Many of today’s retirees are the wealthiest retirees of all time. Rising home values, strong market returns, and a generation of dedicated workers mean that there are more millionaires than ever. But, even if you have built a substantial nest egg, you may not feel like a millionaire and may be worried about how you’ll maintain your lifestyle in retirement and avoid running out of money. Here’s what millionaires next door can ask themselves when retirement planning.
How Much Money Do You Need to Retire?
Don’t know how much you need to save before you can retire? Start by figuring out how much money you’ll need year-to-year in retirement. List out your major expenses, think about if you’ll want to travel or pursue more leisure activities once you have unlimited free time, and start tracking your expenses. There’s no magic number you need to hit. Everyone’s income needs in retirement are different. It’s also important to have a strategy for not outliving your savings.
Where Will Your Retirement Income Come From?
Social Security may not make up the bulk of your retirement income, but it can provide guaranteed income for the rest of your life. If you want to supplement your Social Security check and distributions from a 401(k) or IRA, you may consider an annuity. An annuity is an insurance-based financial product that accepts funds and then pays them back later in a stream of payments or a lump sum. An annuity can be thought of as the opposite of life insurance and helps protect against outliving your money by providing guaranteed payments to you for life or a pre-determined amount of time.
How Much Will You Pay in Tax in the Future?
While you may not think of taxes as a risk factor, the fact that they can be raised makes them a risk. This is especially true if you have a significant amount of money saved in a taxable account like a traditional 401(K) or IRA, own real estate, or want to pass on your wealth in a tax-efficient manner. Taxes may be relatively low right now compared to later in your retirement. Most of the provisions in the Tax Cuts and Jobs Act will expire at the end of 2025, and the Biden administration has proposed several potentially tax-increasing measures on individuals. By taking advantage of current rates and working with a professional, you can create a long-term tax minimization strategy for retirement, and adjust it as needed.
What Can You Do?
By the time we reach a certain point in our careers, we become experts. The same goes for parenthood if you have experience raising children or step-children. Practice makes perfect, and specialized knowledge can be invaluable. Just like you became a master of your trade, we’re a master of ours. We help guide people through the retirement process and create a plan that’s designed specifically for them. Schedule your complimentary retirement readiness meeting to get started.
Please Note: Epstein & White is a tradename. All services provided by Epstein & White investment professionals are provided in their individual capacities as investment adviser representatives of Mercer Global Advisors Inc. (“Mercer Advisors”), an SEC registered investment adviser principally located in Denver, Colorado, with various branch offices throughout the United States doing business under different tradenames, including Epstein & White.
Information contained herein is for informational and illustrative purposes only and general in nature. It should not be considered investment advice or a recommendation to buy or sell any type of securities or insurance products and no investment decision should be made based solely on any information provided herein. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas.
Investment in securities carries a risk of loss, including loss of principal amount invested. Different types of investments involve varying degrees of risk. It should not be assumed that diversification or asset allocation protects a portfolio from loss or that such will produce profitable results. An annuity’s guarantee is subject to the claims-paying ability of the issuing insurance company.