Scores of mountain climbers have perished for misjudging the objective to be the illustrious summit, and forgetting it was to return home to their loved ones. This misappropriation of priority is further demonstrated in the fact 80% expired on the descent, indicating that in many cases too little energy was preserved to make it down the mountain. Consider the following practices for a successful transition from late career to early retirement, so that your financial estate can survive you, and not the other way around.
- Review both the spending and income sides of your budget every year. Never has this been more important than in the early years of living on a fixed income, when most retirees unexpectedly spend more money due to the availability of time, and never has it been more consequential.
- Make sure your investment portfolio reflects your risk tolerance, risk requirement, and risk capacity. Risk tolerance is subjective and involves the level of volatility you can stomach. Risk requirement measures the minimum risk level required to attain your retirement goals. Risk capacity measures the maximum risk which will allow for both income need and the ability to endure a prolonged down market.
- Boost emergency savings to avoid a large unexpected withdrawal from your retirement portfolio, which taken during a down market can cost you years of lost income and growth.
- Maintain a tax-smart withdrawal strategy. Take Required Minimum Distributions (RMD’s), dividends, and interest first, and sell capital investments last to meet the income need. Consider small annual Roth Conversions between your retirement date and when RMD’s begin. Encourage your investment advisor and tax consultant to work together on your behalf.
- Create a plan for your long-term care. The lack of one is the equivalent of a climber who packs enough food for ideal weather conditions only, and seldom does it work out.
- Update titling of assets, beneficiary designations, and estate planning documents. Appropriate powers for financial and health proxies to trusted individuals.1
- Remain thankful, stay engaged in serving others, and enjoy a blessed and fruitful retirement! ??
“A wise man leaves an inheritance to his children’s children”?~Proverbs 13:22
1 Yahoo Finance, “9 Things Every Retired Person Should Do”, Charles Schwab, September 22, 2023.
The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
