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Mar 15, 2021 | Investment Management, Q&A

Why didn’t you include XYZ stock in my portfolio?

Tags: investment portfolio, Investment Strategy
Two People Checking the Global Markets
We get this question on a regular basis, usually when the stock in question has recently been in the news and has seen a meaningful move higher in price. When building portfolios, we choose high-quality companies with consistent and predictable earnings through a detailed evaluation process. In general, if a company is not included in your portfolio, it is because it did not pass our evaluation process or it would not fill a specific need in your portfolio.

HOW DO WE SELECT COMPANIES FOR YOUR PORTFOLIO?

The construction of a portfolio is a multi-step process with the ultimate goal of assembling a fully-diversified portfolio of high-quality companies. Our first step is to develop an intermediate-term economic outlook. Simply put, we consider measures of inflation, interest rates, and corporate earnings, as well as current monetary and fiscal policy. This allows us to determine if the economy is “growing” or “slowing.”

As a result, the next step is to construct a portfolio framework by deciding which industry sectors to emphasize, which to avoid, and how to weight them. Based on our outlook, we can choose to be neutral, over-weighted, or under-weighted in a portfolio relative to each stock market sector. Therefore, there is an intentional weight for each sector.

Once we have determined our economic outlook and outlined our sector exposure, we select the best companies to represent those sectors. The individual company selection process focuses on company fundamentals and is approached by thinking of a company as an operating business, not a stock. Godsey & Gibb’s focus is always to own quality businesses, each of which is a leader in its industry with a strong balance sheet and a history of consistently higher earnings.

Each company we buy provides exposure to certain aspects of a sector and makes an individual contribution to your portfolio. This evaluation and selection process is critical, as the construction of diversified portfolios to help meet your goals is the essence of what we do. Questions? Please reach out to one of our advisors.

Author: Ephraim Ulmer | Wealth Management Advisor
Written: March 15, 2021

How Retirement Accounts and Taxes Affect How Much You Need

A retirement nest egg of $1,000,000 in a traditional 401 k is not the same as $1,000,000 in a Roth account or taxable brokerage account. Taxes can significantly change how much retirement income you actually get to spend.

Account types and taxation:

  • Pre-tax accounts (traditional 401(k), traditional IRA): Withdrawals from 401(k)s and traditional IRAs are typically taxable as ordinary income
  • Tax-free accounts (Roth IRA, Roth 401(k)): Qualified withdrawals are generally tax-free
  • Taxable accounts (joint brokerage, trusts): Subject to capital gains taxes

Retirement income may still be taxable, including traditional 401(k)/IRA withdrawals and Social Security taxation. Required minimum distributions from an individual retirement account or employer sponsored retirement plan start at age 73 under current law, potentially forcing higher taxable income and affecting Medicare premiums.

State income taxes differ significantly. Virginia and South Carolina tax retirement income (though SC offers some exemptions), while Florida and Arizona have no state income tax. Relocating in retirement may affect your gross income needs after tax.

Tax-aware withdrawal strategies—such as blending withdrawals from traditional and Roth accounts, realizing capital gains strategically, or performing Roth conversions before RMD age—may help optimize your financial situation. However, tax laws and brackets can change. Working with a team that integrates investment management with ongoing tax strategy and preparation, like Godsey & Gibb’s in-house CPA team, can help keep your retirement plan and tax advice current. Consult your tax advisor for guidance on your particular investment and account structure.

Pitfalls of Popular On/Off-Track Benchmarks

Widely-referenced age-based retirement savings goals suggest you have: 1x your annual salary saved by age 30, 3x by 40, 6x by 50, 8x by 60, and 10x by age 67 to maintain your current lifestyle in retirement if you plan to retire at this traditional retirement age. A common guideline is to save between 10% and 15% of your annual pretax income for retirement, assuming a 40- to 45-year working career.

This framework was developed by Fidelity Investments internal research around 2014 and used in part as a marketing tool. Certain assumptions—such as social security accounting for 35% of one’s retirement income—are inapplicable to many affluent retirees. The framework was validated for incomes between $50,000 and $300,000, another indication it doesn’t apply to everyone.

Common pitfalls that distort how much money someone thinks they need:

  • Underestimating healthcare costs

  • Ignoring inflation’s impact on living expenses over 25+ years

  • Assuming very high future results from investment strategies

  • Not planning for long-term care or surviving spouse needs

A retirement calculator can help gauge whether current retirement savings and asset allocation align roughly with targets, but complex situations—business owners, large concentrated stock positions, potential inheritance—usually benefit from professional modeling. Investing involves risk, and actual investment results will vary.

At Godsey & Gibb, we frequently review progress towards retirement with clients and adjust their savings plan as markets, tax law, and personal financial goals evolve.

A retired couple strolls hand in hand through a serene park, surrounded by lush greenery and blooming flowers, enjoying their time together in nature. Their relaxed demeanor reflects the joys of retirement, a time when they may also be considering aspects of their healthcare, such as Medicare premiums and the impact of modified adjusted gross income on their medical insurance costs.

Why a Personalized Retirement Plan and Ongoing Professional Guidance Matter

How much retirement income you need is not a one-time calculation. It’s a moving target influenced by markets, inflation, health, tax legislation, family needs, and personal goals. To start saving effectively for retirement, you may benefit from a plan that adapts.

A personalized retirement plan typically includes:

  • A detailed retirement budget and spending map

  • Investment strategy aligned with investment objectives

  • Tax strategy coordinated with distributions

  • Estate and legacy planning (wills, trusts)

  • Risk management (insurance, long-term care planning, survivor income planning)

Developing the plan is only half the work. Executing the plan—making investment changes, tax decisions, and distribution adjustments year by year—is equally complex. Many retirees find that working with financial advisors who can delay retirement decisions strategically, coordinate employer match optimization while still working, and manage the transition is valuable.

Godsey & Gibb’s model brings financial planners, portfolio managers, and CPAs under one roof so that tax strategy, investment management, retirement income planning, and estate considerations can be coordinated. We focus on helping clients understand how much retirement savings they may need given their current age and goals, leveraging expertise in all the necessary areas of complexity.

If you’re in the Richmond, Greenville, Jacksonville, or Phoenix areas, consider a conversation with a fiduciary financial planner to refine your own directional retirement number. With thoughtful planning, periodic review, and the right advisory team, we strive to help clients approach their retirement years with greater clarity and confidence about how much income their savings may support.

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Information contained herein is for general educational purposes only and is not intended to be substituted for personalized investment, financial, tax, or legal advice as individual situations can vary. The use of charts, graphs, formulas, and other illustrations are not intended to be used independently to guide investment decisions or to determine which securities to buy or sell, or when to buy or sell them. Information was obtained from sources considered reliable, but no representations or warranties are made to its accuracy, timeliness, suitability, or completeness. Statements expressed are opinions of certain Godsey & Gibb Wealth Management personnel and are subject to change without notice. Forward-looking statements expressed herein are subject to change due to shifts in the market and economic conditions. Full disclosure: https://www.godseyandgibb.com/disclosure/

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