By Michael Gold, CFP®, MBA, Founder & CEO, Wealth Advisor
Have you ever worried that your money might not last as long as you do in retirement? If so, you’re not alone. That is the biggest concern for 49% of Americans regarding retirement. With increased longevity and fewer companies offering traditional pensions, it is a valid concern. Instead of worrying about running out of money, though, you should take action to ensure that it won’t happen. Here are some things that you can do to help make sure you don’t outlive your money.
1. Identify Flexible Spending Categories
As you build your budget, organize it based on needs. Every single expense should be identified as either fixed or variable and essential or non-essential. For example, your housing expenses are likely fixed and essential. Food is essential, but it is a variable expense. A gym or country club membership may be fixed, but it is non-essential. Other forms of leisure or travel are likely variable and non-essential.
Knowing which expenses are necessary and which are flexible can give you incredible peace of mind. If you’re used to spending $8,000 a month, once you sort your expenses and discover that only $4,500 of them are truly necessary, it relieves a lot of pressure.
It also allows you to make wiser financial decisions and adjust better to market conditions. If we enter a bear market and your portfolio is down, you can cut spending back to cover the necessary expenses you identified. Maybe you put off that big trip or eat out less. This can potentially keep more of your money invested so you can be better positioned if and when the market bounces back.
2. Don’t Forget Taxes
Unless all of your money is in an after-tax account or Roth IRA, you will have to deal with taxes in retirement. Having your mortgage paid off before retirement is a common—and excellent—goal. However, don’t make the false assumption that no mortgage equals no payments.
Part of your monthly mortgage payment may be going toward property taxes and homeowners’ insurance in your escrow. Don’t forget that you still have to pay these bills when your home is fully paid off, and these expenses must be included in your budget. Keep in mind these numbers will inflate over time as well. One way to handle property taxes and homeowners’ insurance in retirement is to set aside money every month, just like you did with your mortgage so that you have the funds when those bills are due.
Property taxes won’t be the only taxes you will owe in retirement. Distributions from 401(k)s and IRA accounts will most likely be considered taxable income. Even your Social Security benefits may be taxable, depending on your overall income. It’s critical to make sure that you are withholding and paying the proper taxes so that you don’t get into a large tax bill situation. Tax planning in retirement is critical to ensure you position your distributions appropriately.
3. Work With A Professional
A wealth advisor who focuses on holistic financial planning including tax planning and advanced planning can make the difference between a retirement marked by fear and stress (like the 49% of Americans mentioned previously) and one of confidence. As you retire, you will find many investment advisors who want to work with you and manage your money for you. It is wise to have a professional help you with your investments, but that isn’t enough. You need to find a financial professional who will not only professionally manage your money but help you manage all the aspects of your financial life as well. Yes your investment strategy is very important and also incorporating your taxes, your trust and estate planning coupled with risk management (ensuring you maintain the appropriate levels of insurance coverage to protect your wealth) are all critical to your financial plan. In your retirement you get one shot to get it right, seek out a professional wealth advisor who focuses on holistic financial planning to help you can connect all the dots and all moving parts of your financial life.
A good holistic wealth advisor will help you develop a comprehensive financial plan that includes a look into your short-term and long-term goals, a sustainable budget, and a general road map to help you navigate retirement. If you want to learn more about what it’s like to work with a professional who cares more about your life than your investments, reach out to us at Gold Family Wealth, LLC. Contact me at firstname.lastname@example.org or (800) 303-2533 to schedule a complimentary 30-minute consultation and start taking control of your finances!
Michael Gold is the Founder and CEO, Wealth Advisor of Gold Family Wealth, an independent wealth management boutique and named one of the Top 100 People in Finance. Michael has 20 years of experience in the financial industry and has a bachelor’s degree in business and economics from the State University of New York College at Oneonta, an MBA from NYU Stern School of Business, specializing in Quantitative Finance and Leadership and his CERTIFIED FINANCIAL PLANNER™ (CFP®) credential. He serves business owners and entrepreneurs by stress-testing their financial plan to identify red flags and missed opportunities. Michael strategically outsources professionals from various fields, such as tax, insurance, retirement and trust and estate law to collaborate on potential solutions to help position his clients to pursue their desired goals.
Michael currently lives in Westport, CT. When he’s not working, you can find him spending time with his wife, Giselle, their three children, Sebastian, Aria, and Pierce, and their dog, Charly. To learn more about Michael, connect with him on LinkedIn.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Gold Family Wealth, LLC), or any non-investment related content made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Gold Family Wealth, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Gold Family Wealth, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Gold Family Wealth, LLC’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are an Gold Family Wealth, LLC client, please remember to contact Gold Family Wealth, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.
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