With a retirement that could last 30+ years, it is important to consider the impact that a sequence of negative investment returns early on can have on the longevity of your nest egg. Awareness of this risk allows you to develop a strategy to attempt to mitigate this risk during the years surrounding your retirement.
Although longevity risk can pose a serious threat to your retirement plans, its impact can be mitigated with prudent planning and using reasonable assumptions for how long you and your spouse may live.
Understanding the law of diminishing returns, and applying it to your situation can allow you to develop a strategy that lets you find the sweet spot between the benefits gain and the effort given.
The company-specific risk that comes with concentrated holdings can be mitigated through diversification. However, the process of selling can have many nuances. Having a diversification strategy in place could be useful when making investment decisions with tax and emotional implications.
Some of these retirement milestones create potential planning opportunities to boost savings, maximize retirement income, or improve tax efficiency. Others mark deadlines that could result in stiff penalties if overlooked.
Performing Roth conversions in your lower-income years, allows you to potentially decrease your total tax liability throughout your retirement.
A successful retirement investment strategy does not require great genius nor tremendous effort, but it does require you to stick with that strategy in good times and bad.
Qualified charitable distributions can be a tax-efficient way to manage required minimum distributions for those who are charitably minded. Because of their tax benefit, QCDs and RMDs should be carefully coordinated to ensure proper timing. It is reasonable to seek out assistance from a trusted advisor to assist you with their execution.
Healthcare costs are an important factor to consider when creating your retirement income plan. You want to ensure that these expenses are properly accounted for. However, these costs can potentially be affected by your income in retirement.
Some higher-income retirees may have to pay more for their Medicare Part B and Medicare Part D prescription drug coverage. This is due to something called the Income-Related Monthly Adjustment Amount (IRMAA).
Once you understand how your Social Security benefits are taxed, you can begin exploring opportunities to potentially reduce the taxes you pay. Depending on your income and mix of assets, you may have the ability to better manage your tax liability in retirement.