As retirement approaches, helping secure your financial future becomes a top priority. National Retirement Security Week (NRSW) is the ideal time to revisit and fine-tune your retirement strategy for lasting stability and peace of mind.
For high-net-worth individuals (HNWIs) or affluent retirees in Iowa, preparing for a financially sound retirement goes beyond the basics. It requires a sophisticated approach to wealth preservation, investment diversification, and risk management. Crafting a thorough plan tailored to your unique financial situation can be the key to enjoying a worry-free retirement.
In today’s blog, we’re exploring essential steps to help you enhance and safeguard your financial future during National Retirement Security Week—so you can enjoy the golden years with peace of mind and confidence.
Understanding Retirement Security
The sooner you begin planning for retirement, the better. Starting early allows you to benefit from compound interest, maximize tax advantages, and gives you the flexibility to refine your strategy over time. However, even if you’re approaching retirement, it’s never too late to develop a smart, forward-thinking plan.
Common pitfalls in retirement planning include saving too little, underestimating healthcare costs, and over-relying on Social Security. To avoid these missteps, it’s crucial to adopt a well-rounded strategy that integrates diverse investments, tax-efficient planning, and adequate savings. A proactive, balanced approach can help ensure financial security throughout your retirement years.
Let’s dive into actionable steps you can take to help secure your retirement.
1. Assess Your Current Financial Position
Understanding your financial standing is the foundation of a successful retirement plan. Without a clear picture of your assets, liabilities, and income streams, it’s impossible to make informed decisions about your future. Begin by thoroughly assessing your current financial status:
- Net Worth: Calculate your net worth by subtracting your total liabilities from your total assets. This should include all investment accounts, retirement savings, real estate holdings, and any other significant assets.
- Retirement Savings: Consider whether your retirement savings are sufficient to sustain your desired lifestyle. Currently, U.S. adults believe $1.46 million is needed to retire comfortably. For HNWIs, retirement goals are often more ambitious, so adequate savings are crucial.
- Income Streams: Identify all potential income streams in retirement, including Social Security, pensions, real estate income, investment dividends, and annuities. Although Social Security is a key source of income for many, it plays a smaller role for HNWIs, who typically have more diversified revenue streams.
This holistic assessment can provide a foundation from which you can create or adjust your retirement plan. Consider meeting with a fiduciary advisor to help ensure your evaluation is thorough and tailored to your goals.
2. Leverage Tax-Efficient Strategies
For HNWIs, taxes can be a significant drain on retirement savings. Effectively managing your tax exposure is critical to helping preserve your wealth and optimizing income. Here are a few key tax-efficient strategies to explore:
- Roth Conversions: Converting traditional IRAs or 401(k) accounts to Roth IRAs can be an effective tax strategy. While you’ll pay taxes on the converted amount upfront, Roth IRAs offer tax-free withdrawals in retirement, allowing for more flexibility with tax planning as you age. This can be especially beneficial if tax rates are expected to increase in the future.
- Tax-Loss Harvesting: For individuals with taxable investment accounts, tax-loss harvesting can help minimize the impact of capital gains. This strategy involves selling investments that have experienced losses to offset the taxes on gains elsewhere in your portfolio.
- Charitable Donations: Donating appreciated assets (like stocks) to charity can help reduce your taxable income while fulfilling philanthropic goals. Consider establishing a donor-advised fund, which allows you to contribute to charitable organizations in a tax-advantaged manner.
Working with a fiduciary can help you identify and implement the most appropriate tax strategies for your specific financial situation.
3. Diversify Your Investment Portfolio
Maintaining a diversified portfolio is essential for managing risk and helping ensure consistent returns over time, especially as you near retirement. For HNWIs, diversification can include a wide range of asset classes, from traditional investments like stocks and bonds to alternative assets.
- Stocks and Bonds: A well-balanced portfolio typically includes both stocks for growth and bonds for stability. As retirement approaches, many investors shift towards a more conservative allocation to help protect their wealth from market volatility.
- Alternative Investments: HNWIs often benefit from incorporating alternative investments like real estate, private equity, and hedge funds. These assets provide diversification beyond the stock market and can help protect against inflation while offering higher potential returns.
- International Investments: Expanding your portfolio to include global investments can help hedge against domestic market risks. Consider adding international equities and bonds to tap into growth opportunities in other regions, especially in emerging markets.
Your financial advisor can help you assess your current investment mix and recommend adjustments based on your risk tolerance and goals.
4. Develop a Sustainable Withdrawal Strategy
One of the most important financial challenges many face is helping ensure that your retirement savings last. For HNWIs, a sustainable withdrawal strategy is critical to maintaining your lifestyle while helping protect against the risk of depleting your savings too early. Here are some strategies to consider:
- The 4% Rule: The 4% rule is a common starting point for withdrawal strategies, suggesting that retirees withdraw 4% of their savings annually, adjusted for inflation. While this method provides a baseline, it may not be suitable for everyone—especially for those with more complex financial needs. HNWIs should consider more tailored approaches.
- Dynamic Withdrawals: Adjusting your withdrawal rate based on portfolio performance allows for more flexibility. In years of strong market returns, you can withdraw more, while in down years, reducing withdrawals can help preserve your portfolio’s longevity.
- Bucket Strategy: Dividing your portfolio into different “buckets” based on time horizons can help ensure liquidity for immediate needs while keeping long-term investments in higher-growth assets. This approach helps protect against market volatility and ensures that your short-term withdrawals come from more stable investments, like bonds or cash.
Establishing a robust withdrawal plan can prevent overspending and help ensure that you have enough resources to cover expenses well into your later years.
5. Plan for Longevity
With advances in healthcare and lifestyle, Americans are living longer than ever. For HNWIs, this longevity requires careful financial planning. According to the Social Security Administration, one in four people aged 65 today will live past age 90, while one in 10 will live past age 95. Preparing for a longer retirement can help you avoid financial shortfalls down the road. It can be beneficial to consider the following:
- Longevity Insurance: Also known as a deferred income annuity, longevity insurance provides guaranteed income starting at a future date (e.g., age 85). This may offer a potential financial cushion for your later years and help prevent you from outliving your savings.
- Long-Term Care Insurance: Long-term care (LTC) insurance helps cover the costs of assisted living, nursing homes, and in-home care—expenses that can significantly impact your financial plan. With nursing home costs in Iowa averaging over $90,000 per year, LTC insurance can be a vital component of financial longevity planning.
- Health Savings Accounts (HSAs): HSAs offer a tax-advantaged way to save for medical expenses in retirement. Contributions to an HSA are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses. This makes HSAs an ideal vehicle for covering healthcare costs, which are expected to rise substantially in the coming decades.
Incorporating longevity planning into your overall retirement strategy can help ensure that you’re financially prepared for an extended retirement.
6. Maximize Contributions to Retirement Accounts
Retirement accounts like 401(k)s and IRAs are powerful tools that can set you up for long-term success. National Retirement Security Week is a great time to help ensure you’re contributing as much as possible to these accounts.
- 401(k) and IRA Contributions: For 2024, the maximum contribution limit for a 401(k) is $22,500, with an additional catch-up contribution of $7,500 if you’re over 50. Likewise, IRAs allow up to $6,500 in contributions annually, with an extra $1,000 for those 50 and older.
- Catch-Up Contributions for Individuals Over 50: If you’re 50 or older, don’t miss out on catch-up contributions. These allow you to boost your savings during the final stretch of your career, giving you the opportunity to set aside more funds for retirement.
7. Work with a Fiduciary Advisor, like Johnson Wealth and Income Management
When it comes to planning your financial future, especially as a high-net-worth individual (HNWI), having the right guidance is crucial. A fiduciary advisor is more than just a consultant—they are a trusted partner legally bound to put your best interests first.
At Johnson Wealth and Income Management, our fiduciary advisors are dedicated to helping ensure that every decision made and every piece of advice offered is tailored to your specific goals, providing a strong foundation to help you secure retirement.
Putting Your Interests First
Unlike some financial advisors who may prioritize products or services that benefit their firm, fiduciaries are legally required to act solely in your best interest. This means you can trust that the advice you’re receiving isn’t influenced by commissions, hidden fees, or conflicts of interest. A fiduciary advisor, like those at Johnson Wealth and Income Management, follows a code of ethics that demands transparency, integrity, and a focus on helping you achieve your financial goals. This legal obligation helps ensure that your financial well-being is always the top priority, whether you’re making an investment decision, structuring a withdrawal strategy, or planning your estate.
In a world where financial decisions can be complex, having a fiduciary advisor on your side gives you peace of mind. With comprehensive, objective advice, you can feel confident that the strategies presented are aligned with your long-term interests and risk tolerance, helping you navigate potential pitfalls while optimizing your financial resources.
Tailored Financial Strategies for High-Net-Worth Individuals
Managing significant wealth comes with its own set of challenges. As an HNWI, you require a financial strategy that goes beyond traditional retirement planning. At Johnson Wealth and Income Management, we’re experienced in addressing the nuanced needs of affluent clients, offering bespoke financial plans that encompass everything from tax efficiency to investment diversification.
Our fiduciary advisors begin by thoroughly understanding your financial goals, risk preferences, and long-term objectives. Whether you’re focused on preserving your wealth for future generations, minimizing tax liabilities, or protecting your portfolio from market volatility, our team crafts strategies that are uniquely designed to meet those goals. For HNWIs, this often includes:
- Retirement Planning: We help you plan for a secure retirement by developing income strategies that help ensure you have a steady stream of income throughout your retirement years. This includes Social Security optimization, pension planning, and withdrawal strategies.
- Strategic Asset Allocation: Effective asset allocation is key to helping balance risk and return in your income-focused portfolio. We assist you in optimizing your asset allocation to help ensure that your investments provide a reliable income stream while maintaining an appropriate level of risk. Our team uses advanced tools and methodologies to create a diversified portfolio that helps minimize volatility and maximize income potential.
- Advanced Tax Strategies: Tax-efficient planning is critical to protecting your wealth. Our advisors work closely with tax professionals to develop strategies such as Roth conversions, tax-loss harvesting, and charitable giving plans that minimize your tax exposure while maximizing the longevity of your portfolio.
- Customized Risk Management: Balancing growth and preservation is a fine art, especially in retirement. Our fiduciary advisors help you diversify your portfolio across asset classes, including alternative investments, helping ensure your wealth is well-protected while still offering growth potential.
Ongoing Education and Resources
Johnson Wealth and Income Management offers an array of resources that are available to you to help you get more clarity on the state of your retirement, and what the future might hold. Be sure to check out our:
By working with Johnson Wealth and Income Management, you receive personalized guidance that not only protects your current wealth but also helps ensure that your financial legacy is secure. Whether you’re managing complex assets, planning for philanthropy, or simply looking to secure a comfortable retirement, our fiduciary approach provides the holistic support needed to navigate each financial decision with confidence.
Final Thoughts
National Retirement Security Week is the perfect opportunity to review your financial plan and make necessary adjustments to help ensure a secure retirement. By evaluating your current financial position, leveraging tax-efficient strategies, diversifying your investments, and incorporating longevity planning, you can create a sustainable roadmap for your financial future.
For those looking to enhance their retirement plan, partnering with a fiduciary advisor like those at Johnson Wealth and Income Management can make all the difference.
Visit johnsonwim.com to learn more about our services and schedule a consultation today.
Retirement Planning FAQs
- How Much Money Do I Need to Retire?: The amount of money you need to retire depends on factors like your lifestyle, life expectancy, and healthcare costs. A common rule of thumb is to aim for 70-80% of your pre-retirement income each year. However, it’s essential to consider inflation, rising healthcare costs, and potential long-term care expenses. A fiduciary advisor can help you determine a personalized target based on your goals and circumstances.
- When Should I Start Saving for Retirement?: The earlier you start, the better. This allows your savings to grow over time through compound interest, making it easier to accumulate a substantial retirement fund. However, it’s never too late to start. Even if you’re close to retirement, there are strategies such as catch-up contributions to help maximize your savings in the years leading up to retirement.
- What Are the Best Investment Options for Retirement?: Retirement portfolios typically include a mix of stocks, bonds, mutual funds, and other assets to balance risk and growth potential. The right mix depends on your risk tolerance, time horizon, and retirement goals. As you near retirement, a common strategy is to gradually shift toward more conservative investments. Consulting a fiduciary advisor can help you create a diversified portfolio suited to your specific needs.
- How Do I Account for Healthcare Costs in Retirement?: Healthcare can be one of the largest expenses in retirement. Medicare covers many healthcare costs, but it doesn’t cover everything, such as long-term care. To account for these expenses, many retirees consider purchasing supplemental insurance (Medigap), long-term care insurance, or setting aside savings in Health Savings Accounts (HSAs). Planning for healthcare costs early can prevent unexpected financial strain.
- When Should I Start Taking Social Security?: You can start taking Social Security benefits as early as age 62, but the longer you wait, the higher your monthly benefits will be. Waiting until your full retirement age (around 66-67 for most people) or even until age 70 maximizes your benefits. The best time to start depends on your financial situation, health, and life expectancy. A fiduciary advisor can help you evaluate the most beneficial time to claim your Social Security benefits based on your personal needs.