Originally aired on KAOX, KID, KNRS, and KSL

The Great Investment Debate: Active vs. Passive Strategies for Utah Retirees

Published: May 25, 2025
Last Updated: May 25, 2025
Author: Mike Stevens, Capital Wealth Advisors
Episode: Retire Right Radio, May 25, 2025

Originally aired on KAOX, KID, KNRS, and KSL. This comprehensive guide is based on the May 25, 2025 episode of Retire Right Radio with Mike Stevens, founder and president of Capital Wealth Advisors.

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Introduction: Choosing Your Investment Vehicle for the Retirement Journey

Picture this scenario: You're standing at a car dealership facing a crucial decision. On one side sits a sleek sports car that promises exhilarating performance but requires skilled handling and frequent maintenance. On the other, there's a reliable SUV designed for predictable, comfortable travel with minimal fuss.

This analogy perfectly captures the essence of today's investment landscape - the ongoing debate between active and passive investing strategies. For Utah retirees and pre-retirees, this choice isn't just about financial theory; it's about securing the lifestyle you've worked decades to achieve.

In an era where the economy seems to be shrinking, inflation refuses to retreat, and trade war discussions persist while the stock market somehow continues its upward trajectory, making sense of investment strategies has never been more critical. The mixed signals in our economy make it challenging to navigate retirement planning, but they also create unique opportunities for those who understand how to position their portfolios strategically.

Whether you're approaching retirement or already enjoying your golden years in the beautiful state of Utah, understanding these investment approaches could mean the difference between financial stress and confident retirement living.

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Understanding the Investment Landscape: Making Sense of Economic Chaos

The Current Economic Paradox

We're living in unprecedented times where traditional economic indicators seem disconnected from market performance. The economy shows signs of contraction, inflation continues to impact everyday expenses, and geopolitical tensions create uncertainty - yet somehow, the stock market maintains its upward momentum.

How do we make sense of this apparent contradiction?

Mike Stevens from Capital Wealth Advisors puts it bluntly: "We don't. It's craziness. You try to make sense of it and you're like, I can't make sense of it. This is crazy."

This honest assessment leads to a fundamental principle for Utah retirees: plan for the worst, hope for the best. Rather than trying to time the market or predict economic outcomes, successful retirement planning requires building flexibility and protection into your strategy.

Why Traditional Rules No Longer Apply

The Death of the 4% Rule

For decades, financial advisors recommended the 4% withdrawal rule - the idea that retirees could safely withdraw 4% of their portfolio annually without running out of money. This rule is now considered obsolete and potentially dangerous for modern retirees.

Why the 4% rule fails today:

• Longer life expectancies
• Healthcare cost inflation
• Market volatility patterns
• Tax law changes
• Inflation impact on purchasing power

The Utah advantage: Utah retirees benefit from no state tax on Social Security benefits, but this advantage can be negated by poor withdrawal strategies that increase federal tax burden.

The Portfolio vs. Plan Distinction

One of the most important concepts for Utah retirees to understand is that a portfolio is not a plan. Simply having investments scattered across various accounts doesn't constitute retirement planning.

What constitutes a real retirement plan:

• Inflation planning for Utah's cost increases
• Tax increase preparation (federal and state considerations)
• Healthcare cost planning (Utah's excellent but expensive healthcare)
• Emergency and flexibility reserves
• Income layering strategies

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Active vs. Passive Investing: The Fundamental Differences

Active Investing: The Sports Car Approach

Active investing involves trying to beat the market through frequent buying and selling based on research, market timing, and professional management decisions.

Characteristics of Active Investing:

• Higher costs: Management fees, transaction costs, research expenses
• Higher risk: Potential for significant outperformance or underperformance
• Time intensive: Requires constant monitoring and decision-making
• Tax implications: More frequent trading can trigger taxable events
• Flexibility: Ability to adjust strategies quickly based on market conditions

Utah-specific considerations for active investing:

• Coordination with Utah's tax advantages
• Timing strategies around retirement account distributions
• Opportunities during market downturns
• Tax loss harvesting benefits

Passive Investing: The SUV Strategy

Passive investing aims to match market performance by holding diversified index funds or ETFs for the long term.

Characteristics of Passive Investing:

• Lower costs: Minimal management fees and transaction costs
• Lower maintenance: Less time required for monitoring
• Predictable performance: Follows market indices closely
• Tax efficiency: Fewer taxable events due to buy-and-hold approach
• Broad diversification: Instant exposure to hundreds or thousands of securities

Benefits for Utah retirees:

• Simplicity for those who prefer minimal portfolio management
• Cost efficiency preserves more money for Utah's recreational lifestyle
• Predictable performance for budgeting purposes
• Time freedom to enjoy Utah's outdoor activities

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The Technology Revolution in Investing

From Kitchen Phone to Instant Trading

The investment landscape has been revolutionized by technology in ways that dramatically impact both active and passive strategies.

The evolution of trading:

• 1980s: Required calling a stockbroker from your kitchen phone with the long coiled cord
• Today: Instant trading from your smartphone anywhere in Utah's beautiful landscapes
• Speed progression: Days → hours → seconds → nanoseconds

Modern Trading Technologies

Algorithmic Trading:

• Computers execute trades at lightning speeds based on market signals
• Processing speeds faster than any human could achieve
• Creates opportunities and challenges for individual investors

Robo-Advisors:

• AI-driven platforms provide automated investment management
• Lower costs than human advisors
• Limited personal touch and customization

Fractional Shares:

• Ability to purchase portions of expensive stocks
• Makes investing accessible with smaller amounts
• Particularly beneficial for Utah residents building wealth gradually

The Human Element: Why Pilots Still Matter

Despite technological advances, there's still tremendous value in human oversight and decision-making. Mike Stevens uses a compelling analogy: "You know why planes still have two pilots in them? A plane can probably take off and land itself, but I think having the humans on board is to oversee in case the computer doesn't fully understand the big picture."

The human advantage in investment management:

• Understanding personal circumstances and goals
• Emotional intelligence during market volatility
• Customization based on individual Utah lifestyles
• Strategic adjustments for changing life circumstances

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Tax Implications: A Critical Consideration for Utah Retirees

Understanding Different Tax Scenarios

One of the most overlooked aspects of the active vs. passive debate is the tax implications, which can be particularly significant for Utah retirees.

Active Strategy Tax Considerations:

• More frequent trading may generate more taxable events
• Potential for both short-term and long-term capital gains
• Opportunities for tax loss harvesting
• Greater complexity in tax planning

Passive Strategy Tax Benefits:

• Fewer taxable events due to buy-and-hold approach
• Primarily long-term capital gains treatment
• Simpler tax reporting
• More predictable tax planning

Utah's Unique Tax Landscape for Retirees

Utah retirement tax advantages:

• No state tax on Social Security benefits
• Moderate state income tax rates
• Retirement income credit for qualifying retirees
• Strategic opportunities for Roth conversions

Common tax surprises in retirement:

• Many retirees underestimate their tax burden
• The IRS becomes a "partner" in tax-deferred accounts
• Required Minimum Distributions (RMDs) can create unexpected tax bills
• Medicare premium increases triggered by higher income

Important distinction: Not all taxes are created equal

Think of taxes like hammers - there are different types for different purposes:

• Ordinary income tax rates: Applied to IRA/401(k) withdrawals (highest rates)
• Long-term capital gains rates: 0%, 15%, or 20% depending on income
• Short-term capital gains: Taxed as ordinary income

Understanding these differences allows Utah retirees to optimize their withdrawal strategies.

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The Three Critical Questions for Utah Investors

When determining the optimal investment approach for your Utah retirement, Mike Stevens suggests asking yourself three fundamental questions:

Question 1: Do You Need Income from Your Investments?

Income sources to consider:

• Dividend income: From diversified stock portfolios (never guaranteed)
• Annuity payments: Pension-style payouts for life
• Bond interest: Predictable income streams
• Utah municipal bonds: Tax advantages for Utah residents

Time horizon consideration: Warren Buffett's wisdom applies here - you shouldn't be in the stock market unless you can part with that money for an extended period. The legendary investor suggested being comfortable enough to "fall asleep for 10 years and wake up happy that I own that financial instrument."

Utah lifestyle planning: Consider your desired lifestyle in Utah's recreational paradise:

• Skiing and outdoor activities
• Travel to Utah's five National Parks
• Grandchildren visits and activities
• Community involvement and hobbies

Question 2: How Much Time Do You Have Before Needing the Money?

This question directly impacts your risk tolerance and investment strategy selection.

Short-term needs (1-3 years):

• Emergency funds
• Known major expenses
• Bridge income before Social Security or pension starts

Medium-term goals (3-10 years):

• Travel funds for Utah's stunning destinations
• Home improvements or modifications
• Vehicle replacement for Utah's terrain

Long-term wealth building (10+ years):

• Legacy planning for children and grandchildren
• Long-term care preparation
• Inflation protection for later retirement years

Question 3: How Much Emotional Strength Do You Have for Market Volatility?

This may be the most honest and important question of all.

Reality check: Many investors believe they can handle risk until the market actually declines. Mike Stevens shares a common scenario: "I've asked in the past, are you okay with risk? 'Oh, yeah, yeah, yeah. No problem. Risk is good.' And the minute the market has a little hiccup, they're like, 'Oh my gosh, what should we do?'"

Understanding healthy market behavior:

• Markets naturally go up and come down
• PE ratios (price-to-earnings) provide insight into market valuation
• Healthy PE ratios typically range from 16-18%
• When PE ratios exceed normal ranges, markets become more fragile

Historical perspective for confidence: Since 1980, the S&P 500 has finished positive 34 out of 45 years - over 75% of the time. This includes recovery from significant declines:

• 1980: Dropped to -17% during the year, finished +26%
• March 2020: Fastest decline in US history at -34%, finished the year +16%

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Strategic Portfolio Management for Utah Retirees

The Importance of Diversification

Rather than putting all retirement funds in the stock market or keeping everything in "safe" accounts, successful Utah retirees employ a layered approach:

Layer 1: Safety and Protection

• Index annuities with no fees
• Protection against market downturns
• Guaranteed income options

Layer 2: Growth and Opportunity

• Diversified market investments
• Direct indexing opportunities
• Tax loss harvesting strategies

Layer 3: Flexibility and Income

• Money market funds
• Short-term bonds
• Utah municipal bonds

Taking Advantage of Market Opportunities

Buying the dip strategy: When markets decline, opportunities emerge for those with properly structured plans. Instead of selling when the market is down (the worst possible strategy), prepared retirees can:

• Use safe money to cover living expenses
• Purchase quality investments at discounted prices
• Implement tax loss harvesting strategies
• Rebalance portfolios advantageously

Utah-specific opportunities:

• Supporting local Utah businesses through investing
• Municipal bond opportunities
• Real estate investment trusts (REITs) focused on Utah markets

Strategic Review Meetings: Beyond Rate of Return

Capital Wealth Advisors conducts strategic review meetings with clients at least twice yearly, focusing on opportunities rather than just performance reporting.

What strategic reviews accomplish:

• Identify tax loss harvesting opportunities
• Evaluate Roth conversion possibilities
• Assess rebalancing needs
• Plan for upcoming tax law changes
• Coordinate with Utah-specific tax strategies

The opportunity cost of missing these strategies: Clients without proactive advisory relationships may miss tens of thousands of dollars in optimization opportunities over their retirement years.

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Real Utah Client Success Stories

Case Study: The Technology Executive Transition

Background: Salt Lake City executive nearing retirement Challenge: High-stress job with market uncertainty concerns Solution implemented:

• Hybrid active/passive approach
• Safe income floor for peace of mind
• Growth investments for long-term purchasing power
• Utah tax optimization strategies

Results: Retired 18 months earlier than originally planned with confidence in sustainable income

Case Study: The Teacher and Postal Worker

Background: Traditional pension recipients in Utah County Challenge: Modest savings supplementing good pensions Utah advantages utilized:

• Lower healthcare costs than neighboring states
• Family support network nearby
• Recreation opportunities without resort premium prices

Strategy:

• Pension optimization timing
• Conservative investment approach leveraging pension security
• Utah municipal bond allocation
• Healthcare bridge planning

Outcome: Comfortable retirement enabling travel and grandchildren involvement

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Lifecycle Investment Strategy: From Accumulation to Distribution

The Accumulation Phase (Working Years)

During your career years, passive strategies often make sense for long-term growth:

• Dollar-cost averaging into diversified funds
• Employer 401(k) matching maximization
• Tax-deferred account building
• Utah-specific considerations: Taking advantage of state tax benefits

Moving beyond target-date funds: While convenient, target-date funds have significant limitations:

• No customization for individual circumstances
• Generic age-based allocation
• No consideration of Utah-specific factors
• Limited flexibility for changing needs

The Transition Phase (Approaching Retirement)

As retirement nears, more active management becomes valuable:

• Protection strategies against market downturns
• Income planning implementation
• Tax strategy coordination
• Healthcare cost preparation

The Distribution Phase (In Retirement)

Retirement requires a completely different approach focused on:

• Reliable income streams
• Inflation protection
• Tax efficiency
• Legacy planning

Utah retirees in distribution phase benefit from:

• No state tax on Social Security
• Strategic Roth conversion opportunities
• Municipal bond advantages
• Coordinated healthcare planning

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Common Investment Mistakes Utah Retirees Must Avoid

Mistake 1: Selling When Markets Are Down

The worst possible timing: Panic selling during market declines locks in losses and prevents recovery participation.

Historical evidence:

• Every major market decline has been followed by recovery
• Missing the best recovery days devastates long-term returns
• Emotional decisions typically occur at the worst possible times

Mistake 2: Making Knee-Jerk Reactions

The importance of staying the course: Short-term market movements rarely require portfolio changes. Having a well-designed plan prevents emotional decision-making.

Mistake 3: Ignoring Fees and Expenses

Many retirees don't understand the total cost structure of their investments.

Fee categories to understand:

• Management fees
• Administrative costs
• Trading expenses
• Advisory fees
• Insurance charges (for annuity products)

Utah consideration: Every dollar saved in fees is a dollar available for Utah's recreational lifestyle or family activities.

Mistake 4: Inadequate Tax Planning

Common oversights:

• Not optimizing withdrawal sequencing
• Missing Roth conversion opportunities
• Failing to coordinate with Utah's tax advantages
• Inadequate RMD planning

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Advanced Strategies for Utah Retirees

Direct Indexing Benefits

Direct indexing allows ownership of individual securities rather than mutual fund shares, providing:

• Tax loss harvesting opportunities
• Customization options
• Lower fees than actively managed funds
• Transparency in holdings

Utah Municipal Bond Strategies

For Utah residents in higher tax brackets, Utah municipal bonds offer:

• State tax exemption
• Federal tax benefits (for most issues)
• Support for Utah infrastructure projects
• Predictable income streams

Roth Conversion Planning

Utah's moderate tax environment creates opportunities for strategic Roth conversions:

• Lower current tax rates may not persist
• No state tax on conversion amounts
• Future tax-free growth and distributions
• Estate planning benefits for heirs

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Building Your Utah Retirement Income Plan

The Four Pillars of Retirement Income

Pillar 1: Guaranteed Income

• Social Security optimization
• Pension maximization
• Annuity income riders
• Utah-specific benefits

Pillar 2: Investment Growth

• Diversified market exposure
• Active and passive strategies
• Tax-efficient positioning
• Utah municipal bonds

Pillar 3: Flexible Resources

• Emergency reserves
• Opportunity funds
• Healthcare reserves
• Travel and recreation funds

Pillar 4: Legacy Assets

• Life insurance strategies
• Trust planning
• Charitable giving
• Family wealth transfer

Coordinating Multiple Income Sources

Timing optimization:

• Social Security claiming strategies
• Pension distribution options
• IRA/401(k) withdrawal sequencing
• Tax-efficient coordination

Utah-specific considerations:

• State tax impact on income sources
• Healthcare supplemental planning
• Recreation and travel budgeting
• Family support considerations

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Technology Integration for Modern Utah Retirees

Embracing Helpful Technology

While technology has revolutionized investing, Utah retirees benefit from selecting the right tools:

Beneficial technologies:

• Portfolio monitoring apps
• Tax planning software
• Healthcare cost estimators
• Utah recreation planning tools

Technology limitations to recognize:

• Robo-advisors lack personal touch
• Automated systems miss nuance
• Complex situations require human judgment
• Emotional support needs human interaction

The Balance of Technology and Personal Service

The most successful Utah retirees combine technological efficiency with personal advisory relationships:

• Technology for monitoring and information
• Human advisors for strategy and emotional support
• Regular reviews combining data and personal circumstances
• Customization based on Utah lifestyle preferences

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Estate Planning Integration for Utah Families

Utah Estate Planning Advantages

State benefits:

• No state estate tax
• Simplified probate process
• Favorable trust laws
• Family-friendly legal environment

Legacy Planning Strategies

For Utah families with multiple children:

• Equitable distribution planning
• Education funding strategies
• Family business succession
• Charitable giving coordination

Tax-efficient wealth transfer:

• Life insurance strategies
• Trust utilization
• Generation-skipping planning
• Utah-specific considerations

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Healthcare Planning for Utah Retirees

Utah's Healthcare Landscape

Advantages:

• Excellent healthcare systems (Intermountain Healthcare, University of Utah)
• Lower costs than many coastal states
• Preventive care focus
• Healthy lifestyle culture

Planning considerations:

• Long-term care costs still significant
• Medicare supplement planning important
• Prescription drug cost management
• Coordination with investment strategies

Healthcare Cost Integration

Investment strategy impacts:

• Higher income triggers Medicare premium increases
• Tax-efficient withdrawals preserve benefits
• HSA maximization strategies
• Long-term care funding options

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The Retirement Money Map™ Advantage

Capital Wealth Advisors has developed a proprietary process called the Retirement Money Map™ that goes far beyond traditional portfolio management.

Components of the Retirement Money Map™

Comprehensive analysis:

• Income needs assessment
• Expense projection (including Utah-specific costs)
• Tax planning integration
• Healthcare cost preparation
• Legacy planning coordination

Utah-specific customization:

• State tax advantage optimization
• Recreation and travel planning
• Family consideration integration
• Healthcare system coordination

Why Generic Planning Fails

Target-date fund limitations:

• No knowledge of retirement timing changes
• Ignores health challenges
• Generic risk allocation
• No Utah-specific considerations

The customization advantage:

• Personalized risk assessment
• Utah lifestyle integration
• Family circumstance consideration
• Flexible adjustment capability

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Frequently Asked Questions About Active vs. Passive Investing

Q: Should I choose only active or only passive investing?

A: Most successful Utah retirees benefit from a combination approach. Different life phases and financial goals may call for different strategies. The key is proper balance and coordination.

Q: How do fees impact my retirement outcome?

A: Fees compound over time and can cost tens of thousands of dollars over a retirement. However, paying reasonable fees for valuable services often provides net benefits. The key is understanding what you're paying for and ensuring it adds value.

Q: What if I've been following the 4% rule?

A: The 4% rule is outdated and potentially dangerous for modern retirees. A comprehensive retirement income plan considers multiple income sources, tax efficiency, and inflation protection in ways the 4% rule cannot.

Q: How often should I review my investment strategy?

A: At minimum, annually, but strategic reviews twice per year allow for better opportunity identification and tax planning. Major life changes warrant immediate strategy review.

Q: Can I change from passive to active strategies (or vice versa)?

A: Absolutely. Investment strategies should evolve with your life circumstances, risk tolerance, and goals. The key is making changes strategically rather than emotionally.

Q: How do Utah's tax laws affect my investment choices?

A: Utah's moderate tax environment and lack of Social Security taxation create unique opportunities for strategic investing, Roth conversions, and withdrawal sequencing that may not be available in other states.

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Taking Action: Your Next Steps

Immediate Actions for Utah Retirees

Step 1: Honest Risk Assessment

• Evaluate your true comfort level with market volatility
• Consider how market declines would affect your sleep and stress levels
• Assess your time horizon for different financial goals

Step 2: Comprehensive Fee Analysis

• Gather all investment statements
• Calculate total fees paid annually
• Evaluate whether fees provide corresponding value
• Consider Utah-specific optimization opportunities

Step 3: Tax Strategy Review

• Analyze current withdrawal strategies
• Evaluate Roth conversion opportunities
• Consider Utah municipal bond benefits
• Plan for Required Minimum Distribution impact

Professional Consultation Benefits

What to expect from a comprehensive review:

• Retirement Money Map™ analysis
• Fee and tax optimization review
• Income planning coordination
• Utah-specific advantage identification

The complimentary consultation process:

• No sales pressure or product pushing
• Educational focus on opportunities
• Honest assessment of whether assistance is needed
• Clear explanation of potential strategies

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Conclusion: Finding Your Perfect Investment Balance

The active vs. passive investing debate isn't about finding the "right" answer - it's about finding the right answer for your specific Utah retirement situation. Like choosing between a sports car and an SUV, the best choice depends on your destination, your comfort level, and your personal preferences.

Key takeaways for Utah retirees:

1. Balance is crucial - Most successful retirees benefit from combining active and passive strategies
2. Utah advantages matter - State-specific benefits should influence your strategy
3. Plans beat portfolios - Comprehensive planning is more important than investment selection
4. Technology enhances but doesn't replace human judgment and emotional support
5. Flexibility is essential - Your strategy should evolve with your life circumstances
6. Professional guidance adds value - Strategic reviews identify opportunities you might miss

Your retirement should represent the reward for decades of hard work. Utah's natural beauty, outdoor recreation, excellent healthcare, and family-friendly culture provide an ideal retirement environment. The key is ensuring your investment strategy supports the lifestyle you envision rather than creating stress and uncertainty.

Whether you prefer the potentially higher returns of active management or the simplicity and cost efficiency of passive strategies, the most important decision is ensuring your approach aligns with your goals, risk tolerance, and Utah retirement lifestyle aspirations.

Remember: There's no award for being the wealthiest person in the cemetery. The goal is enjoying your retirement years with confidence, surrounded by Utah's beauty and supported by a well-designed financial plan.

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Special Offer for Utah Residents

For the next five callers: Complimentary Retirement Money Map™ analysis - a comprehensive review typically requiring 5-10 hours of professional analysis.

What's included:

• Comprehensive income and expense analysis
• Tax optimization review specific to Utah residents
• Fee analysis and reduction opportunities
• Investment strategy coordination
• Completely complimentary with no obligation

Contact Capital Wealth Advisors:

• Phone: 801-210-5500
• Text: "VISIT" to 801-210-5500
• Website: capitalwealth.com

Remember: The strongest investment strategies aren't the most aggressive ones - they're the most prepared ones.

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This content is based on the May 25, 2025 episode of Retire Right Radio. For personalized advice regarding your specific Utah retirement and investment situation, contact Capital Wealth Advisors for a complimentary consultation.

Tags

• Active vs Passive Investing
• Utah Retirement Planning
• Investment Strategy
• Capital Wealth Advisors
• Mike Stevens
• Retire Right Radio
• Utah Retirees
• Portfolio Management
• Retirement Income Planning
• Tax Efficient Investing
• Technology in Investing
• Direct Indexing
• Roth Conversions Utah