement planning matters, Healthcare is one where most people feel less confident. The task of navigating pre-Medicare private insurance, Medicare, and the unsettled state of Healthcare in this country contribute to this uncertainty. Healthcare planning for retirement should not be left to chance. Our work with pre and current retirees has given us considerable experience with healthcare planning. 

Although Cornerstone does not sell healthcare insurance, we recommend professionals who have helped our clients or work with your existing broker. Healthcare planning is not generally a one-time event. As insurance and Medicare evolve, we will be here to review how these changes impact your plan.

Surprisingly, healthcare planning is not a service offered by many financial advisors. Families of those advisors will need healthcare planning assistance from elsewhere, which increases the chance for coordination gaps in their plan.

At Cornerstone, healthcare planning is an essential part of our client’s overall financial plan. As retirement healthcare best practices change over time, we will have these discussions with our clients.


There is a significant relationship between income in retirement and what you pay for Medicare premiums. It turns out; this is an expensive relationship. 

Your Medicare Part B cost is based on your combined Adjusted Gross Income (AGI) and tax-exempt interest. The higher this income, the more you pay. This increase is meaningful. 

Additionally, Medicare looks back two years at a taxpayers’ income to determine the current years’ premium. For example, a couple who in 2018 had $174,000 in qualified income will pay $3,470.40 in 2020 for Medicare. This premium does not include the cost of supplements. If this couple instead earned $175,000, the Medicare costs increase to $4,857.60. This is a 40% increase for the same benefits. If their income in 2018 was instead $219,000, this cost doubles. 

The 2020 Medicare Plan B cost breakdown is below.


What does this mean to you? Managing how retirement income is generated can help you manage Medicare premiums. The savings over time is meaningful. Understanding and managing the relationship between retirement income and Medicare’s cost is another example of how Cornerstone adds value to our client’s financial lives.   


Retirement scenario planning

Scenario planning is how we help clients make critical financial decisions. Our help in this area has aimed to improve our clients’ condition, and for many millions of dollars. If you are like many of our clients, your planning questions – goals and dreams – might be:

  • What if we downsize our home? Will that improve our plan?
  • What if we live in a different state? A more tax-friendly state? (Which, based on current tax law, is anywhere but California). Will that help our plan? 
  • What will happen to our plan if we buy a second home in [Lake Tahoe, Maui, Arizona, Idaho]?
  • What if we help our children buy their first home?
  • What if I retire a few years early?
  • Is it a good idea to move some of our retirement money into Roth IRA accounts?
  • What does it look like if we spend $200,000 on remodeling our home?

This list can be endless. Ask us, and we will add it to the list. Your projected outcome compared to others will vary because your goals and resources are unique to you. Each question will include a thoughtful set of discussions, assumptions and rationale, and financial illustrations. 

Imagine working with an advisor who does not have the experience and tools to help you with these questions. What if you decided, because you could not get the help needed, you did nothing because you weren’t sure what to expect? 

At Cornerstone, exploring these goals and dreams is done through retirement scenario planning. Scenario planning will include comparing your options side-by-side to help you make a well-informed decision.   

Cornerstone is a place where goals and dreams are explored. You have worked hard your entire life. You deserve all the retirement scenario planning options you can imagine.


Earliest retirement

Each year presents challenges that seem to be greater than the previous years. As our clients get order, they look forward to a time when they can spend the day doing what we want to do rather than what they must do. 

The question becomes, “can I retire early?”

There is usually an answer to this question. Sometimes it is yes. Other times, it is no. At Cornerstone, we suggest rephrasing this question: What can we do to make early retirement possible? This rephrasing allows us to solve this question rather than looking at this as an absolute. Some of the variables for getting to “yes” include

The variables considered will depend on each client’s circumstances. You might be thinking about retiring early today. Or, this could be something you wish to target in a few years. Either way, Cornerstone can help you explore how this can work best for you.


Real Estate Investment Planning

People from all walks of life find investment real estate an exciting asset to hold. The reasons include:

While passion for this asset class is high, finding advisors who work with clients on directly held real estate investment is uncommon. It was such a significant gap in the early 2000s (and still today) that it was the reason one of the principals at Cornerstone enter financial services. As a result, Cornerstone has always been an advocate for those who seek help understanding the merits of owning investment real estate.   

Here is why working with a financial planner who is also a real estate specialist is a good idea:

Investment real estate requires a substantial amount of capital. This generally means hundreds of thousands of dollars. For many, as a percentage of total net worth, this is double digits. Having a substantial portion of your net worth (over 5%) in a single investment is a insurance called “holding a highly concentrated position.” In creating a prudent retirement asset allocation, highly concentrated positions should be avoided. The trouble is, what if something terrible happens to that single holding? If a large percent of a retirees’ portfolio is in a troubled asset, it creates risk for their retirement plan. 

Investment real estate has risks that go beyond what an investor can control: An unruly tenant, rent control, required capital repairs and replacements, legislative risks, personal liability. These are a few considerations that extend beyond managing for tenant quality and cash flow. As we have seen with COVID-19, a tenant can be legally allowed to not pay rent for a period without recourse. 

Cornerstone loves real estate planning. We understand each of the factors covered above. One of the principals at Cornerstone own commercial real estate, and since 2005 has taught real estate investment classes to financial planners in the UC Berkeley Personal Financial Planning program. Cornerstone has seen thousands of investment real estate cash flow models and has advised clients on many of these matters.

If you have a hankering for real estate in your asset mix, you will get better advice from planners who have considerable experience in these matters. People with a passion for real estate will feel at home with Cornerstone.


College savings

With most of our clients aged 50 or older, saving for their children’s college is in the rearview mirror. We have helped them set up traditional and alternative college savings strategies and have seen how these have played out. We have helped manage the impact of intentionally and inadvertently over and under-funding for this need. 

Today, most of our clients are interested in helping fund their grandchildren’s education. The challenge is that younger parents are beginning to question the value of an undergraduate or graduate degree, requiring more flexible funding strategies. If not used for college, they would like to use these funds to help fund a business for the entrepreneur child. Or if life does not go as planned, the funds can be used to buy a big-ticket retirement toy. Using 529 College or Coverdale accounts for these decisions would trigger penalties. Alternative college funding strategies would not be subject to penalties. 

At Cornerstone, we help clients plan for multiple generations’ future, including recommending both traditional and more flexible college savings strategies.

Net Worth and Cash Flow statements

Reviewing and coordinating your assets with your financial plan is part of the financial planning experience. It can give you a higher sense of confidence and economic well-being. Your net worth and cash flow financial statement becomes a part of this experience.   

A personal net worth statement is a snapshot of your current assets and liabilities. Assets include investment accounts, retirement accounts, real property, and personal property. Assets also include cash value in a life insurance policy, bank accounts, and private debt you own. Liabilities include mortgages, personal property loans, personal uncollateralized loans, private debt, and credit cards. Each asset and liability is part of a net worth statement. 

Clients entering retirement generally have a positive net worth, which means that assets exceed liabilities. A net worth statement can represent a sense of accomplishment for many clients. For others, it could feel like more work is needed and that they are far from ready for retirement. Cornerstone will help you assess your assets and liabilities’ strengths and opportunities during the financial planning experience and what it means to your retirement picture.

Your cash flow statement becomes the backbone of your success in retirement. A cash flow statement is an annual snapshot of your income and expenses. The difference in your income and expenses will result in a household with positive yearly cash flow (you have more income than expenses) or negative annual cash flow. 

Negative cash flow is typical for retirees who no longer have earned income. Most times, Social Security income is not enough to alone cover retirement expenses. To cover this retirement “expense gap,” retirees will need to draw income or capital from assets they own, which will impact their net worth. Although these are separate documents, they are equally crucial to your retirement future. 

Financial statements are excellent tools in the financial planning and plan review process. We often introduce financial statements to our clients for their first time. A regular review of these statements can benchmark your plan’s progress and serve as a useful tool for accountability.

Financial Statements might seem like a “big boy pants” activity. When you work with Cornerstone, you are indeed working with the big boys, figuratively speaking.


Charitable and philanthropic planning

As retirees have more time to reflect on what is important to them, it’s common for them to consider how they can use charity to help others. 

The triggering event seems to be either a client life event (cancer, pets, children, the list is endless) or a cause that has always resonated. Delivering on charitable interests can take many forms. 

The options include donating time, money, setting up charitable accounts, and funding advanced strategies. 

Cornerstone can help you explore strategies that satisfy your charitable intentions. 

VIDEO: Coordinate with your other professionals

You commit time and money to create the very best version of your financial plan. It looks spectacular and represents the hopes and dreams of you and your family. But like an Olympic relay race that gets off to a great start then goes wrong, your plan can miss in the handoff to your other professionals. 

Another approach to this is, when was the last time you had each of your key professional advisors around the table to coordinate your financial matters at the same time? Professional advisors include your accountant, insurance agent, attorney, and financial advisor to start. The answer is likely, this has never happened and will likely never happen. This answer can leave your spectacular plan with significant coordination gaps. 

Cornerstone is cross-disciplinary in its approach to financial planning. We are accustomed to and seek to coordinate with existing professionals or introducing you to new professionals. As your financial life evolves, your bench may go more in-depth. 

It could include real estate brokers, property appraisers, real estate attorneys, property managers, and exchange intermediaries for real estate investors. 

For business owners, this bench can include bookkeepers, group healthcare insurance brokers, third-party retirement plan administrators, part-time or temporary CFOs, and business brokers. 

The bench might include trust attorneys, appraisers, and in-house professionals in our advanced planning department for high net worth clients.

At Cornerstone, our advisor’s first careers resemble the experiences of many of our clients. We were directors, senior-level executives, entrepreneurs, and founders. We have needed, and often still require, the same types of experts we recommend to clients. We understand the value of coordinating with other professionals and how this will result in a higher likelihood of success with your most important financial goals.


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Cornerstone Wealth Management is recognized for its delivery of independent, comprehensive financial planning. This essential work goes beyond traditional investment planning.

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