Protect Your Wealth During Retirement

Protect Your Wealth During Retirement

March 06, 2023

As you approach retirement, protecting your wealth becomes increasingly important. After all, you've spent decades building up your nest egg, and you want to ensure that it lasts as long as you do. 

It’s no secret that it’s hard to plan for retirement. ‌In addition to growing a sizeable nest egg, you must protect it from ‌external factors like market‌ ‌volatility, inflation,‌ ‌and unforeseen expenses. 

If you've amassed a healthy portfolio of assets from years of hard work, how can you guarantee that it will be sufficient to sustain you through retirement and support your family after you pass on? To aid in securing your wealth during your golden years, we've outlined some strategies to consider. 

Here’s what you need to know.

Be Flexible With Your Withdrawal Strategy

Retirees face a significant risk in the form of inflation, which gradually diminishes the purchasing power of their savings, making it challenging to maintain their lifestyle over time. Although the 4% rule is a helpful starting point for determining the yearly withdrawal amount, it can be an outdated strategy in 2023. This is why a flexible withdrawal strategy is crucial to adapt to the ever-changing market. 

In case of unexpected downturns in your portfolio, you may need to curtail your withdrawal increases or even decrease the withdrawals to protect your long-term needs. Your Fiduciary Advisor can collaborate with you to develop a withdrawal plan that adjusts as your retirement progresses.

Take Your Required Minimum Distributions (RMDs)

Once you reach a specific age, you're obligated to make annual withdrawals of a minimum amount from your tax-deferred retirement accounts, such as the 401(k) and traditional IRA. Failure to do so will result in significant penalties levied by the IRS. 

Although you cannot control your Required Minimum Distribution (RMD), you can opt for various methods to allocate the funds. This includes safeguarding other assets or finance expenses, including permanent life insurance. If you require further details on the RMD regulations, you can contact your Fiduciary advisor. The IRS also offers resources for determining your RMD.

It's important to stay in the loop with changes to RMDs. Recently, the SECURE 2.0 Act has increased the RMD age to 73 for those turning 72 in 2023. Additionally, the penalty for not taking RMDs has been reduced to 25%.

Diversify Your Portfolio

As the adage goes, don’t put all your eggs in one basket. Diversification is the practice of building a portfolio with a variety of investments that have different expected risks and returns. This specific strategy is essential when it comes to protecting your wealth. 

While diversification can’t guarantee that your investments won’t suffer if the market drops, it can improve the chances that you won’t lose money, or that if you do, it won’t be as much as if you weren’t diversified.

Reviewing your portfolio with your retirement income planner/Fiduciary a few times each year can help keep your long-term plan on track and ensure you don’t have your goals tied to one or two investments.

Review Your Estate Plan

One crucial aspect of safeguarding your wealth is ensuring that it passes on to the intended recipients once you're no longer around. To achieve this, it's vital to regularly assess your estate plan, or if you haven't already created one, to do so. Your estate plan should include the following:

  • Will: Your will should outline how you want your estate to be managed after your passing.
  • Trust: Your trust allows you to designate a trustee to supervise an asset's utilization on behalf of a beneficiary.
  • Beneficiary Designations: It is essential to review the beneficiary designations on your retirement accounts and life insurance policies. Along with any Transfers or Payables on Death (TOD and POD) that you may have on other accounts and property.
  • Legacy Planning: Suppose leaving a legacy is a priority for you. In that case, you must assess whether you're on course to achieve your legacy objective. Which could be anything from funding a charity to financing your grandchildren's education.

By staying vigilant and updating your estate plan as needed, you can ensure that your hard-earned wealth is distributed according to your wishes and benefits your loved ones and causes you care about. 

As always, it's best to first consult with your trusted Fiduciary Advisor to evaluate your estate plan and ensure that it meets your needs.

Plan for Healthcare Costs

With longer life spans and medical costs that historically have risen faster than general inflation—particularly for long-term care—managing health care costs is important for retirees. Retirement planning conversations should include a discussion of the impact long-term care costs have on individuals and their family’s future.

The cost of long-term care can be substantial, and it's not covered by traditional health insurance or Medicare. On average, a year in a nursing home can cost around $100,000, and the cost of in-home care can be just as high.

In 2023 without insurance, monthly long-term care costs could see you paying: 

  • $5,148 for a home health aide
  • $1,690 for adult day care
  • $4,500 for assisted living
  • $7,908 for a semi-private room in a nursing home
  • $9,034 for a private room in a nursing home

Individuals 65 or older have a 70 percent chance of needing long-term care services in the future, but only 11 percent purchase long-term care insurance. The rest are left scrambling to cover costs when the time comes.

To help fill a gap in saving for health care expenses, make sure you are properly insured and consider increasing contributions to your tax-advantaged accounts, especially HSAs (if you have one). HSAs will help enable tax-free spending on health care in retirement.

Work With Agemy Today

After devoting many years to saving and investing for your retirement, switching from saving to spending that money can be stressful. Ideally, soon-to-be retirees should work with a financial advisor to review their individual savings and investment plans to make sure they’re on track for all their goals.

Working with the advisors at Agemy Financial Strategies can help you get ready for the future and future generations. Because making just a couple adjustments to your financial lifestyle can be greatly beneficial in the long run.

Click here to instantly book the day and time you'd like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.