Apex News

August 4, 2021

Retirement is a notoriously tricky decision to make. Over the decades, the number one question we always hear from our clients is, "How will I get paid in retirement?" There are a lot of factors to consider, and no two people are the same. However, if you want to improve your retirement chances over time, the key decisions revolve around how much capital you need to start with, how much you're willing to lose, and the tax efficiency of each option. At Apex, we believe planning is paramount, and it is imperative to evaluate the tax implications of our retirement income projections.

Some people think they'll get paid in retirement by fixed-income securities and selling off their assets. But, of course, you can only sell so much, and with rates at all-time lows, retirees must look elsewhere to shore up their cash flows. The current interest rate environment may force you to buy lower quality or riskier investments to produce the required income. Whether credit, duration, tax, or rate risk, we want to help you mitigate these risks. 

A "High Income-Tax Efficient-Controllable Risk" Walks Into A Yardley Office

A few years ago, we searched far and wide for a solution to provide income to our clients while mitigating risk factors. We reviewed many products, from publicly traded REITs and MLPs to more esoteric private lending and structured products. All had their merits but, just about all ultimately lacked the "piece de resistance"—high income, tax efficiency, controllable risk.

We concluded that direct, private, commercial real estate ("CRE") was the clear outlier, with "direct" being the key here. We could reduce fees, increase yield, actively manage taxation, and anticipate or control the risk by cutting out the middlemen. Real estate, as an asset class, is also somewhat inflation-resistant. As the value of the mighty dollar goes down, the price of land goes up, as do the costs of raw materials to build new structures. Add to this a standard lease structure with annual rent increases, and you have a valuable asset, pun intended. 

Now, APEX had a plan.

The Launch Of AFA Real Estate Partners

Our founder has been personally investing in CRE for decades, partnered his success with the income desires of our clients, and launched AFA Real Estate Partners ("AFA"). Fun fact - our founder owns our home office located in Yardley, PA. AFA focuses on long-term, direct CRE investments creating that "piece de resistance" of high income-tax efficiency-controlled risk.

AFA's investment philosophy generally centers around Class A office buildings located in strategic suburban markets. We feel that commuting to cities has become less desirable and companies can get more space for a similar or lower cost. Another reason we stick to these types of investments is that the rate of return (aka "cap rates") is wider, leases are generally longer, and there's less turnover. 

Our projects are offered through private partnerships for each asset and offer either equity or debt participation. The latter is subordinate notes with fixed coupons and a stated maturity. These were primarily designed for qualified money, allowing IRA investors to access these projects without the risk of unrelated business taxable income (UBTI). It's important to note that these private investments are for accredited investors only. 

Creating A Withdrawal Plan

In addition to the investments offered through AFA, we also source quality products in the form of mutual funds, interval funds, municipals, corporates, etc., to meet our client's specific income needs. But probably just as important as finding these sources of income is creating a withdrawal plan well before you need to enact it. After all, the tax-efficient liquidation of a retirement portfolio requires the coordination of both taxable and pre-tax retirement accounts like an IRA or 401(k). We focus on the different "tax buckets" and help you strategize your withdrawals in the most tax-efficient manner.

Whether income, retirement, or withdrawal planning —Apex delivers all of these services as a comprehensive "financial plan." Financial planning refers to the process of strategically managing your financial resources to facilitate and ensure financial security in a manner that optimizes your chances of achieving the future of your dreams. The only thing in your way of living the future of your dreams is creating a plan to enact it. 

So what's your income strategy? How will you pay for your living costs when you stop working?

Disclaimer: Actual photo of trophy asset owned by select clients and principals of Apex Financial Advisors, Inc. This is neither an offer to sell, nor a solicitation to buy securities, nor an invitation to subscribe to specific services. This overview is for informational purposes only, and nothing contained herein shall be construed as investment advice.