The power of household-level rebalancing

This portfolio group approach, also known as household-level rebalancing or holistic financial advice, enables advisors to align every account with a household’s financial plan. By considering all assets together, advisors can optimize cash flow, tax efficiency, and retirement income strategies, generating more value for their clients.

Cash-flow planning: matching investments with life events

Imagine a young couple, Dan and Rachel, with several financial goals: saving for retirement, paying off student loans, and preparing for their first child. They have a variety of accounts—401(k)s, brokerage accounts, and a savings fund. Mid-year, they need $25,000 for unexpected medical bills.

With account-level rebalancing, the advisor might sell assets only from their brokerage account, which could deplete their savings prematurely or leave the overall portfolio misaligned. Instead, household-level rebalancing helps the advisor evaluate every account to find the optimal strategy, such as:

• Tapping bonds from Dan’s 401(k) to preserve more growth-focused investments in other accounts
• Simultaneously rebalancing Rachel’s Roth IRA to increase exposure to equities, aligning with the couple’s long-term growth objectives
• Triggering tax-loss harvesting in the brokerage account for a more tax-efficient outcome

By looking at the entire household, the advisor ensures that the couple’s portfolio stays aligned with their long-term goals, minimizing disruptions and unnecessary taxes, all while meeting their immediate cash needs.

Tax efficiency: minimizing the impact of capital gains

Consider a family with a mix of Roth IRAs, traditional IRAs, and a taxable brokerage account. They want to rebalance their portfolio to return to their target asset allocation of 60% stocks and 40% bonds, but market gains have thrown the allocation off balance. Simply rebalancing across all accounts could result in higher capital gains taxes from selling stocks in taxable accounts.

With household-level rebalancing, the advisor can rebalance strategically to reduce taxes and trading costs by:

• First adjusting holdings within tax-deferred accounts, such as the traditional IRA, where trades won’t trigger immediate tax consequences
• Selling underperforming positions in the taxable account to harvest losses and offset gains elsewhere in the portfolio
• Reallocating high growth assets like equities to the Roth IRA to maximize future tax-free withdrawals

As a result, the family experiences fewer taxable events and preserves more of their portfolio’s growth. By treating the household as a single portfolio, the advisor reduces trading activity, minimizes tax drag, and keeps the family on track to meet their long-term financial goals.

Retirement income strategy: maximizing withdrawals while reducing tax drag

Meet Susan and Mark, a retired couple with $2 million spread across several accounts: Susan’s Roth IRA, Mark’s 401(k) rolled into a traditional IRA, and a joint brokerage account.

Without household-level rebalancing, withdrawals might be made haphazardly, potentially triggering higher tax liabilities or prematurely depleting key accounts. Instead, the advisor employs a multi-phase withdrawal strategy that optimizes income streams while managing taxes:

• Early in retirement, the couple withdraws from their brokerage account to pay only capital gains tax while leaving tax-advantaged accounts to grow
• Simultaneously, small withdrawals from Mark’s traditional IRA reduce future required minimum distributions (RMDs), keeping their taxable income lower in later years
• Susan’s Roth IRA remains untouched, acting as a tax-free safety net for future unexpected expenses or healthcare costs

By using asset location strategies in a household-level rebalance, the advisor allocates stocks to the Roth IRA (where future growth will be tax-free) and bonds to the traditional IRA (to minimize risk and volatility). This ensures the couple maintains their desired asset allocation with lower tax drag.

The result is a comprehensive strategy that adds significant value to the couple’s retirement plan by extending the life of their portfolio and minimizing tax liabilities. The advisor demonstrates true expertise by maintaining the same pre-tax risk level across the household’s assets, adding more potential value through financial planning, discipline and ongoing guidance to their accounts.

Rebalancing households: a new standard for financial advisors

The traditional approach of account-level rebalancing falls short when households juggle multiple goals, tax considerations, and account types. Household-level rebalancing gives advisors the tools to manage portfolios more effectively by taking a holistic view of the household’s financial landscape. This strategy goes beyond balancing individual accounts, it delivers targeted outcomes across all financial dimensions.

For advisors embracing cash-flow financial planning and retirement income specialization, household-level rebalancing offers a new way to differentiate their services. By adding value through tax efficiency and asset location strategies, advisors can preserve wealth for their clients while building deeper, more trusting relationships.

In a world where clients demand more than cookie-cutter solutions, household-level rebalancing sets the new standard—ensuring that every dollar works harder, and every goal is within reach.