Year-End Wealth Management Strategies

At Withum Wealth, we believe that a large part of long-term financial success is planning ahead. For this year-end planning guide, we have included a list of actions to consider in this dynamic financial environment. In addition, we include a brief article about important portfolio considerations as you approach retirement, offering guidance on asset allocation, Social Security, Roth conversions, and Medicare to help you refine your strategy for a secure retirement.

For much of the past, retiring at age 65 was the norm. However, retirement looks different for each of us today. Many clients are choosing to retire later for a variety of reasons—whether it’s the need to boost savings, a passion for their career, or a desire to stay engaged and avoid boredom. As you approach 60, it’s crucial to reassess key areas of your financial plan:

The Withum Wealth Team will help you explore these important questions and offer guidance to help you refine your retirement strategy. While offering a broad overview to encourage thoughtful planning, but remember, retirement is personal — what works for one person may not work for another. A detailed, tailored wealth analysis is the best way to ensure you’re on the right track.

A key starting point in retirement planning is understanding your retirement expenses. We need an accurate estimate of these to determine how much money you will need to retire. First, look at your detailed current expenditures. We can provide a worksheet to assist you with this. Then, consider what will change in retirement. For example, many retirees have increased travel expenses but spend less on work attire and commuting. You might want to help fund 529s for your grandchildren or buy a second home. Your Medicare expenses will vary based on your income level. This is just a small list of things to consider when developing a post-retirement budget.

Another question arises: At what age should we begin taking Social Security? When to take Social Security is both a quantitative and qualitative decision. It is quantitative to the extent that the monthly amount you can receive increases about 8% per year until age 70, and we can calculate when you’ll “break even” if you begin taking it later than Full Retirement Age. For healthy clients with a family history of longevity (and no immediate cash need), it often makes sense to wait. Conversely, those with health concerns or fears about the sustainability of the Social Security system may choose to claim earlier.

As you near retirement, it might make sense to shift your asset allocation to reduce risk, typically by increasing exposure to less volatile assets like bonds and cash. We use “might” because asset allocation should be tailored to individual circumstances. For those with significantly more than enough money to cover their retirement expenses, the portion intended for beneficiaries can be invested more aggressively. Those who need growth to achieve their retirement goals may need to maintain higher allocations in equities. Assessing your individual needs and objectives with a wealth plan will enable us to determine the appropriate asset allocation for you.

Roth conversions can be a powerful tool, especially if your income dips in the years between retirement and the start of Social Security or Required Minimum Distributions (RMDs). Again, everyone’s situation is unique. Why convert? If most of the assets you have for retirement are qualified, you may have large Required Minimum Distributions you must take as you age. This could push you into high tax brackets, potentially even higher than during your working years. In this case, you would likely benefit from “smoothing out” your tax brackets, potentially saving significant tax dollars over the rest of your lifetime. This strategy also has the benefit of leaving your beneficiaries with untaxed distributions and is particularly attractive for those whose children are high earners.

Even if you do not retire at age 65, you are entitled to Medicare. You are eligible for Medicare Part A (hospital coverage) if you are 65 or older and meet the citizen and residency requirements. You can purchase Part B (doctor visits, outpatient services, and preventive care); the cost depends on your income level. There are several decisions to make regarding the type of coverage and which prescription plan you prefer. For many more details and nuances related to Medicare coverage.

As you approach retirement, the most important thing you can do is create a wealth plan to assess your unique situation. Even if you are nearing the end of your work life, you can still do things to increase your chances of a financially secure retirement.

If you are interested in working with a financial planner to create a wealth plan, please contact us. We genuinely enjoy guiding our clients through this period of their lives and believe that with the right plan, your retirement can be a time of financial security and peace of mind.

“Establish a game plan and be opportunistic.”

Many of our planning strategies can serve as an effective foundation for optimizing goals and objectives. During periods of market and/or political uncertainty, it is important not to lose sight of these foundational strategies.

Disclaimer: No action should be taken without advice from a member of the Withum Wealth Management Team because tax law changes frequently, which can have a significant impact on this guide and your specific planning possibilities.