Financial Planning // Part 1: The Accumulation Strategy

Michael Porter wrote a brilliant piece on corporate and organizational strategy in 1996, titled What Is Strategy? Porter illustrates “three key principles underlie strategic positioning 1) Strategy is the creation of a unique and valuable position, involving a different set of activities 2) Strategy requires you to make trade-offs in competing – to choose what not to do. 3) Strategy involves creating fit among a company’s activities” (Porter, 1996/2000, p. 1). I subscribe to the idea that Porter’s work can be translated to individuals and their strategies related to financial planning.

Managing your assets in retirement is often discussed throughout the literary and financial planning world, as it inevitably becomes a little more difficult to manage the five pillars of wealth management once your primary income has ceased. What is not discussed as often is what it takes to get to retirement and how the correct strategy can help you successfully accumulate your assets to ensure you are prepared to separate from employment.

This post on efficient accumulation planning and strategy will be part one in a three-part series of addressing the three stages of financial planning: accumulation, distribution, and legacy planning.


The word itself makes this step seem easier than it is. Accumulation, by definition, is the increase or growth by addition especially when continuous or repeated [1]. Relying on this alone, one would be left to believe all they have to do is continually save money until their desired retirement date. This is only partly true. The accumulation of these assets must be in line with the proper investment strategy, and this proper investment strategy, similar to a syllabus, lesson plan, or strategic planning process, must be continually and repeatedly assessed in order to make the proper adjustments and changes required to align with the environment. When educators are in the accumulation stage the continual addition of funds into the right mix of investments is of critical importance. Educators have a few accessible vehicles in regard to their ability to accumulate while working.

  • College, University and School Districts have access to one, or sometimes all, of the following plans: 403(b), 401(a), 457(b). Access to these plan(s) allows you to contribute on a pre-tax or post-tax basis, depending on the plan design with each employer.
    • Each plan will have a pre-established library of investments for you to choose from and decide how you would like to allocate contributions from you and your employer.

The ability to contribute to a Roth IRA or execute a backdoor Roth[2] contribution is also present for educators – depending upon their personal financial situation. These qualified vehicles allow you to accumulate money throughout your career but investing those contributions wisely and opportunistically is the key. Questions that should be answered in order to take advantage of these vehicles include:

  • What fund(s) are in my best interest at this current time in my life?
  • What are the expenses associated with each fund?
  • Is passive management available in my employer sponsored plan?
  • Are there specific sectors where I should defer to active management?
  • How much should I contribute each year to make sure I can be financially independent at the age I’m targeting?
  • What should I do with the qualified plan I have at my former employer?
  • How do I determine my eligibility for a Roth IRA contribution?
  • What is the difference between a backdoor Roth contribution and a Roth conversion? Which should I execute?

The answers to these questions are very individualized. Each employer sponsored plan has a different menu of investments, which need to be understood before employing annual capital into the plans, and planning around Roth IRAs is directly tied to the family/individual tax strategy.

Solutions to Consider

Target Date Funds:
“Strategy involves creating “fit” among a company’s activities.”


Target date funds are a great place to start. The target date fund was invented to allow investors access to a solution that included a hands-off approach. In essence, a target date fund is an investment that includes a date in which you are targeting retirement. The investments inside the specific fund automatically rebalance to a more conservative allocation every year, so by the time you retire you are allocated very conservatively. This is meant to avoid being in an all equity portfolio six months before your retirement.


While being automatically rebalanced every year sounds like the solution, it’s not necessarily the best option. Where target date funds fall short is their ability to customize to you. It’s not uncommon for someone retiring at age 60 to be in a target date fund that includes a 50% allocation to fixed income. This may seem appropriate on the surface, but in reality, this individual may live another 30-years. Planning for 30-years of income, growth, and spending in retirement can often require an allocation that reflects the appropriate time horizon.


Doing It Yourself:
“Strategy requires you to make trade-offs in competing – to choose what not to do.”


Allocating and managing your assets completely on your own within your qualified plan is an option for everyone. It’s your plan! You have control, you can pick the investments you like and know, and you can change your investment options without fear of a taxable event (remember, it’s all tax-deferred). This approach does not cost you a management fee (outside of the fund expenses) and allows you complete and total authority over how your money grows.


You are on your own which could lead to behavioral mistakes that many do-it-yourself investors struggle with due to the opportunity to make tax deferred changes and thinking mistakes can be rectified quickly. Are you a market timer? Are you a buy and hold? What are you buying and holding? Are you opportunistically rebalancing? Are you shifting to cash, then forgetting to shift back to equities? These are all items to consider when taking on your investment strategy.


Engaging a Financial Planner:
“Strategy is the creation of a unique and valuable position, involving a different set of activities.”


This is where customization enters the picture. Engaging a financial planner allows you to create a customized financial plan and put your objectives into a living and breathing document (the plan). You gain industry expert advice on financial planning, tax planning, insurance planning, estate planning, investment planning – all items you need to understand to take advantage of your ability to accumulate.


There will be a cost associated with this engagement. Costs can range, depending on the planner and the scope of the engagement, between a flat annual fee or a percentage fee of the assets they are managing.

I will include ‘losing control’ as a con, although this is a strong misconception of hiring a financial planner. Many engagements will have an option available to the consumer where control of the investments still lies within them. Hiring a planner allows you access to a disciplined voice of investment direction and objective reasoning.


Next Steps

Accumulation is the first step in financial planning, and one could argue the most important step in the process, as you cannot get to the distribution phase without proper execution of the accumulation phase. To ask it simply, what is your strategy?


Our team of wealth advisors here at BerganKDV are fee-only fiduciaries who are dedicated to helping you navigate all areas of your financial life. Want to learn more about what we can do for you? Start here.


Diversification and asset allocation do not ensure a profit or guarantee against loss.

The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, an SEC Registered Investment Advisor.


[1] Retrieved on 2020-09-17 from:

[2] A backdoor Roth IRA is not an official type of retirement account. Instead, it is an informal name for a complicated, IRS-sanctioned method for high-income taxpayers to fund a Roth, even if their income is higher than the maximum the IRS allows for regular Roth contributions.

Works Cited
Porter, E. Michael. What Is Strategy? Brighton, MA: Harvard Business School Publishing Corporation; 2000. (Original work published 1996. Reprint #96608).

CATEGORIES: Wealth Management
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