10 Steps to a Worry-Free Retirement

October 9, 2024

October 9, 2024

By

Conway Wealth

Transitioning into retirement can be an exciting yet daunting prospect. Worrying about finances during this time can rob you of the joy that comes with leaving work behind and pursuing your passions, as well as the opportunity to create a lasting legacy for future generations. In this comprehensive guide, we provide 10 essential steps to help you achieve a worry-free retirement – one where you can focus on living life to the fullest without financial concerns. Whether you're just starting to plan or are nearing the finish line, these tips will give you peace of mind and set you up for success in your golden years.

1. Begin With the End in Mind and Start Planning Early

What do you imagine your retirement looking like? Do you envision lots of travel? Perhaps you want to take up more hobbies than you could before or spend more time with children and grandchildren?  Whatever the case may be, it is important to visualize your ideal retirement and work backward to understand the financial needs required to make that vision a reality.  

What you need to have the lifestyle you intend on in retirement may be more than you expect, especially when factoring in inflation. This is why the sooner you start, the better. Once you determine what the end goals look like, you can define clear objectives for how much cash flow you will need to meet your desired lifestyle in retirement. The earlier you do this, the earlier you can begin forming a strategy and taking advantage of compound interest and long-term investment growth. This will set you up for financial independence when it is time to retire and potentially allow you to pass on wealth to future generations.

2. Establish an Emergency Fund

Planning for the unexpected is not easy, so it’s necessary to be prepared ahead of time for whatever life may throw at you with a proper emergency fund. The ideal emergency fund is six months to a year worth of average expenses held in a savings account, allowing you to be prepared in any event.

3. Maximize Retirement Accounts

The earlier the better, is especially true with contributions to various retirement savings vehicles like 401(k)s, IRAs and Roth IRAs. If you’re able, maximizing these contributions can provide significant advantages such as employer matching and tax benefits. Business owners and entrepreneurs also have the ability to set up other unique plans allowing them to set aside additional assets. Be sure to adjust contributions based on your income and age to accelerate savings growth and ensure you are making the most of available resources.

4. Plan for Inflation and Longevity

You should account for inflation’s impact on the dollar’s purchasing power over time and ensure your money lasts as long as possible by investing in appropriately allocated portfolio to outpace inflation. Should a primary goal of yours be to pass down wealth and resources to future generations, preventing the loss of value through inflation is critical.

5. Understand Social Security Benefits

Familiarize yourself or work with a financial professional with the intricacies of Social Security, including age-based benefit amounts, delayed retirement credits and spousal benefits. Make informed decisions about when to claim your benefits for maximum payouts while minimizing the impact on other sources of income. An advisor can help to run projections on Social Security withdraw scenarios, ensuring you and your partner are making the most efficient selections possible.

6. Consider Tax-Efficient Strategies

Learn about tax-efficient strategies such as withdrawing from taxable, tax-deferred and tax-free accounts in the right order. Understanding Roth conversions, required minimum distributions (RMDs) and how to minimize taxes in retirement can save you more money than you’d expect. Some of these methods may be more complex and require the assistance of professionals such as financial advisors and tax professionals.

7. Plan for Healthcare Expenses

Anticipate healthcare costs during retirement by researching Medicare options, exploring supplemental insurance policies or setting aside funds for out-of-pocket expenses. Be aware of potential gaps in coverage and consider long-term care insurance to cover the cost of any necessary assistance as you age.

8. Adjust Your Portfolio and Retirement Plan

Consider shifting your investment portfolio to focus on income generation and capital preservation during retirement. As you age, conservative portfolios that preserve wealth are generally favored over ones that take on significant risk for the sake of outsized gains. A financial advisor can help you perfectly align your portfolio and your retirement goals.

The world of finance is constantly evolving, and it is essential to regularly review and adjust your retirement plan as needed. Stay informed about changes in tax laws, investment opportunities and economic conditions. Be prepared to adjust investments, goals or spending habits based on the latest information and changing circumstances.

9. Prepare Your Estate

Ensure that you have prepared your estate plan and that everything is in order should something happen to you. This includes wills, living wills, trusts, POA (power of attorney) documents and more. The more complicated your financials and family dynamics, the more complicated getting your estate in order will be, and preparing all these documents requires time and attention.

10. Work with a Financial Advisor

While this is listed as number 10, it is arguably the most efficient way to ensure a worry-free retirement. Seeking professional advice early on can help you establish clear strategies on all the aspects listed above. A financial advisor can help you navigate complex decisions, avoid biases in investment decision making, stay on track toward your goals and adjust as needed to ensure long-term success.

The Bottom Line

Achieving a worry-free retirement requires careful planning, knowledge and ongoing attention. By following these 10 essential steps, you can lay the foundation for a financially secure future – one where you can focus on living life to the fullest without financial concerns holding you back. But, here at Conway Wealth, we know this is not an easy feat, especially with complicated financials and changing priorities as you begin focusing on children, grandchildren and the future of your family.

For more information on finding the right financial advisor that can address your unique needs, feel free to reach out directly to the Conway Wealth team by emailing info@conwaywealthgroup.com or calling 973.285.3640.

Investment advisory and financial planning services offered through Summit Financial, LLC, an SEC Registered Investment Adviser, doing business as Conway Wealth Group (4 Campus Drive, Parsippany NJ 07054. Tel.973-285-3600). 7094898.1

Initial 2021 Tax Considerations

With the swearing-in of a new President and Vice President, plus convening of the next Congress, affluent Americans are weighing how changes in federal government may financially impact them.

Given that Democrats hold the Presidency and control both Houses of Congress by a slim margin, it now seems likely that tax reform could be passed as a budget reconciliation bill and then signed into law. While there is a remote chance that expected tax changes will be retroactive, it is more probable that they would take effect immediately upon becoming law or even at the start of 2022.

Since 2021 may be a last opportunity to capitalize on current income, capital gains, and transfer tax laws, families are considering key financial & estate planning adjustments, where appropriate.

Income & Capital Gains Tax Proposals

With the swearing-in of a new President and Vice President, plus convening of the next Congress, affluent Americans are weighing how changes in federal government may financially impact them.

Given that Democrats hold the Presidency and control both Houses of Congress by a slim margin, it now seems likely that tax reform could be passed as a budget reconciliation bill and then signed into law. While there is a remote chance that expected tax changes will be retroactive, it is more probable that they would take effect immediately upon becoming law or even at the start of 2022.

Since 2021 may be a last opportunity to capitalize on current income, capital gains, and transfer tax laws, families are considering key financial & estate planning adjustments, where appropriate.

“Be fearful when others are greedy and greedy when others are fearful.”

Responsive Planning

Given the above proposals, there is great uncertainty surrounding future tax policy. Even if some of the more benign tax provisions now in effect are not repealed, many of them are scheduled to sunset at the end of 2025 already.

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  • Phase out the 20% pass-through deduction on qualified business income for people with annual income exceeding $400,000
  • Eliminate capital gain deferral through like-kind exchanges of business & investment real estate for people whose yearly income exceeds $400,000
  • Increase the highest corporate income tax rate from 21% to 28% and subject corporate book income of $100,000,000 or more to a 15% alternative minimum tax
  • Double the tax rate on global intangible low tax income (GILTI) earned by foreign subsidiaries of American businesses from 10.5% to 21%
  • Impose a 10% surtax for U.S. companies that move manufacturing & service jobs to another country and then provide services or products for sale back to the American market
  • Create an advanceable 10% “Made in America” credit for manufacturers’ revitalizing, re-tooling and hiring costs
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