The Guide to a Healthy Retirement for High-Net-Worth Individuals
Updated: Apr 21
High-net-worth individuals can make some important decisions now to prepare for retirement. Retirement can mean a major shift in income, without a regular salary coming in every year.
Fortunately, planning for retirement does not need to be stressful. It’s about understanding your assets and your future needs and setting goals that will guide your retirement activity.
Here are a few ideas for creating a sound and secure retirement plan:
1. Select the Best Tax Options
Tax planning is an important consideration when it comes to choosing where to put your investments. You want a broad tax diversification strategy that takes into account the following tax advantages:
Holdings you’re required to pay income taxes on annually
Holdings you pay taxes on only when you make a withdrawal or distribution
Holdings you rarely if ever have to pay taxes on in taxable investment account
One consideration about income taxes is location. Seven states – Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming – do not tax retirement income. Others only tax dividends and interest in retirement accounts.
2. Maximize Retirement Plan Contributions
Maximizing your contributions to workplace retirement plan such as 401(k)s or 403(b)s lets you build up your savings now. For 2021, the maximum allowed contribution is $19,500. If you’re over 50, you have more opportunity to save by adding $6,500 in catch-up contributions to your retirement accounts.
Keep in mind that if you are a highly compensated employee, there are limits on how much you can contribute once you exceed a level of earnings for the year. In addition, remember that the maximum total employer and employee contributions for 2021 is $58,000 (excluding catch-up contributions).
3. Consider Social Security
If it’s possible to delay payouts from Social Security, you’ll be able to take larger monthly distributions in the future. Claiming benefits starting at age 62 instead of at 66 will lock in those monthly rates for the rest of your life. If you can wait until age 70, you’ll earn an extra 8 percent annually in retirement accounts.
Also, remember that if you delay Social Security benefits until age 65, you may still need to apply for Medicare benefits within three months of that birthday to escape paying larger lifetime premiums for Medicare Parts B and D.
4. Consider Inflation For Retirement Income
While the United States has had a relatively low rate of inflation in recent years, 2021 is showing us the risk of inflationary price increases. You need to assume an average rate of inflation, say 3 percent annually, and project out what that would mean for your income and expenses when you retire.
This plays a big factor in comprehensive financial planning for retirement accounts.
5. Factor in Long-Term Care Insurance
The reality is that as we age, we are more susceptible to illnesses. While it’s good news that life expectancy in the United States continues to grow, not all of us will have good health as we age. If you can afford long-term care insurance, it’s a prudent investment that will not eat away your hard-earned resources.
Long-term care insurance covers items that health insurance does not, such as assistance with daily tasks and costs of chronic medical conditions & living expenses to go with it. Factoring this in helps to produce an optimal investment strategy.
6. Develop a Comprehensive Financial Plan
Planning for the future means considering your wants and needs in the coming years. A comprehensive financial plan can help you manage your assets today and in the future, especially for the highest income tax bracket. It lets you map out any testamentary provisions you have for children, grandchildren, or favorite charities, while also allowing you to fully understand your investment strategy and risks.
7. Pick the Right Retirement Savings Advisors
You’ve worked hard for what you have. When thinking about retirement, you need a trusted financial advisor to help you consider options, make plans, and track progress.
Retirement strategies for high networth people often have complex financial matters. Working with experienced wealth advisors helps ensure that your assets are protected, your wealth is preserved and that your investments are monitored and modified to meet your tax free growth goals, as well as retirement goals.
When you want sound, measured investment advice and expert insights into your retirement planning & investment portfolio, contact Solas Wealth. We can get your retirement savings goals planned out so you can have a secure financial future.