Retirement Investing

01.02.24 12:00 AM

Retirement planning looks much different than it did a century ago. With lifespans and retirements lasting longer, it’s not just about planning for a financial future; we must also create a post-career strategy that takes into account emotional, intellectual and quality of life challenges during later years.

After all, we don’t just stop enjoying life after age 65, 75, 85 or older. As long as we’re alive, we want to enjoy the things that make us happy. When you start the retirement planning process, it’s important to think about things you’ll want at each stage of your golden years — from the active stage, to the slowing down stage, and even the periods when you can reasonably expect to have health and/or mobility challenges.

Savings, investments and insurance are at the crux of retirement planning — providing income now and for loved ones who may survive you. If you’d like help developing financial strategies for each stage of retirement, please give us a call.

Among the first things to consider in retirement investing’s earliest considerations is regular contributions and the power of compounded interest. Obviously, the earlier you start, the better your chance of accumulating earnings. There’s also the added advantage of getting a current income tax deduction on tax-deferred contributions to qualified retirement accounts.

However, by mid-career it’s also important to consider the value of tax diversification. It can be a burden to pay taxes on plan distributions once you’re retired, so it’s worth considering strategies that diversify your retirement portfolio in terms of account types and tax obligations to help avoid a huge tax bill on your retirement income.1

It’s also important to consider how much market risk you should take on during retirement. On one hand, you don’t want to lose long-accumulated earnings to a market decline. On the other hand, living 20+ years in retirement requires continued growth opportunities. It’s a good idea to work with a financial advisor to help establish a mix of retirement investments for your circumstances, taking into account your goals, risk tolerance, investment timeline and the composition of your overall portfolio, as well as including a high-yield savings account for emergencies.2

A Roth IRA can help address tax diversification through long-term compounding and access to funds in retirement. The Roth allows you to withdraw original contributions tax-free and penalty-free at any time for any reason. Any money in a withdrawal that exceeds the amount of your original contributions is considered “earnings” and is subject to possible penalties and taxes. To withdraw earnings without paying taxes or penalties, you must follow very specific rules. Not only do you not pay taxes on qualified distributions from a Roth IRA, but that income doesn’t count when calculating taxes on Social Security payments.3

Converting to a Roth IRA may be beneficial to those approaching retirement who are concerned about the potential tax liability on their qualified assets. Individuals can use their current income to help pay the inevitable income taxes on the conversion throughout a number of years. However, they’ll enjoy freedom from income taxes on qualified Roth distributions during retirement.4 Again, this strategy should be considered within the context of one’s overall retirement portfolio, and we’re happy to help you assess if this would be a good fit for your unique circumstances.

Since the post-career period is generally longer these days, retirees also need to pay attention to the current economic environment when making financial decisions. For example, recent and expected hikes in interest rates by the Federal Reserve Bank, CDs and other fixed income vehicles offer a conservative option for retirement funds. While growth is important in the long-term, retirees may need to strike a balance between preserving the funds they have now and what they may need to earn for the future.5

1 Aaron Brask. Apha Architect. April 19, 2018. “Quantifying the Value of Retirement Accounts.” Accessed June 2, 2018.
2 Craig Stephens. U.S. News & World Report. May 18, 2018. “6 Low Risk Investments to Build Retirement Income.” Accessed June 2, 2018.
3 Nathan Slaughter. Nasdaq. May 11, 2018. “The Simplest Move To Reduce Your Tax Bill.” Accessed June 2, 2018.
4 Larry Light. Forbes. May 15, 2018. “Does Switching To A Roth IRA From A Regular One Still Make Sense?” Accessed June 2, 2018.
5 Brian O’Connell. Insurance News Net. May 20, 2018. “Investors Perk Up As Bank CD Rates Near 3 Percent.” Accessed June 2, 2018.

Content prepared by Kara Stefan Communications
​The hypothetical example provided is for illustrative purposes only; it does not represent a real-life scenario, and should not be construed as advice designed to meet the particular needs of an individual’s situation. We are able to provide you with information but not guidance or advice related to Social Security benefits. Our firm is not affiliated with the U.S. government or any governmental agency. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.